CASE STUDY

CATHERINE’S CONFECTIONARIES
Catherine Horton was an expert cook, and she immensely en- joyed the creative freedom
of developing new dishes. Her spe- cialty was desserts. For years, her friends had raved
about her creations, and many had suggested that she go into business for herself. About
seven years ago, Catherine took the plunge. At first, she worked out of her home,
generating sales through word of mouth and a small advertisement in the Yellow Pages.
Most of her initial sales were for special occasions, such as weddings and banquets.
Catherine would plan with the customer, usu- ally weeks in advance. This gave her plenty
of time to order the ingredients and prepare the desserts beforehand. Soon Catherine
found that she was making the majority of sales to other businesses, such as restaurants
and specialty gro- cery stores. These business customers would order more regu- larly,
but they also wanted Catherine to quickly adjust the mix and quantity of items she made
for them. These customers also were more price sensitive than individual customers.
As sales continued to increase, Catherine outgrew the abil- ity to use her own kitchen.
She thought that if she could in- crease sales just a little more, she could quit her regular
job and work full-time in the dessert business. Things didn’t work out exactly as planned.
In order to find a kitchen suitable for her needs, Catherine leased a space that had been
previously used as a restaurant. Even though this was less than ideal, she could not afford
to build and equip the perfect site for the business. Not only was the lease payment more
than Catherine anticipated, but also there was a large space she had no real use for (the
former eating space). Cathe- rine decided to use the space to generate extra revenue by
mak- ing extra desserts and selling them on a piece-by-piece basis to walk-in customers.
This forced her to add two salespeople. Catherine had hoped that hiring the salespeople
would free her from the walk-in business, but this was not the case.
Because the walk-in business was fairly small, especially at first, she could afford to pay
only minimum wage. Catherine found that she was spending much of her time training
and supervis- ing these folks, and because the minimum wage caused high employee
turnover rates, the hiring and training never stopped. Catherine soon found that she did
not have enough time to manage both the make-to-order customers and her new walk-in
business. So Catherine hired a local homemaker (Mary) part-time to help make the
desserts and a recent busi- ness school graduate (Tom) to keep the books and manage
the walk-in business. While the extra help was greatly appreciated, it made Catherine’s
financial situation even more tenuous. While taking a rare day off, Catherine reflected on
her situation. After almost seven years, she was getting burned out, was no longer
enjoying her work, and was putting in 15-hour days at least six days a week, and the
business was still barely profitable. She felt she had been pulled away from the origi- nal
focus of the business (the focus that she enjoyed) and now found almost no time to be
creative and attempt new recipes.
Questions:
1-What are the three major types of customers Catherine serves? How do they differ
from one another? What do you think the order winners are for each group?
2. Consider Catherine’s decision to lease the restaurant space (a structural decision).
Was this decision consistent with the needs of her different customers? Why or why
not? How did this decision change Catherine’s business?
3. Consider Catherine’s initial decision to hire unskilled labor to help with the walk-in
business (an infrastructural deci- sion). Was this decision consistent with the needs of
her different customers? Why or why not?
4. Catherine is clearly unhappy with the way things are going right now. What would you
suggest she do? What infor- mation would you like to have before making a decisio