The first problem I'm noticing in this case is the effort being put forward to diversify from their core competence, making confectionery products. I do understand that it may be economically sound to diversify into markets that are complimentary to your core where economies of scale could be realized. But in this case it seemed like Chupa Chups was trying to build a kingdom where everything they needed would be supplied by an internal source.
The scenario where Chupa Chups partnered with the bread baker to make cakes was a great use of their core competence being leveraged for other revenues. In this case, there were common resources required for both the candies and the cakes that Chupa Chups didn't have to recreate because of their presence in the industry.
There were other instances where Chupa Chups developed its own distribution system for the products. I feel that there were opportunity costs involved with doing this that could have been defrayed by outsourcing the distribution and investing that capital into making candy.
There are two options being recommended that will provide a solution to this problem. The first one assumes that Chupa Chups has a competitive adv...
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...exists within the organization. Also, the meetings that will occur with the virtual teams should probably be no more frequent than once a month.
Impact to Bottom Line:
There will be a cost associated with either solution that will impact the bottom line in the short term. Nevertheless, I feel that there will be intangible benefits realized from this sharing of information that will indirectly have a positive impact on the bottom line.
I recommend that Chupa Chups diversify and gain economies of scale as suggested in solution two for the first problem. Since they have a huge distribution system, they would have already learned lots about distribution systems that can be incorporated on other customers.
As for the knowledge sharing, I feel that it's important to implement both solutions to gain the full effect of economies of scope.
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