PART A – Strategic Management Case Study for Wimm-Bill-Dann


 


Introduction


            Wimm-Bill-Dann Foods is one of the largest dairy food manufacturers in Europe. It was founded in 1992, and since then, it produces a wide variety of branded products, including dairy food, such as milk, butter, cream, sour-milk products, cheese, yoghurts, and pudding; juices and beverages, such as juice concentrates, juice-based drinks, and berry-juices; bottled mineral water, baby food products, and products for nursing mothers. Its headquarters is located in Moscow, with 36 other production sites in 26 cities in Russia. Its popular brands include “J7”, “Agousha”, “Jolly Milkman”, “Favourite Garden”, “100% Gold Premium”, and “House in a Village”. Currently, it sells its products to independent wholesalers and distributors, SME’s, supermarket chains, groceries, and restaurants ( 2007).


            Since 1999, to answer to the shortage of cattle, the company has been an advocate of the Milk Rivers program, leading to a significant increase of sales and production from 26% to 45% between the year 2000 and 2004. As its competitive advantage, it employs a strategy of producing dairy products in the region where they are consumed, thus, contributing to its strong production base in the Russian regions. Currently, it has over 18,000 employees in its production, having significant roles in keeping the mission of the company. This mission involves helping the entire family live healthier through offering their nutritious and delicious products ( 2007).   


Strategy Position of WBD


            The macro environment of any organization includes external factors, such as the economy, demographics, culture, politics, natural resources, and technology (1999). These factors must be determined, as they largely and significantly contribute to the success and the problems being faced by the organization, and thus, responsible in Will-Bill-Dann’s (WBD) strategic position or competitive advantage in the market. In terms of its external or macro environment, WBD excelled by taking advantage of its economy, demographics, technology, and natural resources. Despite the effects of the Asian Economic Crisis in Russia and its difficult adjustment in the change of its market system, WBD took advantage of the fact that Russia has one of the biggest market in the world in terms of the food market, specifically in the dairy and juice markets. The reforms and collapse in the Russian economy reduced the imports of juices, thus, giving a chance for WBD to take over the juice market in the country. The economy of the country somehow restricted the production and manufacture of products of the company. However, because of its strategic position in terms of its natural resources, the company was able to surpass the crisis. The company also strategically positioned its manufacturing plants where sources for dairy products, such milk and cheese can be bountifully obtained, giving the company its advantage over its foreign competitors. In this regard, the company had been able to position its production facilities in such a way that it would be able to obtain bountiful raw materials for its production. In this regard, the company had been successful in both utilizing its natural resources, with the support of its manpower, creativity, resourcefulness, and technology. Such success would not have been observed without its technology, employing innovative product development, distribution, quality, packaging and marketing (2005) all at the same time. The efficiency, creativity, and resourcefulness of the company had been their primary tools for going through the economic crisis affecting Russia, along with the intense competition from other foreign dairy and juice manufacturers.


In analysis of WBD’s competitive positioning that affects the ability of the organization, the five-force model of competitive positioning can be used. The use of this model enables realization and analysis that all the five forces listed in Porter’s model have significant effects on the overall performance of WBD in its industry. It also enables the analysis of the overall capability of an organization to respond to the different crises that may come their way, which would affect their operations and productions. One of the forces is competitive rivalry, which pertains to the ranges of products being offered by WBD and its differentiation over the products of its competitors. In this regard, WBD has a significant competitive position over its competitors, as it offers a very wide range of products that are not offered by other dairy and juice manufacturers. Second factor is new market entrants, which refers to the geographical factors that affect the production and distribution of dairy and juice products of WBD. This involves offering the products to other geographical locations, which the company was able to succeed from, as it was able to strategically place its manufacturing plants to areas that would not only enable it to obtain bountiful raw materials, but reach its consumers as well. Product and technology development allows WBD to maintain its products at low prices, based on the trends in the economy and market. This factor is the most significant aspect in any organization in this generation, given the important role technology plays. Organizations that do not take advantage of the capabilities of technology need to rely heavily on costly human resources to fulfill the same functions (). Supplier power pertains to the reputation and quality of the products, and the relationship that exists between the company and its customers, while buyer power refers to the powerful choice, cost, and demand of the consumers on the products of WBD ( 1998). From this analysis, it can be perceived that the competitive advantage of WBD in the market is determined by the effective and efficient interplay of such factors.


