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Strategic Plan: Jamba Juice

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Autor:  jessica85  08 March 2010
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Running Head: STRATEGIC PLAN: JAMBA JUICE











Strategic Plan: Jamba Juice

MBA580

University of Phoenix


















Executive Summary

As Jamba Juice heads into the next decade, it will be faced with many challenges. The organization will face challenges such rising fuel cost, the rising cost of food, and a changing demographic that may affect their customer base. The goal of the organization is to continue to grow and open new stores, as well as expand on the customer base. In order to achieve the goals, the company will need to develop an aggressive advertising campaign and adjust they way they do business in order to address external forces affecting them.
The company expects to invest heavily in advertising in order to attract an older demographic, but the cost will only be temporary and eventually offset by changing some store habit. The company intends to rely less on shipments of produce but instead will purchase from local farmers whenever possible. The company will also use frozen goods in lieu of fresh good when prices spike. The overall goal is to become more independent, more socially and ecologically responsible and less reliant on heavy fuel consuming shipments.
Company Background

The company Jamba Juice for the subject of this project is Jamba Juice. Jamba Juice was originally found in 1990 by a recent college graduate named Kirk Perron. The company then incorporated in 1991 under the name Juice Club, Inc in San Francisco, California. In 1993 the company opened it doors in two more cities in California, and two years later changed its name to Jamba Juice. Jamba Juice’s goal was to sell healthy, natural smoothies, which led to them joining forces with Whole Foods Market in 1997. Jamba Juice uses real fruit and 100% fruit juices. All smoothies, except for its "All Fruit Smoothies," contain another ingredient, as per the recipe: sherbet, frozen yogurt, sorbet, plain yogurt, lower-calorie dairy base or soymilk. Over the years Jamba Juice has grown in popularity and now has 707 stores nationwide and boasts over nine thousand employees. Although the company has grown they are still true to their original belief of healthy living, which is probably why the company has shown continued success over the years.
Vision Statement
Jamba Juice envisions itself enriching the daily experience of our customers, our community and ourselves through the life-nourishing qualities of fruits and vegetables. Customers leave our stores feeling better about them self because they know that by choosing Jamba Juice they have chosen a healthy lifestyle.
Mission Statement
Establish Jamba Juice as the world’s leading source of healthy energy in the form of freshly blended beverages with an uncompromising commitment to making a difference through values.
Values Statement
Jamba Juice stands by our products and believe that we are truly helping each and everyone one of our customers live a better life. We believe that the acronym FIBER says it all. The acronym FIBER stands for fun in what you do, integrity in what you say, balance in your life, empowerment in yourself, and being respectful to yourself.

Values Analysis
Values Anticipated Employee Behaviors How it Supports Jamba Juice’s Grand Strategy
Integrity Honesty and respect of customers As Jamba strives to attract older customer an appreciate will be there as they feel the store and workers truly care

