ARLA FOODS – MATCHING STRUCTURE WITH STRATEGY Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

ARLA FOODS – MATCHING STRUCTURE WITH STRATEGY Case Study Solution

Structure or Processes to Best Manage Various Customers and Categories

New structure is needed to manage the multiple customers and categories. As the company is going for an expansion in the new markets; it is not necessary that company follows the same structure in the new markets as well. Moreover the company would be required to establish its strategic business units from the scratch in those of new markets thus company should do extensive research on the new markets. The behaviours of consumers in those markets should be studied thoroughly and then with all of these consideration company should formulate its operational chain. Moreover company can study the structure of successful firms operating in that demographics as this will enable the company to understand consumer insights and market patterns in a better way. All of this intelligence then should be used in the formulation of strategy for the customers and categories. Whereas it can also undergo a small experiment to gain more accurate results like they can establish couple of strategic business units and one should run with the existing standard operating procedures and the should run with the new findings from the research conducted by the company in that specific demographics. Both of the mechanisms should be allowed to work for a pre decided time frame for instance; let’s say 3 to 5 months. And after the decided time frame the performance of both of the strategic business units should be analysed by the company executives and industry experts as well. Afterwards the strategic business unit which has performed better than the other should be considered as benchmark for the following expansions into new demographics. Moreover as the company would be entering in an entirely new market therefore it should keep some space and leverage for any kind of modification and alteration whenever company feels it is crucial and necessary. Similarly when dealing with the suppliers company can offer some great packages to them, which will lead them in motivated direction and thus they will definitely work with their full potential.

Structure that can help to Innovate and Increase Control

The executive council should consider the innovation in all the aspects as important factor. Because as it is witnessed that a sudden change of policy from the European Union has brought the opportunities for whole of the industry to maximize its output. To cope up with the desired speed of expansion the executive council and key executives of the company should promote the innovative techniques. Moreover it should emphasize the middle managers to apply new and competitive techniques in the business process. Here comes another important point that only promoting innovation and new technology are not the solution to move forward, another thing with equal importance is to increase the control over the business process and operations. The importance of this aspect also increases in the current situation where the company is almost ready to expand its operations to the whole new demographics. To keep control over its existing territories is much easier than maintaining the control over the new territories. As the new demographics have much potential for the expansion of the business, there would be other firms in the race as well to acquire the market share of those new places. In such scenario, the chances and profanity of exploitation from other companies increases very much as each of the firm will be trying individually to capture the market. Moreover there is possibility that in case other firms do get involve in some sort of illegal merger or cartelization to counter and demolish the position of Arla. In such scenario the structure would be needed in which the suppliers and the end user become loyal to Arla, although it is not going to be easy task yet it cannot be taken away from the consideration. In such scenarios Arla or other firms competing for market share would not able to dominate the market solely, so the options of merger with the consideration of mutual benefit should be there. Also in this way it would be easy for Arla to maintain its control in the market and on its customers as well.

Managing the Availability of Skills

As the melamine contamination scandal in the China during 2008 has increased the doors for the international companies to invest to China to provide safe and healthy food items. But the biggest barrier is availability of skills. So, for the issues ARLA is facing regarding the availability of skills, we must first know about the industry dynamics and ARLA’s internationalization strategy.

Arla would be needing to arrange all the skilled labour before the commencement of operations. To facilitate this process they can first batch from the home land with the responsibility of training other locals for the operations and all the process. This issue needs to be treated with extensive responsibility, as any mishap in this regard can bring difficulty to the company.

As ARLA also faces the issues related to the availability of skills to increase its operations, the company can use its strength of global presence and strong financial position to invest in its employees to improve their skills. Moreover the company can partially invest its retain earnings in hiring and training its employees. Following are some core required skills for the company and the ways to manage those skills:

Sourcing:

Initially the company needs to hire a batch of employees who can improve the sourcing mechanism of the company. Moreover, ARLA can invest in training of the existing employees to increase their efficiency.

Sales and Distribution:

The other very important skill required is to make its sales and distribution network very strong, which will increase the sales and efficiency of the network and will ultimately increase the sales revenue of the company.

Technological Innovation:

Technological innovation is very important to remain competitive in the industry, as the company has performed very well in the past but due to increasing competition and increasing demand for customization ARLA needs continuous innovation to compete with its competitors and retain the stability of the company in future also.

Charter of Cooperative: Reinvest the Profits rather than Distribute as Dividends

As the charter of cooperatives requires the company to reinvest its profits in the business rather than paying out in the dividends. The major reasons for such requirement lies in the following industry dynamics. Despite that the business of dairy having characteristics that are more similar to a brick and mortar structure, there is still need for innovation in some fields to make the business more profitable and competitive.

