Business Case Part II_Phase 3_ 48

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Annex 4_Business Case Part II Group number 48 Jhon Jairo Torres Vinasco Jorge Iván Soto Rony Fernando Muñoz Fernandez Date 23/10/2023 1 [The Diamond Supermarket-group 48]

BUSINESS CASE TABLE OF CONTENTS 1. STRATEGY ..................................................................................................................... 3 2. PROPOSAL IMPACTS ...................................................................................................... 4 3. RISK MANAGEMENT ...................................................................................................... 5 4. RECOMMENDATIONS .................................................................................................... 7 5. METRICS ....................................................................................................................... 7 6. CONCLUSIONS .............................................................................................................. 7 7. REFERENCES ................................................................................................................ 8 2 [The Diamond Supermarket-group 48]

1. STRATEGY Strategy choice Describe the type of strategy selected by the group to sort out the situation: (1) Name of the strategy, (2) General definition. 1. Strategy Name Differentiation 2.Strategy general definition Vertical Integration is a strategy in which a company expands its business operations to different stages of the same production chain. This implies that a vertically integrated company will incorporate previously outsourced operations. There are two types of vertical integration: Forward integration: Occurs when a company takes control of post-production processes, getting closer to the end customer. Backward integration: This happens when a company decides to control its suppliers or inputs, going back in the supply chain. 3.Example of application in other companies Apple Inc.: Apple is a vertically integrated model. The company is responsible for creating its software, hardware and operating systems. This comprehensive management of their business, from manufacturing to sales, gives them a privileged position in the technology sector. Starbucks: Starbucks is not only dedicated to selling coffee in its stores, but it also owns coffee farms. This backward integration allows them to have a constant supply of high quality grains. Netflix: Netflix, which started as a DVD rental service, has evolved into a streaming platform. In its expansion, it has ventured into the production of its own content, generating series and films, which is an example of forward integration. 4.Why could this type of strategy suit the situation of the case? In the case of “The Diamond” supermarket, the implementation of a vertical integration strategy could be advantageous for several reasons: Dominance over suppliers: Through backward integration, “The Diamond” could have greater control over its suppliers, ensuring quality and proper delivery. This could solve the problems they currently have with some suppliers. Expanding production: Given the supermarket's reputation for quality, especially of its sausages, it could benefit from producing more of its own products, ensuring quality and potentially expanding its product range. Greater market penetration: By controlling more aspects of the business, from production to sales, “The Diamond” can offer competitive prices and ensure that its products adapt to the changing demographics and tastes of the population of Villa de Leyva. Reducing operational inefficiencies: By having more internal operations, “The Diamond” can optimize processes, reduce costs and address current inefficiencies 3 [The Diamond Supermarket-group 48]

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in its operations. Strategy scope How would you apply the strategy in the Diamond Supermarket? Backward integration: Product creation: The supermarket has already received a positive response for its sausages. You might consider manufacturing more of your high-demand products in-house. For example, they could establish or partner with farms to produce organic fruits, vegetables and other products that satisfy the preferred tastes of new inhabitants. Supplier Relationships: “The Diamond” may invest in or form alliances with key suppliers, especially those that supply high-demand or high-margin products. This can ensure product quality, consistent supply and better price negotiations. Commitment to the farmers' cooperative: Deeply engage with the newly formed farmers' cooperative to source local and fresh products directly, ensuring quality and promoting local businesses. Forward integration: Brand and expansion: Leverage the reputation of “The Diamond” to launch your own brand of products, especially those that are in high demand in the region. These products could be sold not only in your own supermarket, but could be distributed to other retailers or even online. Direct-to-consumer sales: Explore opportunities for online sales, home delivery, or even establishing small outlets or kiosks in strategic locations, especially near the new university campus or upcoming hotel. Customer engagement centers: Establish dedicated customer service centers or kiosks within the supermarket where customers can provide feedback, obtain information and resolve problems. This can improve customer satisfaction and retention. Operating efficiency: Integrated supply chain management: By having more control over both suppliers and distribution channels, “The Diamond” can establish a more efficient supply chain, reducing costs, minimizing waste and ensuring product freshness. Centralized decision making with decentralized execution: While strategic decisions can be centralized, employees or department heads must be empowered to make operational decisions based on the overall strategy. This will make the business more agile and responsive. Community Commitment and CSR: Local production : Promote the fact that products are sourced or produced locally, supporting local businesses and farmers. This can be a unique selling proposition against chain supermarkets. Sustainability: Given the preference of new inhabitants for ecological products, integrate sustainable practices in production and supply. This can include biodegradable packaging, organic farming practices, and more. Employee training and empowerment: Cross-training : With more integrated operations, train employees to handle multiple roles, from production to sales, ensuring flexibility and efficiency. Empowerment: Allowing employees, especially those in leadership roles, to make decisions about their departments, ensuring they align with the overall strategy. Commitment to upcoming hotel chain: Given the size and scope of the hotel, it presents a significant business opportunity. “The Diamond” could become a major supplier to the hotel, providing everything from daily food supplies to specialty products. Anticipated outcomes Detail five (5) specific tactics and its measurable outcomes for the strategy proposed by the group, including a timeline for each in a three years perspective. Customize the items in the table to suit your proposal. (Examples: New procedures, Events, Activities, etc) 1.TACTICS 2.OUTCOME / DELIVERABLE 3.ESTIMATED COMPLETION DATE stablish Direct Supplier Relationships 20% increase in on-time deliveries, 10% reduction in product costs, and enhanced one year 4 [The Diamond Supermarket-group 48]