Environmental Analysis


As the world changes, forces and trends change as well. In the United States there are several forces and trends that are affecting just about everyone. One of the biggest forces in the US currently is the economy. The unemployment rate is up and consumers are spending less, which is having a direct impact on businesses. Another trend we are seeing is the rising fuel cost. The price of fuel has significantly increased over past two years and is predicted to go even higher. In an effort to reduce the impact of higher gas prices, farmers have started to grow more corn for the purpose of creating ethanol. Although the ethanol may aid in slightly decreasing fuel cost, it raises the prices for vegetables and fruit, which still hurts American consumers. This paper will address trends and forces that are affecting Jamba Juice, and are likely to continue affecting the organization in the future. The paper will also address the organization strengths, weaknesses, opportunities, and possible threats. Next the paper will discuss Jamba Juice’s market structure, its current situation, current position, and the primary product and service line. Lastly the paper will identify long-term goals and revisit the mission and vision statements.
Jamba Juice’s primary product is an “all fruit” smoothie and they pride themselves on using the freshest ingredients. The drinks contain soy milk, sherbet, yogurt, or sorbet. The customers have the option of adding boosts to their drinks, which are basically scoops of calcium, fiber, and even energy. The boosts are actually free. Jamba Juice also offers fresh wheat grass shots and freshly squeezed juice shots. The stores also sell pretzels, t-shirts, hats, and cookbooks with healthy recipes. The stores are very popular and continuously busy but there are signs of slowing. Jamba Juice has been negatively affected by the all of the previous mentioned trends. Being that Jamba Juice needs fresh fruit on a regular basis that also means that they need shipments on a regular basis. The organization has already been forced to raises their prices in order to compensate for the higher cost of shipping and the good themselves. With farmers converting normal crops such as strawberries and soy to corn crop, there is significant impact on pricing as supply decreases and demand goes unchanged. Jamba Juice sells fruit and veggie smoothies and as the economy slows their profits slow. While profits slow, the trends are showing that the cost of gas, produce, and food in general in increasing at an alarming rate.
Macroeconomic forecasts
Future forecasts look very good for the continued success of Jamba Juice. While there was no specific category for smoothies, soft drinks forecasts were used as a guide. Based on the forecast for next five years, significant growth is expected. As American drinks more and more soft drinks and flavored beverages, the consumption of tea and coffee are expected to be nearly unchanged. That is good news for Jamba Juice because the organization would like to tap into some of the coffee shop customers and market to a whole new demographic. There are also positive forecasts for energy consumption, including fuel, and personal income. Fuel consumption is expected to decrease, while personal income is expected to increase. New technology comes about everyday and attempt to reduce the amount of fuel dependency in America and around the world. Alternative fuel sources have come about, as well as hybrid vehicles. As far as income, it naturally increases over time but so does the cost of living. Hopefully personal income will exceed the cost of living and provide consumers with more disposable income. Either way, both fuel consumption, and personal income, economic indicators favor a business like Jamba Juice.
There are non economical factor that can affect and be affected by the strategic plan for Jamba Juice. This paper will analyze the social and cultural, political, technological, and demographic remote environments. “Environment presents firms with opportunities, threats, and constraints, but rarely does a single firm exert any meaningful reciprocal influence.” (Pearce & Robinson, 2004) Although Americans are not generally considered the healthiest people, Americans try to be health conscious and are diet obsessed. Jamba Juice’s edge is that they offer both healthy and delicious beverages, which is makes people feel like they are doing something good for their bodies by drinking a smoothie. In a society where fast food is the norm, but becoming more frowned upon, there are not many healthy choices available. Politics can also play a part in the future of Jamba Juice. As the country strives to be healthy, there has been talk about creating a junk food tax. Bad food would cost more but good, healthy food like Jamba Juice’s would be more affordable and just as tasty. It will all depend on how serious the future leaders take the countries health crisis. Healthier citizens would mean lower insurance for medical coverage and help in addressing one of the nation’s most serious problems. Technology does not need to be the death of an organization like Jamba Juice. Technology can make the process for the organization smoother, such ordering goods and maintaining inventory. As mentioned previously, technology can also affect the organization by inventing fuel saving vehicles and gadget that will ultimately Jamba Juice money. The last factor that may affect Jamba Juice is demographics. Americans and people in general are living longer, which means that in order to maintain success Jamba will need to target other demographic besides teens. An important factor for the organization to take note of is that as people get older they become more aware of eating habit and try to take better care of themselves.
Jamba Juice’s products are competitively priced and are comparable to their two biggest competitors, Juice It Up and D’Lish. Juice It Up is a franchise Corporation but is not publicly traded. D’Lish is of similar make up Juice It up with no public trading and still relatively small in comparison to Jamba Juice but growing fast. The market structure for Jamba Juice is monopolistic, meaning differentiated products, easy entry and exit of industry, small market share, no collusion, and independent action. Prices are controlled by the individual organizations, rather than by the industry. Products are similar but distinct to each organization, and quality does vary.