Customization of Products:

As the dairy business also need to customize the products based on the local needs of the public. Because different regions have changes in tastes and preferences, which can affect the demand of various products in different localities. Therefore, it is very necessary for ARLA to focus on making products based on the locals’ preferences of the regions where it is planning to invest in future.

Design them for Remote Areas with in adequate Facilities:

The other feature of the dairy business is that, it has to make its products available in the remote areas also, because the remote areas contribute significantly in increasing the sales and customer base of the company. Moreover, these remote areas mostly don’t have refrigerating facilities, so they need products that remains safe in such environment. This again needs an innovation to involve technology in making the food item safe even in the areas with inadequate refrigerating and preservation facilities.

Health and Safety Requirement:

The food items especially dairy items are directly related with our health and no one wants to purchase an unhealthy and unsafe product for consumption. This has increased the pressure on the food industry to make necessary measures by investing in technology to make the product more healthy and safe. This requires a huge investment by the companies in this industry to regularly invest in the technology which can make the food items more healthy and safe.

Extending Self Life of the Product:

As the food items are the ones with least shelf-life because they lose their quality and even become dangerous for health when left longer time than their natural life. So, a very sophisticated technology is required to increase the life of food and dairy products. Given their importance, it is very necessary for the company to invest in research and development to increase the self-life of the products. Moreover, this is very beneficial for the company also because this will increase the sales of the company and its capacity to produce. Because now the company would have more interval time to repeat the production process for the same product.

Effect of Charter of Coop on Structuring of Arla and New Acquisitions

Charter of coop tells that the profits generated by the company would be used in the aggressive expansion and growth of the company. As the company needs capital and investments to grow its operations it has multiple options to raise investments. For instance the company can take loan from any of the financial institution or company can go for issuing the stocks. Also there is another option available for Arla to invest its earned amount that is supposed to be the net income in the investment purposes. In this way company would not have to take the loan or would not need any external financing neither the owner’s equity would dilute because of issuing of shares. But there would be some significant impacts on the overall structure of company and its operations in future as well. Any acquisitions that were in process might get cancelled as the minority stake holder of that company would not be willing to be the part of the company that do not pays out the income and rather it is planning to expand for upcoming 5 years. This situation can be resolved if the investors believe that if they are not getting income in form of dividends they will make the monitory value in form of capital gain. If the invertors believes the company to provide them monitory value in any of the way among which capital gain is the procedure through which both reinvesting for expansion can be done and investors will also make monitory value, this will minimize any negative impact of charter of coop.

Are Milk Producing Owners Same as Shareholders

The structure of Arla clearly states that most of the milk producers are not exactly like the shareholders. As the milk producers are owners of Arla cooperative, farm owners produce the milk which is then marketed by the companies. Raw milk is making up the value of 60 % of the cost of dairy enterprise, where as in dairy cooperative it is different, managers in cooperative are provided with the incentives for distribution amongst the farmers for the expansion. Milk producing owner are not exactly like the shareholders for their services and supply of milk they are being compensated by the company directly through the managers, whereas shareholders are those who have made investments in the company’s equity.

Conclusion

Arla food has now been exposed to great opportunities after the decision from the European Union to lift the ban from producing the dairy stuff in surplus. Arla wants to capitalize the situation by expanding to other markets as well. Arla needs to respond quickly in order to attain the first mover advantage in the industry. Moreover Arla needs to study the consumer behaviour in those new markets and formulate its policies accordingly for the new demographics. Moreover to invest its own profits is going to be a favourable decision for the company, as company would not be needing to pay any sort of cost over capital. Also it can give favour to the shareholders in form of capital gain or stock split as well. Political and economic factors are also the aspects that are needed to bring in consideration before taking any final decisions.

Recommendation

In addition to this, one thing that Arla has not yet considered is its presence over the e-commerce channels. As the production capacity and supply chain network of the company are huge, it should do some sort of mutually beneficial contract with the retail giants like Ali express, Walmart, amazon etc. This will enable Arla to reach the places where it cannot reach directly. Moreover it should also work upon listing its products on all the e-commerce channels working in the area where it has its supply chain network. This way they would be covering the customers who prefer purchasing stuff over websites, without any additional cost as they already have their functional distribution system. Also it will help the company in brand building and spreading the awareness in new demographics, ultimately leading towards the goal of having sale revenue of 19 billion by the end of 2007...........

This is just a sample partical work. Please place the order on the website to get your own originally done case solution.