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Dennis

Business Strategy: Home Delivery Solution for Retailer Chain

Case information

Difficulty: Advanced

Candidate-led

< 100 Ratings

Times solved: 2.1k

Competitive response Growth strategy Mergers & Acquisition Operations strategy

Case Prompt:

Kadara, a privately-held US retailer active in the Midwest with annual sales of approximately USD 3 bn, is trying to figure out a solution to last-mile home delivery. The company currently operates out of 100 brick-and-mortar stores selling primarily groceries and home essentials (e.g. paper towels, diapers, blenders). They also sell all non-perishable products offered in their stores through their website. Currently, all sales from their website are delivered via 3rd parties (e.g. FedEx, USPS), picking up products from regional distribution centers, and their minimum delivery time is next day. Kadara does not have out-of-store delivery options but they know that services such as Instacart and Postmates are being used by customers to arrange home delivery of groceries. Kadara's management believes that they are, at best, leaving money on the table due to their limited home delivery options and, at worst, at risk of being de-selected by customers as they move towards delivery options.

Kadara’s future CEO, the granddaughter of the founder, has jumped on the chance to move the company into the future. To that end, she has developed a recommendation to Kadara's board to buy Dallas Drone Technologies (DDT). DDT designs, manufactures and operates small-to-midsize flying drones. Their initial models focused on aerial photography but they added goods movement capabilities about two years ago. The future CEO believes that drone delivery is key and that Kadara should buy DDT for USD 100 m to become a leader in the space.

Kadara's current CEO would like your help specifically in evaluating the option to buy DDT and generally in how to think about home delivery and the future of their business.

Overview of All Exhibits

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Acquisition Decision

Should Kadara buy DDT? Why or why not?

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This case is purposefully heavy on exhibits but light on numbers with no need for extensive calculations. The objective is to push candidates on their strategic thinking and their ability to structure their thoughts and arguments. Candidates should be given enough time to digest the exhibits. However, they should not try to turn this into a valuation case or dig deep into profitability. Time value of money can be ignored.

Note for Interviewer

Show Exhibits 1-6 to the candidate and grant some time for them to review the material.

Candidates can make a case for or against buying the drone company but should clearly justify their recommendation.

Strong candidates will consider/evaluate

Kadara's ability to manage and integrate a drone technology company and how a drone company would even fit with a grocer's "Essence"
the ramp-up and acceptance by customers and regulators of drone deliveries
other means to gain home delivery capabilities (is buying a drone company the best way to do this?)
the product capability and core use of the drones today (home delivery is not yet a widely established use case)
the fact that Kadara has only been generating 3% of their sales through their online channel thus far
that Kadara is not a player comparable to the likes of Amazon or Walmart due to its geographical focus and limited size of its footprint

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Strategic Recommendation

With or without the acquisition of DDT, what do you recommend Kadara do next with regards to home delivery?

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Business Strategy: Home Delivery Solution for Retailer Chain i

Case Prompt:

Acquisition Decision

Strategic Recommendation

Business Strategy: Home Delivery Solution for Retailer Chain