Local Competitor Analysis
Jamba Juice Juice It Up D’Lish
Medium Sized Smoothie Costs $3.80 $3.65 $3.90

“One of the most important tools for assessing the strength of an organization within its industry is financial analysis. Managers, investors, and creditors all employ some form of this analysis as the beginning point for their financial decision making.” (Pearce & Robinson, 2004) There are four basic groups of financial ratios and each will be analyzed in order to develop a better understanding of the company’s financial state. The four ratios are liquidity, leverage, activity, and profitability. The liquidity ratio will be used to determine whether or not the organization can meet its short term obligations, this includes current liabilities and maturing long-term debt. The formula used to determine liquidity is current assets divided by current liabilities. Experts suggest that the current ratio be between 2 and 3, and Jamba Juice’s liquidity ratio is 2.9. Anything higher than a 3 is not considered good. Leverage is used to determine the sources of the organizations credit, and is determined by dividing total debt by total assets. The leverage ratio for Jamba Juice is .26, well within what is considered healthy limits. The activity ratio is used to determine how affectively and organization is using its resources. The activity is determined by calculating either the asset turnover ratio of the inventory turnover ration. For the purpose of this paper the inventory turnover was used, and was determined by dividing sales by inventory. The ratio was 36.38, which means very little because of the type of industry Jamba Juice is in. Jamba Juice does not need to keep a lot of inventory on hand because they depend on fresh goods. Lastly, and maybe the most important ratio is profitability. The profitability ratio identifies how effective the organization is being managed and is also referred to as the return on sales (ROS). The return on sales is determined by dividing net earnings by sales. The return of sales for Jamba Juice in the year 2008 was 3. The average return on sales for the US is 5. “There are two basic approaches to using financial ratios. One approach is to evaluate the corporation's performance over several years. The other approach is to evaluate a firm's financial condition and compare it with the financial conditions of similar firms or with industry averages in the same period. Such a comparison gives insight into the firm's relative financial condition and performance.” (Pearce & Robinson, 2004) After taking a snap shot of similar smoothie shops, it is evident that Jamba Juice is out performing their competitors, but Jamba Juice does have more stores.
Jamba Juice Financial Results and Key Metrics
Financial Statement (In thousands)

2007
Income:
Revenue 267
Cost of Revenue 173



Gross Profit: 194

Expenses:
Selling General and Admin 111
Non reoccurring 38
Other 14

Operating Profit: 31

2007 Key Performance Metrics:

1. Sales
2. Operating costs
3. Market share
Financially Jamba Juice is still going strong, despite the current economic problems. But many believe that it is only a matter if time because everyone starts to feel the financial crunch. Jamba Juice has already done a preemptive strike by raising the cost of their drinks by fifteen cents. The organization continues to be a leader in their industry, despite the fact that more competitive similar stores are opening. Jamba Juice is the business of offering healthy smoothies, and with the exception of a few menu items, they are accomplishing their goals. In spite of the fact that the organization is accomplishing its goals based on their mission statement there are opportunities for them to improve their profits are overall culture. Several opportunities were identified to help improve the strategic plan for Jamba Juice. One opportunity identified for the organization is other demographics besides teen. Jamba Juice has really attracted the teen market because of the cool, hip atmosphere of the store but they have failed to truly reach other demographics. Another opportunity for the organization is to receive the bulk of their fresh fruit and vegetables from local growers, rather than shipping a lot of goods. Not only would going local save the organization money but it would show that the organization is being socially responsible by not depending heavily on fuel guzzling trucks and planes to operate the company. The organization has very young employees, which means that little experience comes with them. As unemployment rises Jamba Juice has the opportunity to find experienced employees who are career oriented and looking for long term positions. One of the biggest problems with young employees is that they do not tend to stay long at a job. Sadly for the earth, but beneficial to the organization is global warming. As weather trends indicate, there tends to be more hot days than cold now, and the earth is warming. Jamba Juice sells cool, refreshing drinks and has opportunity to profits as we head into summer. Record temperatures are expected and as people try to stay cool while not running up their energy bill, a nice smoothie may just be the answer. At least that is what they marketing campaign should be telling people.
Jamba Juice’s current situation is good and as an organization they are meeting mission goals. The organization’s mission statement is, “Establish Jamba Juice as the world’s leading source of healthy energy in the form of freshly blended beverages with an uncompromising commitment of making a difference through our values.” Although the mission is being met, there are a growing number of competitors in healthy smoothie market, which means that Jamba mission may need a little tweaking in order to address the changing industry. Although there is more competition entering Jamba Juice’s market, several areas of opportunity were identified. One of the biggest opportunities right now for Jamba Juice is the time of year. As the weather heats up, more people are looking for cool refreshing drinks rather than their typical cup of coffee. Another opportunity for Jamba is the fact that school is out during summer time. The store’s primary customers are teens and young adults. Business tends to spike during the warm weather months but the biggest opportunity for them is to attract new, slightly older customers to Jamba as well. Lastly, there is an opportunity for Jamba Juice to attract some older more experienced employees as the unemployment rate rises. Most of Jamba Juice’s employees are young and inexperienced, can only work part time, and do not stay with the company for very long.
In order to form a sound business strategy for Jamba Juice, an analysis will need to be done. A good technique for analyzing a company is by performing the strengths, weakness, opportunities, and threats (SWOT) analysis.
SWOT Table
Strengths
• Market leader
• Strong sales
• Positive work environment Weaknesses
• Very young employees
• High employee turnover
• inexperienced workers
Opportunities
• High unemployment rate
• Warming temperatures
• School out for summer Threats
• More like stores entering market
• Rising food cost
• Rising fuel cost

