ARAMARK Managed Service Company: Case Study

Introduction

            The history of the ARAMARK Corporation dates back to 1936 - ARAMARK Managed Service Company: Case Study introduction. This is when Davre Davidson started the Los Angeles Company. Two decades after that, Davidson and his partner Mr. Fishman merged their respective companies and registered it under the name of Automatic Retailers of America or ARA. The firm’s operation basically revolved around the territory of West Coast and Mid-West areas in United States. One of the first prominent signs of growth for the company came in 1961 when the company acquired a Pennyslavanian-based organization named Slater Company that specialized on food service business (Datamonitor, 2008).

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            ARA before continuing further became a public limited company in the first year of 1960. The establishment also penetrated the leisure services industry later in the mid-60s. As the 60s was closing, the company furthermore entered the publication business when it bought out the District News Company that ventured in the magazine and book distribution.

            It would pass several years more until the ARA would begin to look beyond the shore of United States to strengthen its financial portfolio. The first target was Japan and the plan pushed through in 1976 when the company entered a joint venture with Mitsui and Co.

            The growth of ARA to its present position now in the industry can be attributed to its acquisition activities and joint ventures. A decade ago, in 1992, it became a partner with Daewoo Corporation in Korea and even penetrated the market of Spain. To keep abreast with the growing clout of the firm in the business, it acquired the name ARAMARK to reflect this and its commitment to the public consumers. In 1995, the company was again listed in New York Stock Exchange under the ticker symbol of RMK.

ARAMARK as a Company

            ARAMARK as a corporation deals with and provides food and facilities management. It even caters to uniform and career clothing services to business, healthcare, education, government and sports and entertainment entities. So far, the company is already operating not just in its home-base United States but is also enjoying operations internationally in the countries like Chile, Spain, Korea, UK, Germany, Mexico, Japan and China (Datamonitor, 2008).

            The company operates in three major segments namely: domestic food and support services; international food and support services; and lastly, uniform and apparel division. In its operation for food and support services, both domestic and globally, it provides food, beverages in forms of refreshment and specialized dietary supplements. Meanwhile, support services involve facility maintenance and housekeeping. This services and products are also catered to business, educational and healthcare institutions aside from the general public consumer.

              ARAMARK’s career apparel division on the other hand provides its clients sale, rental, cleaning and maintenance services. Furthermore, it also operates by delivering this apparel and other textile products on a contract basis. The company also gives services in almost all the aspect concerning the apparel business like providing safety equipment and accessories. Several of these products are walk-off mats, disposable towels, and cleaning cloths which are all environmentally controlled products.

            As food and service provider, ARAMARK keep abreast with ways on how to facilitate the satisfaction of its consumers and clients. As can be noted, the company is not just merely following the simple rule of giving the best products and services. To further the satisfactions of its clients, it also joined the bandwagon or hugged the philosophy of being environmentally conscious with what it passes on to its consumers and clients. One of these moves is the effort of the company to produce apparel and maintenance products like cleaning cloths and other materials that are environmentally friendly.

New Strategy

            ARAMARK’s operational existence for almost five decades does not stop it from entertaining new business strategies for its business. Since there is a growing competition in the industry and an international economic crisis looming around the corner the company has to keep itself on its toes to parry any unforeseen event that can topple it in its position as one of the leaders in the industry it is involved.

            To follow the ideas the tandem Hambrick and Fredrickson (2005), it is not a surprise that companies are talking about strategy for their organization. To quote them a strategy is “an integrated, overreaching concept of how the business will achieve its objectives” (Hambrick and Fredrickson, 2005). And since the obvious business objective of ARAMARK is to maintain its dominance in the market and in its industry, the company is sure to have several strategies designed to address this objective.

            For one, one of the strategies that the company of ARAMARK is going is the deft maneuver to be keep abreast with the times. What then does this mean? It means that the company is flowing with the signs of the times.

            Since the emerging philosophy among consumer and clients nowadays is the issue concerning the environment, ARAMARK on its own will to survive has started making their products environmentally friendly. It can be said that the company is one step ahead of its competitors since the organization is already addressing what its public wants from its products and services.

Difficulties

            If there are two main difficulties that the company of ARAMARK is experiencing today, it is the stiff competition going on in the industry and second is the increase of operating costs that the company has to shoulder to continue its business.

            For one, there is as stiff competition being thrown at the doorstep of the company by several of its rivals in the industry. In the food and support services division of the firm for example, other players like Sodexho Alliance, Delaware North Companies, Centerplate and Compass Group is taking up much of the chunk of the market.

            More than this, there are also threats emerging in the regional and local service providers that mimics the operation of ARAMARK. The establishment has to compete with in-house food providers and facility services in all its known vertical clients like in business, college and universities, correctional facilities, school districts, public assembly facilities and healthcare institutions.

In its operation of providing uniforms, it has to compete with Cintas Coproration, Unifirst Corporation and G&K Services. In this light, the company then is being forced to enter a price war just for it to hold on to its valued customers and clients (Datamonitor, 2008).

Given that there is already a stiff competition that the company has to look at and address to survive, the increase in operation cost is also a difficulty that the company is surely experiencing. This rise in operating cost is a bane for a company like ARAMARK. What this means in a way is the possibility that the growth of the company can be affected severely by this factor.

Example of the rising cost of operation for the company is the expenses it has to shell out for the production of food, providing wages and other labor-related expenses. This includes worker’s compensation, healthcare costs, state unemployment, insurance, utilities, fuel, pieces goods and clothing. The mere fact that the cost of these materials is steadily increasing over time is a difficulty for the company. Another factor is that the price of oil and natural gas is fluctuating in recent years. Furthermore, it is studied that approximately 76% (Datamonitor, 2008) of the firm’s food and support services revenue comes from the profit and loss contracts, something which it cannot pass on to it customers.

Opportunities

Nevertheless, inspite of these threats to the company by growing competition and increase in operational expenses, opportunities are still knocking on the doorstep of the company. There is for example the opportunity for the company for acquisition and collaborations with other companies that are also aligned with the business of the organization.

The firm as an example acquired R&B Coffee, a service company concentrating on office supply, in 2007. The company also entered into a 30-year partnership with New York Mets in the provision of food, beverage and other retail merchandise for Citi Field.

It is also in 2007 that it bought a regional uniform rental companies like Overall Laundry Services and STAR Uniforms. More than that, just this year, ARAMARK ventured into a partnership with Pittsburgy Penguins (again like what it does with New York Mets) to supply food, beverage and other retail merchandise to its customers.

References

“Datamonitor,” (February, 2008). ARAMARK Corporation: Company Profile. Datamonitor, USA

Hambrick, D.C. and Fredrickson, J.W. (2005). Are You Sure You have a Strategy? Academy of Management Executive. Vol. 19 (4) 51-62

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