Introduction
The intended acquisition of Arugula Grocers by your company Evergreen Natural Markets is not only unique as it is part of Evergreens Core strategic plan but also extremely novel. For a start, Evergreen has grown into the behemoth it is today through carefully planned strategic acquisition of other stores. It is important to note, however, that Evergreen started by launching its own Natural Grocery Store, which expanded to become the chain it is today. Hence the company has the capacity and ability to grow the requisite market. However, this acquisition is mainly limited to Rockies region and primarily focused on individual stores, mainly mom & pop stores. Further, Evergreen adopts the store into its supply chain system for most agricultural products through its warehouse system. Quality control is also critical to Evergreen as high quality is the main basis for the power of the Evergreen brand hence, Evergreen takes over quality control issues for the acquired stores. Evergreen also ensure that the employees of the acquired stores get proper training based on the Serve Safe Certification program. To the extent that Evergreen is acquiring yet another store or set of stores to expand its revenues and scope of operations, the Arugula deal can be said as ordinary. Other factors about Arugula including size, location, management systems, leadership and loss-making, would almost automatically eliminate it from being a potential Evergreen acquisition. Based on the foregoing, the intended acquisition will not just need to change Arugula exponentially but it also has the potential of bringing change, and perhaps even chaos to Evergreen.
The Systems and Processes that Support Evergreen’s Acquisition Strategy
A careful analysis of all the information that is available about Evergreens acquisition strategy shows that it follows a very careful modus operandi . Prior to making a decision to acquire, Evergreen carefully evaluates the company, mostly a single store outfit and will only move to make a purchase if they like what they see. The word “like” as used in the statement reflects that the evaluation process is not just scientific, based on data as it is also based on an almost emotional content evaluation. After all, Evergreen is a family business which is a family in itself and any acquisition is akin to an addition to the family. Evergreen begins by evaluating the target store, its location, revenues, and potential. After that, there is the evaluation of the management, which is a typical mom and pop store involving the actual proprietor of the store. The evaluation entails not only the management abilities of the manager based on how systems in the store are run but also leadership evaluation based on the relationships between the manager and the internal and external stakeholders of the company. For example, a manager who is very good to the customers but handles the employees poorly would present a red flag for Evergreen. It is only after all the above parameters are evaluated and present satisfactory results that Evergreen considers making a proposal for the acquisition of a store.
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Strengths and Weaknesses of Evergreen’s New-store Integration Process
Among the primary prerequisites of the Evergreen integration process is allowing an element of autonomy to the management of the local store. The prerequisite has the primary advantage of being a deal-closure with many store managers indicating that they agreed to the Evergreen acquisition because of the promised autonomy. However, it also eliminates the potential for operational uniformity at Evergreen. For example, a similar product may have different prices at different outlets while similar employees are remunerated differently based on the whims of local management.
Evergreen also takes over most of the supply chain management, apart from locally available supplies and also the quality control for supplies. This approach has the advantage of ensuring that the quality bar upon which the Evergreen brand is predicated is maintained by the acquired stores. Inventory costs are also exponentially reduced by the advanced supply chain system established by Evergreen under the concept of economies of scale. Conversely, taking over supply chains takes a ways business from some of the local suppliers of the company, a fact that may affect the local stores’ relationships with its customers, more so in small towns.
Finally, Evergreen provides a comprehensive approach to human resource management to all its acquired branches. The approach entails fair, balanced, and respectable treatment of employees by the management, proper remuneration and also hefty bonuses. The primary advantage herein is that customer satisfaction is the second most important source of value for Evergreen customers, after product quality. Happy and satisfied employees treat customers well thus augmenting customer satisfaction. However, Evergreen seems to be overdoing the employee bonus scheme. For example, in 2011, 65% of the company’s net income went into the bonuses. Treating employees well has thus been coming at an unsustainable cost.
Recommendations Regarding the Integration of Arugula Grocers
Acquisitions are always a two-way street hence the acquisition of Arugula will have an impact on both Evergreen and Arugula itself. Each impact will eventually affect Evergreen as both companies are eventually going to be under one banner. Hence it is imperative that the acquisition is done meticulously right.
The first recommendation is for proper communication within Evergreen to enable the Evergreen team support the Arugula acquisition. Currently, the Evergreen team neither understands nor supports the acquisition. Unless that situation changes, not only will the acquisition fail but also Evergreen itself will be adversely affected in the process.
The second recommendation is that Evergreen needs a new rulebook to handle the Arugula acquisition. This rulebook should be exponentially different from the one used in the other stores. For a start, under the Evergreen acquisition rules, Arugula would never have qualified inter alia due to its size and geographical location. Secondly, Arugula is managed on an inverted pyramid system where all decisions are made at the top. Finally, Arugulas business approach clearly does not work as it has made loses three years in a row, a dangerous sign.
The third and most important recommendation would be to avoid directly incorporating the affairs and activities of Arugula to the rest of the company. There is no way that Arugula can be properly rehabilitated enough to join the Evergreen team, without either completely transforming it, or making the companies acquired earlier feel that they have been treated unfairly. It is noteworthy that the Evergreen system is all about transparency. The company can take advantage of the fact that Arugula is not from the Rockies by using it to create an extra-Rockies Division. The new division will enable Evergreen to gradually reform Arugula without creating chaos in the current branches. After the reformation process , Arugula can then be integrated.
Conclusion
Evergreen made an extraordinary move when it acquired Arugula thus, it needs to adopt extraordinary measures to run it effectively as part of the Evergreen family. Arugula is in Las Vegas, Nevada thus outside geographical area of operation for Evergreen. Secondly, Arugula is not a mom & pop store as it is a collection of seven stores whose revenues are over a third of Evergreens revenues. Finally, Evergreen acquires successful stores to shore up its revenues yet Arugula has been making losses for three years in a row. Employees within Evergreen are already wary about the new acquisition, why it was acquired, and how it will affect their relationship with Evergreen. It is imperative that these fears are eliminated through proper communication. Further, the process of acquiring Arugula cannot follow the laid out path upon which Evergreen has been acquiring stores due to its manifest difference from the acquired stores. Just as Arugula is unusually acquired, it must now be unusually managed, if possible at an arms-length away from the rest of Evergreen, if only in the interim.
