The Community Aspect of Business

The major issues in the case were leadership and team building issues that were impacted by environmental factors. A PESTLE analysis was sufficient to show that this was true. In the L.A. Arts District, Wurstkuche had done well because it had invited patrons in to be part of the building process. The community and the workers were all connected from the beginning, all part of the same journey, as Wilson stated: “We all created something together” (Knapp, Orr, 2017, p. 4). In Denver, this process was much less organic and had a more business-type feel: everyone was hired to do a job; the love of labor and bond of family that helped to establish the Wurstkuche in an up-and-coming district was not there the same way it had been in L.A. The environments were different, and thus the outcome was different. Every place has its dynamic, its own needs—and Wilson and Pitruzzelli were able to see that in the Arts District, mainly because Wilson went to school nearby and was aware of a need for a place where young people could go to hang out, enjoy good but simple food, and have a nice beer. The area needed a good, solid social setting like that which the two entrepreneurs offered. In a sense, the two were not just opening a business but were also adopting a corporate social responsibility perspective: meeting a need in the community and projecting good vibes and good will among the patrons in that region by sharing their struggles with them in the early stages. This allowed fast bonds to be made and for everyone to be pulling together for the same end: all stakeholders were made to feel like they were involved in the process and, ultimately, like they were all on the same team. It wasn’t just Wurstkuche that felt it had a responsibility to provide a social outlet in the District, but also the people there who felt they had a responsibility to provide support to Wurstkuche.

In L.A., the two “entrenched” themselves in the community (Knapp, Orr, 2017, p. 5). They received some initial good press that brought more light on their endeavors and lit a spark under patrons seeking out something new. The bar also benefitted from new social media apps and sites like Yelp, which allowed anyone and everyone to be a food reviewer. As Cousins stated, it was “a place people wanted to be in”—it was the perfect social setting for young, serious Millennials in need of a social environment that they could identify with and call their own. It was the perfect representation of their generation and their cultural tastes—and, best of all, it filled a gap in the neighborhood.

As Ganescu (2012) notes, corporate social performance from a contingency theory perspective allows one to see how environments impact leadership and organizational achievement—and that argument certainly applies to the case of Wurstkuche in L.A. A quick PESTLE analysis of the setting shows that the environment in the L.A. Arts District was perfect. The politics were liberal and creative. The economic incentive was there: the district was entering into a revitalization phase. The social element expressed a need for this type of business. The technological factor was minimal and provided an escape from the tech-heavy world of the Millennials (but at the same time, the new tech of social media helped generate interest in the company). The environmental factors were an obstacle, because of zoning issues in the beginning, but the obstacle and its challenges were shared by the company leaders with the company’s patrons, who could see that the business owners were doing their hardest to keep the bar going—and patrons liked being part of that process, as they began to feel like they were true stakeholders too. The legal factors were similarly challenging, but they did not deter the two entrepreneurs from opening shop and proceeding to just sell sausages while they worked on ironing out the other legal issues relating to the liquor license. Cousins said the situation worked so well because Wilson and Petruzzelli had no egos to get in the way of success—but that might not necessarily be totally true. As Petrenko, Aime, Ridge, and Hill (2016) show, corporate performance can be tied to the ego of CEOs in a positive and effective way. And when corporate social responsibility and corporate financial performance come together under the influential factor of the leaders’ egos, the right formula for combustibility can be achieved to send the entire organization into flight.

In Denver, it was a different story. The team was not gelling, the managers were not effective, and the workers “were underperforming” (Knapp, Orr, 2017, p. 11). There was no accountability and employee turnover was high. The scene just wasn’t right for the type of bar Wilson and Pitruzzelli had to offer. The market revolved around sports and Wurstkuche was most definitely not a sports bar. Workers felt it—the place did not fit in with the Denver scene and as a result, morale was low, with workers essentially disappearing after a short time on the job, never to be seen again. As Wilson stated, “We didn’t have the strong relationships we do in L.A., plus a new restaurant was opening every day in Denver, so there was a lot of competition. We really underestimated the value of our personal networks in L.A. to launch a business” (Knapp, Orr, 2017, p. 10). In other words, Wilson and Petruzzelli were attempting to apply a business model that worked in one environment to a region that had a totally different environment, which would have been revealed with a PESTLE analysis. The circumstances were not the same, and from a contingency theory perspective, the expected outcomes would only be possible by finding a leader who could fit this particular environment and its needs. Wilson and Petruzzelli were out of their depth, out of their sphere of familiarity, and out of touch with the local residents and culture. They were making the same mistake that Wal-Mart was making when it attempted to launch in Germany and Africa: it simply did not know how to fit in or stand out (Rao, Purkayastha, 2014).

The Wurstkuche team should approach its expansion strategy in the future first by locating regions and settings in which their business could fit nicely, instead of attempting to wedge their business into a region where so many other companies were trying to do the same thing. It is important to remember your roots and what helps to determine your success: first, there has to be a need—and Wurstkuche filled that need in the Arts District. The young Millennials were looking for a new social setting that could provide them with a way to relax and take their mind off their stresses. The environment was perfect for what Wilson and Petruzzelli were trying to do.

It is also important to be able to manage “the opportunity cost of their time and energy” as CFO Cousins states (Knapp, Orr, 2017, p. 11). Wilson and Petruzzelli and their families were very hands-on when opening and developing Wusrtkuche in L.A. That closeness and that ability to find support from such intimate relationships helped create an environment in which opportunity cost was low. They did not have to risk much in terms of personal time and energy. No precious moments were lost trekking from one state to another. Everything was immediate and within reach. This was a business model that worked for them and could be applied in settings where there was a community need for such a familial and communal approach to establishing a great social scene.

In a place like Denver, Wurstkuche was just out of place: it didn’t address any particular need or satisfy any particular brand; it was an example of the brand attempting to fit into an environment where it had no moorings, no connection to the people or the culture. Future expansion should be dependent upon considering the social responsibility aspect of the organization: what can it do for a community in order to bring consumers into the bar and its development so that they feel like stakeholders—like family? This is the recipe for success that Wurstkuche should follow; it served it well in L.A., and it could make magic happen for them again in similar situations.

References
Ganescu, M. C. (2012). Assessing corporate social performance from a contingency
theory perspective. Prodedia Economics and Finance, 3, 999-1004.
Knapp, T., Orr, J. (2017). Bratwurst, beer and business: Planning for growth at
Wurstkuche. Lloyd Greif Center for Entrepreneurial Studies, 1-16.
Petrenko, O.V., Aime, F., Ridge, J. and Hill, A. (2016). Corporate social responsibility or
CEO narcissism? CSR motivations and organizational performance. Strategic Management Journal, 37(2), pp.262-279.
Rao, A., Purkayastha, D. (2014). Wal-Mart in Africa. IBS Center for Management, 1-
11.