. “SWOT analysis is a widely used technique through which managers create a quick overview of a company's strategic situation. It is based on the assumption that an effective strategy derives from a sound “fit” between a firm's internal resources (strengths and weaknesses) and its external situation (opportunities and threats).” (Pearce & Robinson, 2004) Several strengths and weakness were identified for Jamba Juice. The strengths identified for Jamba Juice were the strong sales, positive work environment, and the fact that Jamba is considered the industry leader. The weaknesses identified were their young, inexperienced employees, and the high turnover rate, mainly due to young employees whom are only working for the summer or until they go off to college.
Matched Pair Analysis

Internal
factors ---->
External
factors
|
|
/ Internal Strengths:
S1 Positive work environment
S2 Market leader
S3 Strong sales Internal Weaknesses:
W1 very young employees
W2 High employee turnover
W3 inexperienced employees
External Opportunities:
O1 High unemployment rate
O2 Warming temperatures
O3 School out for summer S1/O2 Higher more diverse ages
S2/O1 Create summer specific campaignS3/O3 Target teen market W1/O1 Advertise jobs on Monster jobs and like
W2/O2 Aim at hiring career oriented employees
W3/O3 Create better training programs
External Threats:
T1 More like shops entering market
T2 Higher produce prices
T3 Higher fuel prices S1/T1 Produce consistent high quality product
S2/T2 Be innovative in using lower cost products
S3/T3 Increase prices slightly to compensate W1/T1 Continue teen customer appeal
W2/T2 Strike deal with local growers
W3/T3 Start inexperienced employees at lower wage