            The influence and support of major stakeholders also determined the competitive positioning of WBD. Major stakeholders include its internal and external stakeholders, performance measurement techniques, financial, innovative, business, and customer perspectives, and its competencies, capabilities, and resources. These stakeholders of the organization refers to the fact that individuals have some ‘stake’ in the organization, as they are engaged in some kind of exchange relationship with the organization, whether it be for capital, information, or resources. The expectations of stakeholders vary significantly according to their relationship to the firm, and thus it is important for strategic leaders to understand what each requires in exchange for their investment (). The company would not have been able to meet the demands of the customers during that time without the support, organization, discipline, and expertise of both its internal and external stakeholders. In this regard, labor, skills, hardwork, time, and effort have been the key characteristics exhibited by the employees, staffs, and suppliers of the company, thus, enabling them to effectively and efficiently meet the increasing demand of the public. In addition, the competitive positioning or advantage of the company lies on the fact that it has able to healthily and actively participate in competition brought about by Western companies by producing new product lines and by changing its corporate structure. Thus, in this regard, the internal factors can be deemed a successful means in terms of the continuously changing external environment of the organization.


 


Diversification and Acquisition in WBD


            The aim of the organization to further diversify its line of products resulted from the objective of WBD to formalize its management structure, thus, effectively focusing on strategic management and giving control of production facilities to managers and directors of the company. It has been reported that product diversification is defined as the production of several different commodities by a firm, in different physical commodities, and the production and sale of the same commodity at different times of the year (1976). It is typically more expensive, as it involves an advantage based on distinctive product attributes that would offer benefits that others do not (2003). In this regard, it can be assumed that product diversification for WBD may present financial and resources problems, given the only recovering economy of Russia during this time. However, in the case of WBD, it can be perceived that significant increase in profits were being enjoyed by the company, thus, having adequate resources to support a wide range of product diversification. In support of this, it has been emphasized that signs of improvement appear widespread and optimism has returned ( 2000).    


            Another significant event in the history of WBD is the potential acquisition of Danone in 2003 due to the significant increase of Danone’s share in the stocks of WBD and the continuous exploration of WBD’s stakeholders of mergers with the company. It has been reported that acquisitions and buyouts can introduce untold opportunity for growth, cost savings, and competitive advantage, which can be achieved through alliance of people, processes and information within the newly combined organizations ( 2005). However, for this particular situation, the buyout intention and negotiations have been deemed to produce negative results instead of positive ones. With reference to the economy of Russia, it has been written that dynamic growth has been observed in all economic and industrial sectors during this time (2005), thus, indicating that buyouts from foreign companies might not be needed. In this regard, the internal processes of the organization, including its management must be particularly and significantly modified in order to maintain and sustain the productivity and operations of WBD.


 


Strategic Options of WBD


            One of its open opportunities is improvement using advanced technologies in terms of its operations and production processes. In today’s dynamic and fast-paced changes in terms of technology and information, information systems can be used to support specific functions and operations in the organization, given limited resources, and security vulnerabilities that endanger the essential information-based functions needed to be addressed (2003). In relation to the use of information systems is the update and modification of its IT processes and equipments, to guarantee that its computer systems will function properly ( 1998), thus promoting innovation. Specifically, it can improve its logistics, which would improve business linkages throughout an organization. In this regard, flexibility in terms production can be reached.


            WBD can also engage in extensive Research and Development in order to find ways in further improving their products. The company can provide modifications and alterations on their existing products, such as providing new flavors and coming with new packaging and gimmicks. This would also help the company target new markets in the future. In this regard, product development would be a valuable strategic option for the company, rather than further product diversification. It has been reported that companies nowadays are placing on new products as a source of new sales and profits (1995).


            Another strategic option for WBD is expansion, which would allow the company to speed up its production and entertain new ideas for the improvement of its products. However, expansion is a double-edged sword, which can both present advantages and disadvantages to the company. Although expansion would enable WBD to attain more efficiency in terms of production and increase productivity and creativity, it would also enable the company to increase costs, conflicts, and other problems. One of these problems is the limited resources that the company might have. Resources needed by the company include human, financial and physical resources. The amount of money or the budget of the company serves to be its financial resources, thus, the company must be able to allocate its budget effectively in order to push through with the expansion. Aside from human and financial resources, physical resources are also needed, and include the premises, such as heating, lighting, cleaning, security, and structural alterations (2004). In line with the company’s expansion, problems with resources can be solved through financial help from other companies through sponsorships, or through additional income-generating programs such as contests and promos. Based on the profit and sales of the company at present, WBD has attained a strong sales growth in all segments, with net sales up to 40.5% to US,147.8 million (2007). With such profits and sales, the further expansion of the company with the support of its resources can be effectively and efficiently achieved.