product quality by directly managing key suppliers Launch "The Diamond" Brand of HighDemand Products . 15% increase in sales for in-house branded products, higher profit margins due to reduced intermediary costs, and brand recognition in the local market. Mid Year 2 Engage with the Farmers' Cooperative for Direct Sourcing A steady supply of fresh, local products leading to a 10% reduction in perishable product wastage and a 5% reduction in product costs. End of year 1 TACTICS: Engage with the Upcoming International Hotel Chain for Product Supply Secure a major contract leading to a steady revenue stream, increased brand exposure, and potential for further partnerships with other businesses. Mid Year 3 . Implement Integrated Supply Chain Management System 20% increase in operational efficiency, reduction in logistical errors, and enhanced inventory management leading to reduced overstock and stockouts. End of year 2 Proposal assumptions Summarize key assumptions and preconditions you need to achieve the strategy implementation. Assumptions include expected resources and financial support. Financial stability : "The Diamond" supermarket is expected to have enough money or be able to obtain loans to carry out vertical integration initiatives. Financial support is essential to implement any strategy effectively. Stakeholder Support : For the strategy to be successful, all key stakeholders, especially the Pérez Duque family, must be fully committed and involved in the execution of the strategy. Active involvement of employees, suppliers, and even customers can significantly improve successful outcomes. Availability of resources: The supermarket must have access to the technological, logistical and human resources necessary to carry out the strategy. This includes the ability to hire or train staff with the necessary skills or invest in technologies and systems for supply chain management. Supplier Willingness: Current and potential suppliers must be willing to participate in partnerships or direct agreements with "The 5 [The Diamond Supermarket-group 48]

Diamond" supermarket. This is crucial to achieving the desired results of the vertical integration strategy. Regulatory Compliance: All business practices and partnerships formed during the vertical integration process must comply with local and national regulations. This includes ensuring that suppliers have the necessary certifications and meet health and safety standards. Market stability : Local market conditions in Villa de Leyva are expected to remain relatively stable over the next three years. Significant economic downturns or unforeseen external factors could impact the success of the strategy. Competitive Landscape: While competition is recognized, "The Diamond's" unique value propositions and local brand strength are expected to continue to provide a competitive advantage in the market, even as the integration strategy is implemented. . vertical. Community Engagement: Given Villa de Leyva's growing population and demographic changes, it is expected that there will be continued demand for high quality, local, organic products. Collaborative culture : For the strategy to be successful, a culture of collaboration, open communication and continuous learning must be fostered within "The Diamond" supermarket. Continuous monitoring: The supermarket must have mechanisms for regular monitoring and evaluation of the execution of the strategy. Feedback loops and performance metrics will guide adjustments and refinements to the strategy over time. 2. PROPOSAL IMPACTS Statement of requirements Specify how the proposal fulfill the business needs (Consider the needs identified in Business Case Part I from Phase 2). Address the competition: Identified need: The entry of two chain supermarkets in Villa de Leyva, which has led to a decrease in profit margins for “El Diamante”. Delivering on the proposition: By establishing direct relationships with suppliers, “The Diamond” can secure better deals, guaranteeing a competitive advantage in pricing and product availability against new market entrants. Operating efficiency: Identified need: Operational inefficiencies and a cash flow deficit, which can jeopardize the longevity of the business. Compliance with the proposal: Vertical integration simplifies the supply chain, reduces logistical errors and ensures timely availability of stock. This directly addresses operational inefficiencies and can improve cash flow. Relationships with suppliers: Identified need: Problems with suppliers, including non-payment of invoices and lack of necessary certifications. Compliance with the proposition: Establishing direct, formalized relationships with suppliers can resolve payment issues, ensure quality control, and prioritize suppliers with the necessary certifications. Modern infrastructure and technology: Identified Need: The new warehouse is too large, poorly laid out, and has high utility and tax costs. Supply chain management is rudimentary. Meeting the proposition: Vertical integration can lead to a re-evaluation and optimization of warehouse operations. Investing in modern supply chain management software will further improve efficiency. Expansion of product offering: Identified need: The growing demand for organic, high-quality and environmentally friendly products in Villa de Leyva. Fulfillment of the proposal: Direct partnerships with local farmers and producers will ensure a constant supply of organic and quality products, aligning with market demand. Employee welfare and regulations: Identified need: Absence of formal contracts, social security payments for employees and incidents such as the accident involving employee Felipe. Compliance with the proposition: As part of the vertical integration process, the focus is on formalizing business processes, including ensuring employee safety and well-being and regulatory compliance. Participation in the new demographic market: Identified need: A growing population, especially foreigners and wealthier individuals from other cities, demanding premium products. 6 [The Diamond Supermarket-group 48]