Long Term Goals

“To achieve long-term prosperity, strategic planners commonly establish long-term objectives in seven areas: profitability, productivity, competitive position, employee development, employee relations, technological leadership, and public responsibility.” (Pearce & Robinson, 2004) Three long-term strategic goals were created to aid in the success of the plan and to act as a tool for measuring the overall success. The first long term goal, and one of the most important, is to strive to appeal to a diverse group of people. There are many different types of people who frequent Jamba Juice but the primary customers for the organization are teens. The second long-term goal is continual improvement. Jamba Juice makes a great product but as times change the organization will need to change with it. This could mean offering corporate delivery services, or even offering powdered shakes to make at home that taste just as good and fresh as those offered in the store. The third long-term goal is to stay competitive through aggressive and creative marketing campaigns. Jamba Juice does very little advertising. The organization has several radio spots but the bulk of their advertising comes from word of mouth. While this form of marketing has worked in the past there is more competition in the industry now. The two biggest competitors of Jamba Juice are stores called “Juice it Up” and “D’Lish”. The two competitors can be found at many malls and are rapidly opening more stores. In order to stay ahead, Jamba may need t step out of its comfort zone and try something new to grab customers.
“The mission statement is a message designed to be inclusive of the expectations of all stakeholders for the company's performance over the long run.” (Pearce & Robinson, 2004) The statement should address the purpose of the business and economic goals, as well as the overall organizational image, and their responsibilities to the community they serve. “A vision statement presents the firm's strategic intent that focuses the energies and resources of the company on achieving a desirable future.” (Pearce & Robinson, 2004) The current mission and vision statements for Jamba Juice are sufficient and really do describe the current goal and atmosphere of the organization. The mission and vision statement of Jamba Juice is a clear promotion of a healthy lifestyle. Staying true to these concepts has been the key to the success and growth of the company throughout the years. These statements work for the organization because deep down American want to be healthy and happy but it is not always easy to make healthy food choices.
Jamba! Enriching the daily experience of our customers, our community and ourselves through the life-nourishing qualities of fruits and vegetables.” (jambajuice.com) While the company’s values statement is an acronym for the word fiber, it is fitting for a company that promotes healthy living.
Through out this paper many issues were addressed. An analysis of forces and trends affecting Jamba Juice was conducted, identifying gas prices as big factor. Using EUI, forecasts were identified and analyzed for strategic purposes. Non-economic factors in the remote environment were also analyzed including social and cultural, political, technological, and demographic. Social, cultural, and demographic factor were all identified in playing a part in the future success of Jamba Juice. The market structure of Jamba Juice, which is monopolistic, was identified and discussed. As well as the organization’s current situation, its competitive position, as well as forces and trends facing the industry. Also, potential opportunities for Jamba Juice was identified and discussed. Next weaknesses and strengths were addressed, as well as three measurable long-term strategies for success. Lastly the mission and vision statements were revisited and revised in order to reflect future strategic plans for Jamba Juice.
Strategic Analysis and Choice
Plan Goals and Implementation
The implementation of the plan will need to start immediately because the issues facing the company are serious and they need addressing now. One of the major issues facing Jamba Juice is their market base. Teens are Jamba Juice’s primary customer, which is great, but Jamba Juice needs to expand their marketing to an older demographic. In doing so, the company will be preparing for the future as their current customers age and tire of the chain. A marketing campaign will need to be launched to attract older, more loyal customers.
The hiring of older, more experienced employees will also become a priority. The company tends to hire young teens, which fits the environment of the organization but the young employees do not tend to stay with the company for very long. The company needs to start building a database of possible employees whom are a little older and experienced and looking for a more permanent career. High employee turnovers costs the company both time and money, and this can be alleviated with proper planning and hiring practices.
One of the biggest problems facing the company is the rising overhead costs as the price of gas and food increase. There are several options the company can use to lower overhead cost, but the two this paper will focus on is purchasing goods from local farmers to reduce shipping cost and using some frozen fruit rather than all fresh fruit to help reduce the cost of food.
Objective Goals Action Items Timelines Who is Responsible
Higher revenues Increase profits by 15% in first year More advertising. Currently the stores do little to no advertising 2-4 months District managers and Marketing Teams

Decrease operating costs Reduce dependency on daily deliveries Purchase locally grown goods and use frozen products when local goods are unavailable in order to reduce rising cost of deliveries due to fuel cost 2 months Store managers
Appeal to older customers Attract a variety of customers to the stores Create a marketing campaign to specifically target the older consumer 1-2 months Marketing Team

Timelines have been set for all the goals and are believed to be achievable. Currently the company does very little advertising but with a marketing campaign it is believed that an increase in profits could be seen in as little as two months, with a maximum goal of four months. Another goals is the decrease of operating costs, will can be achieved by obtaining good locally which would decrease the cost of shipping significantly. Last but not least is the marketing campaign, which would roll out within one to two months. The marketing campaign is very important because it will allow Jamba Juice to introduce itself to an entirely new market.
Gap Analysis
A gap analysis was conducted for this plan to determine the current status and the company and where the company ultimate wants to be. Currently Jamba Juice is doing fine within their market but, the organization recognizes the need for change in order to remain a leader their industry. First order of business will be to attract a new kind of customer. Jamba Juice is very popular with teens and young adults but the organization realizes that they will need to add to those demographics if the company wishes to have staying power. Another issue to address is the typical young, inexperienced employees at Jamba Juice. While Jamba Juice is more than happy to have young vibrant workers, the company is also looking to add more experienced workers to the company, with the hopes of finding individuals that are more career-oriented than their teen workers. Lastly the organization would like to ways to reduce operating cost without sacrificing the quality of product and service they offer their customers. The could be achieved by a company of fresh and frozen good that would reduce cost, and still provide their customers with a delicious product. The organization believes that by addressing the gaps within the organization and focusing on their goals, that success can and will be achieved.
Key Performance Metrics
The key performance metrics that will be a used for assessing success of the plan will be sales, operating costs, and market share. The sales metric will be used to determine whether the marketing campaign is working. The operating expenses will also be an important metric because one of the main goals of the company is to lower overhead, which would ultimately mean an increase in revenues. Finally the market share will be analyzed. With more competitors entering the market, it is very important for Jamba Juice to maintain their edge.