            Improvement of the management in WBD is also its strategic option, as it aims to provide the whole organization and its members with the chance to grow and develop as individuals and as a group. Improvement in the management involves the implementation and use of good leadership and motivational styles, such as job enrichment and job rotation programs. To be able to achieve superior success and efficiency in the organization, a recommendation for WBD would be to employ Total Quality Management or TQM, which is a description of the culture, attitude, and organization of a company that strives to provide customers with products and services that satisfy their needs, through requiring quality in all aspects of the operation of the company, with the process being done right the first time and defects and wastes eliminated from operations (2007). In addition, it also refers to employee interventions and techniques used to improve quality, and many are a basic business strategy to provide goods and services that completely satisfy the customers by utilizing the employees’ talents while providing a positive financial return to the shareholders (1995). Such improvements can be done through focusing on work processes, variability, systematic gathering of data in the problem-solving cycle, and continuous learning and improvement in the organization (1995). With the support of the managerial grid theory of leadership, the company would be able to offer a better ground for using leadership styles, and develop team management. With the support of Maslow’s Hierarchy of Needs theory, the employees of the organization would become more empowered and motivated, as the company recognizes all their human needs, beyond those of physical and economic well-being.   


            Last strategic option for WBD is the improvement of its distribution channels and promotion strategies in order to effectively reach its target markets. The exchange of good products and services between consumers and producers is mediated by the use of media, advertising and promotion, and sales service (1999). WBD can enhance its use of different types of media, such as the Internet, radio, television, and print ads to introduce their products and attract potential consumers. In turn, the consumers also use these types of media to interact with their service providers concerning their rendered products. In this type of business, the use of a variety of means in the company’s aim to strategically reach the customer is one effective way in order to generate and increase sales, and establish the company’s reputation in its target market. These can be done through advertising, publicity, or personal selling. In addition, the company can also employ direct marketing and franchising, which may include selling the product and offering commissions through networking. This would also allow the company to engage in globalization, which is a major trend in the world economy and has great impacts on the environment of most organizations ( 2006). In this regard, WBD would be able to foster effective communication with its customers, and in turn achieve higher sales and profits in the process.


 


 


 


PART B – Elements of Strategic Choice


 


Introduction


            The organization in focus is Southwest Airlines, which is the largest airline in the United States, and the second largest airline in the world, both in terms of the number of passengers carried (2007). Compared to its airline competitors, Southwest Airlines dealt with the problem brought about by the September 11 bombing by cutting no flights and laying off no employees, based on their management’s philosophy for the past two decades of managing the airline in good times so that both the company and its employees could prosper through bad times. It had the lowest operating costs of any US airline, had billion in cash, and had the strongest balance sheet and credit rating of any US airline, allowing management to quickly borrow an additional .1 billion and give the company a buffer to pay all its bills and absorb any cash drains (2003). Its strategic management technique of charging cheaper rates over its competitors, allowing the company to attract more customers to fly and grow its market. The supervision of the company is characterized by efficient and effective interaction, thus, appropriately managing the entire organization based on personal relationships. The management strategy of Southwest Airlines is geared towards treating the employees right, thus, making the employees treat customers right (2003). In this regard, the company focuses first on its internal environment to be able to effectively serve its customers.


Elements of Strategic Choice


            Elements of strategic choice include the broad competitive strategy, the direction of development, and the method of development. Competitive strategy refers to the different techniques or courses of actions of organizations to stay competitive and good performing in their industry, with reference to the performance of their competitors in the market (Paley 1999). Having a competitive strategy means that an organization would have to take note off three generic strategies open to them, namely, cost leadership, differentiation, and focus (). Cost Leadership strategy emphasizes efficiency, requiring a considerable market share advantage or preferential access to raw materials, components, labor, and many others, and involves low-cost strategies that could help the company gain significant market share ( 2007). Differentiation Strategy, which involves the production of a new product, which offers excellent value for the customers’ benefit, and to be able to do so, extensive research, communication and innovation must be done ( 2007). The last generic strategy that can be used for the competitive strategy of any organization is the Focus Strategy, emphasizing on specific or particular segments from a larger market ( 2007).


            The direction of the development of the organization depends upon the different competitive strategies that it can employ. As such, this involves development planning, which focuses on the future of the organization (2003). Practically, setting the direction of the development of the organization is based on the different problems and crises it experiences, thus, making the competitive strategies all the more relevant to its development. The third element of strategic choice is the method of development. To be able to make sound decisions and choices in aiming for the competitive advantage of the organization over its competitors, choosing the best and suitable method/s for development must be done. Choosing the method of development requires selecting the method requirements and deciding on what type of instrumentation to utilize and why (1997).


 


Discussion and Analysis


            Identification of the different elements of strategic choice would lead to the perception that these three elements must be compatible with one another to ensure the balanced and effective operations of any organization. In this regard, the company in focus, Southwest Airlines would be analyzed using the three elements.


