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T i t l e o f t h e C a s e : K e m C h i c k s Time Context: 1985 Summary of the Case/ Abstract: The Kem Chicks Group of Companies, founded by Mr.

Bob Sadino i n 1970. The Group also includes the core business Kem Chicks Supermarket, as well as KemFoods, Kem Farms. Bob Sadino, owner o f Kem Group o f business started with asmall business that sells eggs and raises chickens in 1970. This thought of having t h a t k i n d o f b u s i n e s s w a s t r i g g e r e d w h e n h e r e a l i z e d t h a t b e i n g a w o r k e r i n a company is just a slow way o f having a good life. So for him to meet the ends he wanted, he started to have his own business inspired by a book on poultry raising given by Srimulyono Herlambang, a neighbor of him. With his wife, Sulami, he was able to make the business in a growing state enabling it to expand in much bigger arena of industry. In fact, between 1971 and 1984, a significant increased in salesw a s a c h i e v e d b y t h e c o m p a n y e n a b l i n g Kem to hire competent workers andadminis trative directors. The attitude of Bob Sadi n o i s a m a j o r f a c t o r i n t h e continuous success of the business during those years. He was able to make his employees his friends and he was able to establish a good rapport on them enabling the workers to become efficient and effective on their work and in 1975, thec o m p a n y w a s n a m e d K e m C h i c k s . B e c a u s e o f t h e c o n t i n u i n g s u c c e s s o f t h e bu siness it has grown to a bigger one and facilitated to expand into other line of products in 1985. The organizational structure was then expanded because they legalized the papers as a corporation. Positions in the organization were occupied by competent individuals like Indah Chaidir, Fais al Amir, Henny Karyadi andc o m p a n y , a l l o f t h e m f i n i s h e d i n o u t s t a n d i n g s c h o o l s w i t h v e r y g o o d accomplishments . Being a corporation now, the company was able to sell its shares to those people who possessed same ki n d o f a t t i t u d e o f B o b S a d i n o . T h e sharehol ders were come from the old-timers or experienced one coming also within the company prior its incorporation. Bob Sadino granted these shareholders to have whatever percentage they want to have since they can pay for it. On the present, the parent company is now called the Kem group, where subsidiaries are focused on various food industries like in supermarkets, poultry and others. But Bob Sadino andc o m p a n y h a v e t h i s i n t u i t i o n i n t h e f u t u r e t h a t r e l a t e s t o t h e g r o w i n g m a r k e t competition. The management o f the Kem group, specifically the subsidiary KemChicks, wished to achieve certain objectives for them to become the yardstick of the economies existing supermarket in terms of meat and other food selling items since Kem Chicks was the starter of the local meat industry in the country. The alternative for this is to choose on the three types of franchise activity. I. Statement of the Objective To maintain and develop a competitive position in the growing industry. To formulate a strategy in order to gain economies scale for existing supermarkets. II. Central Problem How will Kem Chicks expand its supermarket by its own investment while sustaining its growing operations and without putting the quality of their products into a risk? III. Areas of Consideration Strengths Valuable Human Assets Good personnel management

Caters the needs of immediate community. First quality meat The organization is leading Harmonious relationship between employer and employees. Flexibility BOB SANDINO DOESN t HAVE ANY PROGRAMS, BECAUSE HE IS FLEXIBLE . Weaknesses Lack of marketing strategies Unwillingness of Bob Sadino to know the important details of the financial information of the company Weak long-term strategic planning. Difficulty with over-the-counter communication Lack of internal control. No particular designation of job. Opportunities Acquisition of rival firms Diversification of the business. Expansion of the business. Customers word of mouth. Threats Declining price of oil Which has substantial effect on the economy that maylead to s decline in Gross Domestic Product (GDP). Change in customers preferences. Increasing in Bargaining Positions of the consumers, thus,resulting in the increased risks in capital expansion. Investment risk is at high level. Increasing Competition Rising interest rates. Natural calamities. Government regulations, rules and policies IV. Alternative Courses of Action Given the facts examined, the alternative course of action will then focusedon the types of franchising alternatives since it is stated that franchising has been thoroughly studied by group of individuals for Kem Chicks existing problem. 1.Product Distribution.Is the simplest form of franchising contractual arrangement in which Kem Chicks as the franchisor offers the franchisee the right to market Kem Chicks products in an essentially unchanged state within a designated market area. In return the franchisee would pay a fee to Kem Chicks. Advantages Increase in sales volume of parent company. Disadvantages: Will not cater development of Kem Chicks internal management thus it does not support the supermarket as a whole. 2.Enter into a franchising agreement called Entire BusinessFormat franchising. Under this arrangement, the franchisee would be an imitation of whatthe franchisor is. The franchisee would be offered the right tomanufacture, to sell the product, to use franchisors name of trademarkand other symbols, management system, architecture, design, andwould be provided with super vision, a reporting system andmanagement consultation. Kem Chicks would require certain initialfees, continuous fee based on sales (royalty), a management fee,training and consultation fee, and a fee for design and reportingsystem. Advantages:

