Posted: May 25th, 2022
Organizational Case Study — Nutri Systems
Company Background – Nutrisystem is an American company that provides weightloss products and services. Originally, the company’s sales and marketing model focused on Brick and Mortar stores, in-person counseling and exercise sessions, and the sale of prepackaged supplements and food products retail. In 1999, however, largely due to the number of diets on the market and exhaustive competiton, Nutrisystem began selling online with support through 800#s and email. The company expanded to QVC in 2001 and Costco since 2009 (www.nutrisystem.com).
The foundation of the organization is portion-control and a diet that has a low glycemic index. Separate plans are offered for men and women that support a 1-2#/week loss. All plans have love sugar, cholesterol and sodium and cost from $280-400/week. Users must also purchase additional fresh items locally, but 2009 clinical trials showed that persons with Type-2 diabetes consistently lost more weight and had decreased symptoms after 3 months than the control group (www.nutrisystem.com).
Open Systems Theory in Organizations – OST is an organizational diagnosis model that is used in evaluating an organization in order to determine whether change is desirable. The model considers organizations as social systems which are dependent and affected by the environment in which they exist. Open systems theory has inputs, throughputs (transformation) and outputs and has a feedback loop that connects organizational outputs to renewed inputs (Organizational and Diagnostic Models, 2008). The model is important when an organizational wants to diagnose external variables that affect the business. . The model recognizes that organizations are affected by factors within and outside the business and is used to answer whether there is need to change organizational processes and strategies. Open systems theory is used as an effective method to solve organizational problems. It is also used t develop effective leadership, communication, planning and as a means to improve organizational performance.
Open systems theory can be used in NutriSystem, Inc. To determine whether internal operations are running optimally. An open system will evaluate whether different functions, operations and parts in NutriSystem are aligned well to adapt to internal and external factors. NutriSystem operates in an environment that is highly competitive and is influenced by social, political and economic factors, the model can be used to investigate how the environment influences the company and whether there is need for change.
Diagnosis and Strategy – Organizational diagnosis investigates an organization and provides the differences between ‘what is’ and ‘what should be’. It is therefore essential to strategy because it determines whether the current strategies are effective and can be applied in strategy development (Lowman, 2005). Findings generated from the diagnosis can be used to develop a strategic plan that will address all the issues raised. NutriSystem management can use organizational diagnosis to investigate whether current strategy is appropriate and effective. Organizational diagnosis will determine whether the company’s strategy is efficient when dealing with customers and competitors. The management could use OD to analyze its strategy and create an improved strategy when necessary.
Organizational Structure- In simple terms an organizational structure is the way an organization arranges itself. An organizational structure is mainly represented graphically using a chart and most organizations have a hierarchical structure. Organizational structure provides members’ duties and responsibilities. The main components of an organizational structure are operation core, strategic apex, support staff and middle line (Naqshabandi, 2011). NutriSystem is headed by the CEO, then followed by CFO, CMO and executive Vice President, operations and finally directs. The structure is line with the company’s strategy and therefore is used to ensure the organization performs to the desired outcomes and operations are efficient.
It is important for an organizational structure to be in line with strategy as it provides duties and responsibilities and this will affect company strategy. When an organizational structure is not in line with set strategy it leads to inefficiencies and reduced effectiveness thus the company will not attain the desired results. By allowing for a broader and more flexible management base, NutriSystem was able to successfully transition from one business model to another quite successfully.
Market Strategy and Saturation- When a product becomes profitable it attracts an increased number of players and will continue to do so as more players join due to profitability till the market is saturated. A good market strategy can be used by an organization to penetrate and increase market share and also to maintain competitive advantage. Market strategy is related to market saturation as it is used as a means to ensure continued survival and profitability in a saturated environment (Liu & Yang, 2008). Price can be analyzed using various techniques and comparison to competitors is also important sine the market is saturated. Cost-volume-profit analysis can be used to determine pricing as it will provide the quantity and pricing amounts that are optimum to make profits and penetrate the market. Pricing and product can be used to ensure continued survival in the market. Comparison of competitors’ prices is essential in order to use price as a strategy by setting prices below others thus ensuring market penetration. Product can be used as a strategy by developing products that have higher quality compared to competitors thus ensuring increased market share.
NutriSystem is third in the market niche of diets, behind Weight Watchers and Lifetime Fitness; and just about even with Town Sports Holdings, which is also a fitness club that offers its own brand of diet products. Revenue has held steady, with the exception of Q1 2011, but overall income is negative at almost 30%. Average revenue over the last two years has been about $422 million, with a current ratio of almost 4, meaning it has more reserves than needed at this point in time. The major issue with NutriSystem based on the organization modeling above, is heavy competition and the volatility of market goods (wheat, dairy, corn) (NutriSystem Investment Guide, 2011)
Conclusions- Clearly the marketing and distribution departments perform the builk of strategy with this company, driven by a niche competitiv system no doubt. In some ways they are hybrid — offering services free, charging for meals, and meal planning. With the concern over obesity part of the challenge for developing and developed countries in the 21st century, it is not likely that the company will face a lack of audience. Similarly, this large audience engenders more competition; and with rising costs in food and resources, Nutrisystem will need to relay on continued price strategies, core competencies, additional an mulitdimmension.
Organizational and Diagnostic Models. (2008). Retrieved December 2011, from Leadersphere.com: http://www.leadersphere.com/img/OrgmodelsR2009.pdf
NutriSystem Investment Guide. (2011, December 17). Retrieved from Wikiinvest: http://www.wikinvest.com/stock/NutriSystem_(NTRI)
Liu, Y., & Yang, R. (2008). Competing Loyalty Programs: Impact of Market Saturation. Journal of Marketing, 73(2), 93-100.
Lowman, R. (2005). Importance of Diagnosis in Organization Assessment. Manager Journal, 8(1), 17-28.
Naqshabandi, M. a. (2011). A Study of Orgqanization Citizenship Behaviors. International Journal of Business and Social Science, 182-93.
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