            It has been reported that the company offers no first-class section, no fancy clubs for frequent flyers to relax in at terminals, no meals served on flights, even long ones, and no baggage transfer services to other carriers (2003). Many customers would opt to fly an airline offering low-fare rates. However, they would also look for special features or amenities of the company, such as the features that lack Southwest Airlines. More importantly, passengers would be looking forward to meals during flight, which would get them through their travel. In relation to its broad competitive strategy, the company can use a Differentiation Strategy, which would enable the airline to provide unique features that would not be offered by their competitors. The company has already been successful in implementing a Focus strategy, which enabled the company to target consumers who prefers low-cost flying. Through a differentiation strategy, the airline would be able to add more amenities to their airline, thus, not only being regarded as cost-effective, but an airline that offers convenience in flying as well.


            In relation to this, because Southwest Airlines have now a plan for using Differentiation strategies, then the direction of its development can be gradually achieved. More importantly, the direction of the development of the company is towards the development of its workforce, which would allow the company to serve its customers or passengers better. Southwest puts careful attention to selecting new employees, for the company believes that delivering superior service comes from having employees who also believed that their customers are important. In addition, each employee enjoys considerable authority and decision-making power, which allows and entitles each to take individual responsibilities and contribute to the efficiency and productivity of the company. Moreover, substantial compensation is given to the employees, thus, giving them a strong reason to behave in ways and to do their work that would help the company become more profitable. This contributes to the stability and security of work in the company; therefore, implementing the no lay off policy in the company. This one good competitive strategy sets the direction of the development of the company, as the company focuses first on stabilizing and on developing its internal affairs, which would provide the company with good standing in the market. This just shows that having a strategic plan ahead, featuring the strategy open to the company would help set its direction for development. In this regard, the direction of the development of the company is towards employee and human resource development, which would help the company focus on the welfare and needs of its customers.


            From the strategy and the setting of the direction of development of the company, Southwest Airline is now ready to implement its plan using different methods of development. In this regard, one example of the method of development that an organization can use is its business-unit strategy, which involves designing a profitable, effective business model that requires a clear understanding of how the firm will generate profits, and of the different strategic actions it must undertake (). One specific business-unit strategy an organization can implement is organization alignment, which explores how the various component parts of an organization synchronize their activities to create integration and synergy (2006). Alignment as a strategy involves the effective and efficient coordination of all of the organization’s resources, including human, financial, and physical resources (2004). Aside from this, the company focused on implementing a policy that encourages union members and negotiators to research their pressing issues and to conduct employee surveys before each contract negotiation, which helped both the union leaders and the company itself to focus on issues of concern. This promotes and encourages an employee-friendly work environment. The method of development was achieved by the company, as it focuses on job security and concern through several elements, such as efficient recruitment, training, development, promotion and compensation of employees, implementing an effective management and leadership style, upholding the company’s core values, enhancing employee productivity, and implementing marketing and business strategies that contribute to the success of the company in the market.


            Therefore, the elements of strategic choice have provided Southwest Airlines with adequate strategic options to use in order to make effective management decisions. In this regard, it can be perceived that the relationship that exists among the three elements of strategic choice is that the competitive strategies are used as means in setting the direction of a specific organization to achieve its goals or objectives, and these means are in the form of methods, such as in the forms of business strategy models. However, making a strategic option is not entirely an easy task, as it depends on success criteria, from which the success and the failure of certain strategies depend upon. An example for making a strategic option is evident for both consumers and manufacturers. A strategic option of manufactures may include what products or services it would offer to which markets (1999). Likewise, wide varieties of strategic options are also available to consumers, such as in choosing what products or services they would be purchasing. In this regard, both consumers base upon certain success criteria and producers, which allow them to both make effective and sound decisions. Some of the success criteria that can be used in order to make strategic options include the satisfaction of the client or customer, the defects or complaints with the product or service, the time and cost of manufacturing the product or rendering the service, the profitability of the product or service, and its safety (2007).


 


Conclusion


From the discussion, it can be deduced that making strategic options that are based in certain success criteria influences an organization in terms of making their strategic choices. It must be taken note off that strategic options refer to the situations or objects, from which strategic choices are based upon. In order to make effective and sound strategic choices that involve the use of different strategies and methods, strategic options that are based on different quantifiable success criteria would have to be made effectively. In essence, both concepts and its underlying concepts have significant relationships with one another, thus, confirming the statement, from which this discussion is based upon. In addition, based on the strategies or techniques of Southwest Airlines, it can be concluded that the three elements of strategic choice make significant relationship with one another, as all elements are interdependent from the other elements. In this regard, in order to achieve an effective and successful organization, good strategies must be planned and implemented.


 


 


    


 



Credit:ivythesis.typepad.com


0 comments:

Post a Comment

 
Top