Nutrisystems and Feedback Loops
Company Background -- NutriSystems, Inc. was founded in 1972 and is headquartered in Pennsylvania. It is a commercial provider of weight-loss products and services, until 1999 offering brick-and-mortar weight-loss counseling and products and then moving to a direct to the consumer model through the Internet, mail order, and phone. Since 2001, the products have been featured on the QVC shopping network and most recently (2009) in Costco stores. Most recent (2010) financial data indicates gross revenue of $510 million with net income of $33 million, down from 2006-2009, likely based on external economic factors (nutrisystems.com, 2011).
Fiscal Performance - NutriSystems revenue has moved from $565 million in 2006 to $509 million in 2010, with spikes of almost $800 million in 2007 and a drop to $686 million in 2008. What is significant is their operating income percentage:
Year
Revenue
Operating
Net
(millions)
Income
Income
2006
565950
133056
23.5%
85130
15.0%
2007
776767
162929
21.0%
104152
13.4%
2008
686181
91353
13.3%
46253
6.7%
2009
524618
49434
9.4%
28790
5.5%
2010
509515
53215
10.4%
33637
6.6%
Note that each succeeding year competition and economic pressures have resulted in a diminishing percentage of the ROI for the company, while it is still being forced into spending more money on marketing, sourcing, and information materials. Still, in this industry and economy, a 7% margin on net income allows the company to remain health and still within a growth mode.
Organizational Models (Background) - Within any organization, there are numerous models and permutations that offer explanations to the performance of that model. Open systems theory, for instance, focuses on the manner in which a system continually acts with itself and its environment. It is a diagnostic model that is often used in evaluating an organization to determine whether certain changes are viable. The model uses interactions that may take the form of information, energy, material transfers into our out of the system -- all dependent upon the type of organization under consideration. When dealing with companies, the model considers organizations as unique social systems that are dependent upon the entire paradigm in which they exist. The open systems model has inputs, transformations (or throughputs) and outputs and has a feedback loop that connects the organizational outputs to renewed inputs. The model is quite effective and important when an organization needs to analyze and diagnose external variables that tend to affect the business (Emery and de Guerre, 2009).
Open Systems and Feedback Loops at NutriSystems -- Open systems theory is used within organization to carry out the appropriate diagnosis of input/output loops that affect the performance of the business. Specifically, we can use it to investigate the efficiency, efficacy and/or flexibility of the internal operations and how external issues affect the business. The model and feedback loops particularly recognize that organizations are critically affected by factors both within and outside the business and tends to uncover whether or not organization changes are necessary in order to solve some of the uncovered issues. Additionally, the feedback loop model is used to develop more effective leadership, communications, planning, and strategies as a means of improving organizational performance (Organizational Diagnostic Models, 2008).
In the case of NutriSystems, Inc., open systems may be most effective in determining whether the current model is working; whether different functions, operations, and integral parts within NutriSystems are aligned well to adapt to internal and external factors. This is critical because the organization operates in an environment that is highly competitive and is influenced by social, political and economic factors (Senge, 2006, pp. 83-91). Organizationally, NutriSystems should look at open system feedback loops in order to prevent surprises and evaluate trends in organizational diagnosis and strategy, market strategy and saturation, cost / and volume profit analysis.
Loops-
Issue
Loop
Analysis
Organizational Diagnosis and Strategies
NutriSystems 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...
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