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Fulfillment of the proposition: Vertical integration will allow “The Diamond” to better adapt its product offering to meet the demands of this new demographic, ensuring customer satisfaction and loyalty. Strengthening brand presence: Identified need: The need to differentiate from competitors and leverage the brand strength of “The Diamond”. Fulfillment of the proposition: By controlling more parts of the supply chain and ensuring product quality and variety, “The Diamond” can further build its reputation in the region. Business impacts Indicate the business and operational impacts of the proposal gives for each stakeholder (Consider stakeholders identified in Phase 2 Business Case Part I). 1.STAKEHOLDER 2.REQUIREMENTS Suppliers Improved relationships leading to better negotiation of terms. However, some suppliers might face challenges if not integrated into the new system Employees Enhanced job security due to business stability. Training requirements may increase to adapt to new systems and processes. Customers Improved product quality and variety. Possibly more competitive prices due to better supply chain management. Enhanced trust in the brand. Local Community Benefits from the business's growth, potentially leading to more job opportunities. Increased support for local farmers and producers. Competitors Increased competitive pressure due to The Diamond's optimized operations and potentially improved market position. Investors/Owners Anticipated better ROI due to increased efficiencies and improved profit margins. However, initial investment might be needed for the strategy's implementation. Improved compliance with regulations, especially with formalized employee contracts and adherence to standards. Positive impact on local economy. 3. RISK MANAGEMENT Risk assessment Detail five (5) potential risks. Risks represent events or conditions that can increase costs, extend the time frame of the implementation. Risks can include delays, lack of approval, difficulties, interruptions and more. For each potential risk, indicate the probability of the risk occurring, the severity of its impact (High, Medium, Low) and include a short description of a mitigation strategy. RISK DESCRIPTION 1. PROBABILITY IMPACT Risk: Product Creation - Crop Failure or Livestock Disease Medium High MITIGATION STRATEGIES [ Mitigation Strategy Detail ] Mitigation Strategy: Diversify the range of products 7 [The Diamond Supermarket-group 48]

