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; ‘’ 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 ( and 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 (cited in ‘’ n.d.). 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 (‘’ n.d.). 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 ( and 2000).
Another significant event in the history of WBD is the potential acquisition of in 2003 due to the significant increase of ’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 ( and 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 (cited in and 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 ( and 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.
References
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