Key Performance Metrics
1. Sales 15% 15.5% 16%
2. Operating expenses 58% 53% 48%
3. Market share 30% 33% 37%

Financial Projections and Analysis
Jamba Juice realizes that a sizeable investment will need to be made in the new marketing campaign, which should pay for itself within a matter of months. Also sales will need to see an increase and operating cost will need to be decreased. In the chart below, data was collected based on 2008 figures and projections were made for the next three years. Revenues for 2008 were at 317,000 and by 2010 the revenues should increase by at least 68,000. At the same over the next 3 years cost of revenue would remain the same, which would also allow for a greater profit. The goal is to maximize revenues and have the company significantly performing better by the year 2010.

Financial Statement (in thousands)

2008 2009 2010
Income:
Total Revenue 317,209 350,000 385,000
Cost of Revenue 186,877 186,877 186,877

Total 130,322 163,113 198,123

Expense:
Selling General and Admin 132,858 134,000 138,500
Other 19,168 17,000 15,200


Total 113, 154 117,000 123,300

Profit Before Interest & Taxes N/A N/A N/A

Memo:
Capital Expenditures 52,269 20,000 15,000
Investment N/A N/A N/A


Key Performance Metrics
1. Sales
2. Operating expenses
3. market share


Critical Success Factors
There are three critical success factors to this plan. The first critical factor is an increase in profits over the next five year. Profits will need to increase by at least 10% each in order to generate revenues and compensate for increased operating cost. As the country head into a time of possible inflation and a recession, money may be tight for man American families and the teen consumer will feel the crunch as their parents cut back on their spending money. The second critical factor will be the marketing campaign. The marketing campaign is critical because as times change and the current customers age, there will need to others to fill their shoes and purchase Jamba Juice smoothies. The marketing campaign will target demographics other than teens, mainly the age group 30 – 45 years of age. This age group tends to be a more loyal and reliable demographic. The last critical factor is the government’s policy on farmland conversion to corn crops to produce ethanol. As more and more crops are converted to corn, that will mean less farmland dedicated to growing fruit and other vegetables. Supply and demand becomes an issues and the cost of fruit and vegetables goes up, which either cuts into Jamba Juice’s profits or forces them to raise their prices. Neither option is good for the business.
Controls and Evaluations
A committee will be formed in order to monitor and evaluate the strategic plan once it has been implemented. The committee should be made up of several members of the original planning team as well as key personnel, such as department heads, within the organization. The committee should meet at a minimum of monthly until the plan is well in place and success has been proven. The committee will monitor the plan to make sure that it is meeting its milestones and timeline goals. The committee will also need to make recommendation if problem occur and adjustments to the plan as needed.
One control that will need to be in place is a market evaluation. As the company strives to increase their market share and attract older customers, market studies and research will need to be done to determine success and to make necessary marketing adjustments. The evaluations and monitoring will need to happen at the corporate levels and wells as at the local store levels. If certain stores are not hitting their goals, a determination as to why will need to be, and a decision of viability will need to be made.
Contingency plans will also need to be created because as with any plan things will go wrong, and the company will need have methods in place to address possible issues.










Reference


Market Indicators and Forecasts. (2008, April 9). Retrieved April 12, 2008 from EIU Data Services database.
www.jambajuice.com (2008) [Electronic Version] Retrieved April 20, 2008

Pierce, J., & Robinson, R. (2004). Strategic Management. New York: McGraw Hill Companies

USDA National Agricultural Statistics Service (2007). Corn Acres Expected to Soar in
2007, USDA says Ethanol, Export Demand Lead to Largest Planted Area in 63 Years
[Electronic Version]. Retreived April 18, 2008 from
http://www.nass.usda.gov/Newsroom/2007/03_30_2007.asp

Yahoo Finance (2008) [Electronic Versions] Retrieved May 15, 2008

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