produced in-house and ensure proper insurance coverage RISK DESCRIPTION 2. PROBABILITY IMPACT Risk Supplier Relationships - Dependency on Key Suppliers High Medium MITIGATION STRATEGIES [ Mitigation Strategy Detail ] Maintain relationships with multiple suppliers for each product to avoid dependency on a single supplier. RISK DESCRIPTION 3. PROBABILITY IMPACT Risk Forward Integration - Brand Reputation Damage Low High MITIGATION STRATEGIES [ Mitigation Strategy Detail ] Implement strict quality control measures and respond promptly and transparently to any issues that arise. RISK DESCRIPTION 4. PROBABILITY IMPACT Risk Operating Efficiency - Supply Chain Disruptions Medium High MITIGATION STRATEGIES [ Mitigation Strategy Detail ] Develop contingency plans and maintain a safety stock of key products. RISK DESCRIPTION 5. PROBABILITY IMPACT Risk Community Commitment and CSR - Negative Public Perception Low Medium MITIGATION STRATEGIES [ Mitigation Strategy Detail ] Regularly communicate about the supermarket’s CSR initiatives and engage with the community to understand their concerns. RESOURCES Proposed governance structure Recommend an organizational structure indicating positions to hire. Board of Directors: Oversees company strategy, approves budgets and major capital expenditures, and ensures regulatory compliance and risk management. Chief Executive Officer (CEO): Oversees the entire organization and provides direction, strategy and vision. Chief Operating Officer (COO): Manages the day-to-day operations of the company's retail and supply chain and ensures operations are efficient. Chief Financial Officer (CFO): Manages the company's finances, provides financial projections and accounting services, and oversees the finance department. Director of Supply Chain and Integration: Oversees the integrated supply chain, manages supplier relationships, and ensures a smooth flow of products. Director of Retail Operations: Manages all points of sale and ensures that customers are satisfied and stores are running efficiently. Director of Human Resources: Manages hiring, training and employee relations, and ensures compliance with labor laws and regulations. Marketing and Sales Director: Develops and implements marketing strategies and supervises sales and promotions operations. IT Manager: Manages information technology infrastructure and ensures IT systems support integrated operations. Quality Assurance Manager: Ensures products meet established quality standards and works with suppliers to ensure quality throughout the supply chain. Regional Managers (for multiple locations): Manage a specific region or group of stores and report to the Director of Retail Operations. 8 [The Diamond Supermarket-group 48]

Store Managers: They manage individual stores and make sure they are profitable and customers are satisfied. Procurement Team: Manages the purchase of goods from suppliers and works closely with the Director of Supply Chain and Integration. Legal and Compliance Team: Ensures the company complies with all relevant laws and regulations, manages legal matters and contracts. Positions to be hired according to the proposed structure: Supply Chain and Integration Director Director of Retail Operations IT Manager Manager of Quality Assurance Regional Managers (depending on the number of regions) Procurement team members Member of the legal and compliance team Costs for the proposal Detail the costs according to the proposal and summarize them to identify the amount of money needed: Infrastructure, new employees, advertisement and more. Infrastructure: Warehouse and distribution centers: Lease or purchase of land: $1,000,000, construction and configuration: $500,000, warehouse management systems: $100,000. Transportation: Purchase of trucks (5 trucks): $250,000, maintenance: $50,000 annually. Store improvements: Renovation and systems integration: $150,000. IT Systems: Integration software: $200,000, maintenance: $25,000 annually. Total infrastructure costs: $2,275,000 (initial) + $75,000 (annual) New employees: Director of Supply Chain and Integration: $120,000 annually Director of Retail Operations: $110,000 annually IT Manager: $95,000 annually Quality Assurance Manager: $90,000 annually Regional Managers (5 managers): $350,000 annually (combined) Procurement team members (3 members): $180,000 annually (combined) Legal and compliance team members (2 members): $200,000 annually (combined) Warehouse staff (20 employees): $400,000 annually (combined) Total new employee costs: $1,545,000 annually Advertising: TV and radio campaigns: $300,000 Online and social media campaigns: $150,000 Billboards and outdoor advertising: $100,000 In-store promotions and events: $50,000 Total advertising costs: $600,000 Additional costs: Training for new employees: $50,000 Legal and compliance: $30,000 Consultation fees (for integration strategy): $100,000 Miscellaneous: $50,000 Additional total costs: $230,000 Total startup costs: $2,275,000+600,000+230,000 = $3,105,000 Total annual costs: $75,000+1,545,000 = $1,620,000 9 [The Diamond Supermarket-group 48]

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4. RECOMMENDATIONS 1.CRITERIA 2.ALTERNATIVE BUSINESS & OPERATIONAL IMPACT Implement a robust supply chain management system to improve operational efficiency. This could have a significant positive impact on the business by reducing costs and ensuring product freshness. Invest in employee training and empowerment. This could improve operational efficiency and employee satisfaction, leading to better customer service and increased sales. Project Risk Assessment: PROJECT RISK ASSESSMENT Develop contingency plans for each identified risk. This could include maintaining relationships with multiple suppliers, diversifying product range, and implementing strict quality control measures. Regularly monitor and review risks. This could involve setting up a risk management team or assigning a risk management role to existing staff. COST / BENEFIT ANALYSIS Conduct a cost/benefit analysis before implementing major changes such as launching a new product line or investing in new technology. This could help ensure that the benefits outweigh the costs. Regularly review and update the cost/benefit analysis. This could help identify any changes in costs or benefits and allow for adjustments as needed. 5. METRICS What metrics can be used to measure the benefits? Indicate one (1) metric for each category, include the formula to calculate it and the number or percentage to achieve with the proposal. CATEGORY NAME OF THE INDICATOR FORMULA TO CALCULATE IT GOAL (# or %) Financial Return on Investment (ROI) Investment Gain - Investment Cost) / Investment Cost 20% Customer Customer Satisfaction Index (CSI) (Number of satisfied customers / Total number of surveyed customers) x 100 85% Process Operational Efficiency Process Output / Process Input Improve by 15% Human resources and Innovation Employee Retention Rate (Number of employees at the end of the period - New employees) / Number of employees at the start of the period x 100 90% 6. CONCLUSIONS In the context of the case study, according to the information of Business Case Part II, students include their links of videos with the strategy description from Activity 5 in the guide, also write on their own words a conclusion of one paragraph of 100 words 10 [The Diamond Supermarket-group 48]

