Question

Branca Markets, a chain of traditional supermarkets, is interested in gaining access to the organic and health food retail market by acquiring a regional company in that sector. Branca intends to operate the newly acquired stores independently from its supermarkets.
One of the prospects is Fresh Source, a chain of 20 stores in the mid- Atlantic. Buying for all 20 stores is done by the company’s central office. Store managers must follow strict guidelines for all aspects of store management in an attempt to maintain consistency among stores. Store managers are evaluated on the basis of achieving profit goals developed by the central office.
The other prospect is Singing Moon, a chain of 30 stores in the Northeast. Singing Moon managers are given significant flexibility in product offerings, allowing them to negotiate purchases with local organic farmers. Store managers are rewarded for exceeding self- developed return on investment goals with company stock options. Some managers have become significant shareholders in the company, and have even decided on their own to open additional store locations to improve market penetration. However, the increased autonomy has led to competition and price cutting among Singing Moon stores within the same geographic market, resulting in lower margins.

Required
1. Would you describe Fresh Source as having a centralized or a decentralized structure? Explain.
2. Would you describe Singing Moon as having a centralized or a decentralized structure? Discuss some of the benefits and costs of that type of structure.
3. Would stores in each chain be considered cost centers, revenue centers, profit centers, or investment centers? How does that tie into the evaluation of store managers?
4. Assume that Branca chooses to acquire Singing Moon. What steps can Branca take to improve goal congruence between store managers and the larger company?




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  • CreatedJanuary 15, 2015
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