Kem Chicks will have full control of the business. Security in the protection of the rights and property of thecompany. Disadvantages: Mistake of one franchisee will bear to the image of the company 3.Product licensing arrangement Under this term, the franchisee would be offered almost the wholeoperation of the franchisor. The franchisee would have the right tomanufacture or modify Kem Chicks in a certain area of distribution. Tomaintain its standard product and service quality, Kem Chicks wouldexert tight control over the manufacturing and selling process and set and control specification. In return, the franchisee would pay a royaltyand other fees. Advantages: ure or modify Kem Chicks in a certain area of distribution Disadvantages: -empt all important position in the organization V. Strategy Formulation Considering that the industry is reaching toward the peak of its growthphase, Kem Chicks faces tough competition with a limited choice of land andlocation. Also, an increasing bargaining position on the part of the shoppers,each element of the key success factors should therefore not be neglected.Since the profitability of the investment in a new outlet is highly dependenton the level of sales and cost, each of the success of this investment. Therefore, I have concluded that the best solution to the problem isalternative course of action number 1 which is to enter into a franchising typecalled entire business format franchising because of the following reasons: Franchisee operates exactly the same as franchisor because theentire franchise was provided by Kem Chicks. Kem Chicks will generate different types of income such asmanagement fee, training fee, reporting system fee and otherfrom the franchisee. Privacy of their field of expertise or specialty will be maintainedby Kem Chicks on their own because under this type of franchise, Kem Chicks is the sole provider of all information andneeds of the franchisee upon proper payment. VI. Plan of Action In order to materialize the said recommendation and just like the realprocess in the world of franchise, Kem Chicks should: 1. The franchise relationship is founded upon a contract, which should containall the terms agreed upon. 2. The Kem Chicks must develop first a successful business format (the system),which is identified with a brand name, be it a trademark, service mark and/ortrade name. 3.Kem Chicks must initiate and set a period wherein they will train thefranchisee in the operation of the system prior to the opening of the businessso that the franchisee is equipped to run the business effectively andsuccessfully. Kem Chicks must also assist with the opening. 4. After the business has opened, the franchisor must maintain a continuingbusiness relationship with the franchisee to provide the franchisee withsupport in the operation of the business. 5. The franchisee is permitted, under the control of the franchisor, to operateunder the branding and the business systems developed and owned by thefranchisor and to benefit from the goodwill associated therewith. 6.The franchisee must make a significant capital investment from ownresources. VII. Potential Problems 1.What if there will be a threat of younger employees for which theymanipulate all the transaction of the company prior to theimplementation of the action? 2.What if the action undertaken is not effective for the said company?

3.What if upon the implementation of the action, there is a significantapplications of franchise for which the company lacks inventories fromsuch franchises? VIII. Contingency Plan 1.If younger employees manipulated all of the transaction for their self-interest prior to the course of action, have an emergency audit oremploy a competent independent auditor that will investigate all of theanomalies and to cure immediately the frauds. 2. If the course of action does not work at all, the company can jump intoother alternative courses of actions taking into account their respectiveadvantages and disadvantages. 3. If inventories do not cater all the franchisees, the company can firstfocused on the training side of the action while waiting for additionalinventories needed in setting up franchisees branches.