explaining the results for the Diamond Supermarket including the following words in bold type: (1) Strategy implementation, (2) Metrics, (3) Business case, (4) Costs 1.Student name 2.Video link 3.Conclusion 1.Jhon Jairo Torres Vinasco https://youtu.be/NV9ozfkG F34 It is evident that the implementation of the strategy for Diamond Supermarket holds significant potential to optimize its operations and improve profitability. The proposed metrics offer a solid framework to measure the success of our initiatives, ensuring accountability and continuous improvement. The business case meticulously details the potential benefits and justifies the necessary costs. When executed diligently, this strategy could revolutionize the supermarket's market position, maximizing shareholder value and ensuring long-term sustainable growth. 2. 3. Rony Fernando Muñoz Fernandez https://youtu.be/ezVODYabm_E Retrenchment is part of the fourth family of corporate strategies, and its objective is to reduce the size of the company. It is a strategy also known as restructuring, reorganization and divestiture of businesses when it is necessary to focus on the main business or the most important idea. successful, to rebuild its distinctive competence. In the case of The diamond supermarket, this restructuring and reorganization of the objectives, projection and dynamics of the organization is necessary. Organize personnel according to their specific capabilities and needs. In this way, the diamond supermarket can be prevented from reaching the final stage or reduction strategy, which is bankruptcy. There are five applicable guidelines for the successful implementation of a reduction strategy. (1) when a company has clearly distinctive competence but has not achieved consistently to meet its objectives and goals over time, in the case of the diamond supermarket the two chain markets that arrived at the place (2) when a company is one of the weakest competitors in a given industry (3) when a company is plagued by inefficiency, low profitability, poor employee morale and shareholder pressure to improve performance; In our case, management's perception of the evolution of the traditional business (4) when a company has failed to capitalize on external opportunities, minimize external threats, leverage internal strengths, and overcome internal weaknesses over time, that is, when the the organization's strategic managers have failed. For example, in this case, the following have not been taken into account: the arrival of the two stores, the growth in tourism and population. (5) When a company has grown so much and so quickly, that important a reorganization is necessary. 4. 11 [The Diamond Supermarket-group 48]

5. 7. REFERENCES Use APA guidelines, make sure references are organized by the author's last name in alphabetic (A-Z) order Hans-Ulrich Krause, &. D. (2019). Key Performance Indicators for Sustainable Management: A Compendium Based on the “Balanced Scorecard Approach.” De Gruyter Oldenbourg . Obtenido de https://bibliotecavirtual.unad.edu.co/login?url=https://search.ebscohost.com/login.aspx? direct=true&db=e000xww&AN=2317397&lang=es&site=eds-live&scope=site&ebv=EB&ppid=pp_5 Harvard Business Review Press. (2011). Developing a Business Case. Step 5: Make a Choice and Assess the Risk. Obtenido de https://bibliotecavirtual.unad.edu.co/login?url=https://search.ebscohost.com/login.aspx? direct=true&db=nlebk&AN=675118&lang=es&site=eds-live&scope=site&ebv=EB&ppid=pp_45 Krassimir Todorov, &. Y. (2019). Strategic Management in Emerging Markets : Aligning Business and Corporate Strategy. Contemporary Corporate Strategies (pp. 225-259, 345-365). Emerald Publishing Limited. Obtenido de https://bibliotecavirtual.unad.edu.co/login?url=https://search.ebscohost.com/login.aspx? direct=true&db=nlebk&AN=1827693&lang=es&site=eds-live&scope=site&ebv=EB&ppid=pp_225 Triana Ortiz, K. (21 de 04 de 2020). Porter´s Generic Strategies. [Video]. Obtenido de https://repository.unad.edu.co/handle/10596/33487 12 [The Diamond Supermarket-group 48]

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