Business Strategy

Vimukthi Adithya

Creamy Yoghurts
Business Strategy Individual assignment

Acknowledgment

I would like to thank Ms.Inoka Gunarathne for sharing her valuable ideas with us regarding
Business strategy. Her lecture gave me some valuable points and the hand-outs that were
given came in handy while doing the report. My friends at ICBT who helped at various
situations and the books at the library helped me to gain a good knowledge.
Business Strategy Individual assignment

Executive summary

Strategy refers to the direction and scope of an organization over the long – term. Strategic
planning is the process of managing the organizational resources to meet its objectives, with
also taking the changing market opportunities into account. Creamy Yoghurts is one of the
leading Yoghurt manufacturers in the country. Its vision is ‘Offer the customers with the best
product in a more innovative way than the rivals and have more value towards customers,
while empowering the employees’ and the vision of the company is ‘To become the leader in
the market, with innovation and added creativity and together with empowerment’. The main
objectives of Creamy Yoghurts are Profitability and productivity, Employee relation and
retention, Growth, Marketing and customer relations and CSR. Almost all the organizations
face certain issues when planning strategic direction; this is mainly due to the changing
market conditions. Few issues would be Economic condition, use of resources, Time
duration, Customers taste and preferences, Decisions of the rivals. Organizations use a
number of planning techniques, which would help them to plan their strategic decisions. Few
methods that Creamy Yoghurts uses are SWOT analysis, Gap analysis, Boston (BCG) matrix,
Value chain and Porter’s five forces. It is always advisable for any organization to carry out
an environmental audit / scanning, this will help the organization to identify certain important
factors that are essential to them in future. Usually in here PESTEL analysis is done, which
briefs the organization on Political, Environmental, Social, Technological, Economical and
Legal factors. Next the stakeholders of an organization play a key role in helping the
organization to achieve its goals. Stakeholders could be identified as the group of people who
are interested or affected by the decisions taken by the organization. Creamy Yoghurts have
identified a certain number of stakeholders and their concerns and then these stakeholders are
prioritized and are mainly divided in to four groups as Latents, Promoters, Defenders and
Apathetics. The main aim of an organization would be to grow and expand with the time.
There are a number of growth strategies that Creamy Yoghurts could use to grow. They are:
Ansoff growth vector, Porter’s generic strategies, Mergers, Acquisitions and take over’s,
Scenario building. Creamy Yoghurts are deciding to move into a new market, which is to go
into International trade as their growth strategy. Each division has certain roles and
responsibilities; they might also face problems when trying to obtain the necessary resources
but with careful and effective planning these objectives could be achieved.
Business Strategy Individual assignment

Table of Contents

1. Introduction 1
2. Strategic Terminology 2
2.1 Mission of Creamy Yoghurts 2
2.2 Vision of Creamy Yoghurts 2
2.3 Objectives of Creamy Yoghurts 2-4
2.4 Core competencies of Creamy Yoghurts 4
3. Issues involved in planning strategic direction for the organization under the current
business conditions 5-6
4. Different planning techniques that could be adopted by the organization 6
4.1 SWOT Analysis 7- 8
4.2 Gap Analysis 8- 9
4.3 Boston(BCG) Matrix 10-11
4.4 Value chain 11-12
4.5 Porters 5 forces 13
5. Organizational and Environmental audit 14 – 16
6. Significance of stakeholders and stakeholder analysis 16- 18
7. Alternative strategies that the organization can adopt to grow the business19
7.1 Ansoff growth vector / matrix 19-20
7.2 Porter’s generic strategies 20-22
7.3 Mergers, acquisitions and takeovers 22-23
7.4 Scenario building 23-24
8. Appropriate future strategy of Creamy Yoghurts 25
8.1 Creamy Yoghurts decision on moving to a new market –
The roles and responsibilities 25-26
9. Evaluation of the resource requirements 26 -27
10. Targets and timescales of achievements of the strategy 27-28
11. Conclusion and recommendations 29
12. References 30- 31
Business Strategy Individual assignment

List of illustrations and diagrams

1. SWOT Analysis 1
2. Gap Analysis 9
3. BCG Matrix 10
4. Characteristics of the segments of BCG Matrix 11
5. Porters value chain 12
6. Porters five forces 13
7. PESTELAnalysis 14
8. Table 1 – Stakeholder concerns 17
9. Prioritization of stakeholders 18
10. Ansoff growth matrix 19
11. Porters generic strategies 21
12. Scenario building 24
13. Table 2 – estimated timescales 28
Business Strategy Individual assignment

1. Introduction

Creamy Yoghurts is one of the leading Yoghurt manufactures in the country. The
organization currently holds the 2nd position in regard to the market share and the main aim of
the company is to become the leading Yoghurt manufacture within the next 2 years or so. It is
clearly understood that the main objective of any organization would be to grow and expand
after few years of operations. Cream Yoghurts have identified some core competencies which
has helped them to stand out from its competitors. This report explain the mission, vision,
objectives and the core competencies of Creamy Yoghurts, the problems they might face
while planning strategic direction due to the changing economic condition. The reports also
clearly shows the number of different planning techniques that an organization could use and
it shows how Creamy Yoghurts have effectively got the use of SWOT analysis, gap analysis,
BCG matrix, value chain and the porters 5 forces. The importance of carrying out a PESTEL
analysis is given and also the value of shareholders and the importance of shareholder
analysis are given out effectively. This report also shows that Creamy Yoghurts could use a
number of methods as growth strategies and they have decided to move into a new market,
which is called market development according to the Ansoff growth matrix. It is also
understood that all the divisions has certain roles and responsibilities in helping out Creamy
Chocolates to achieve this objective. In conclusion this report shows the problems faced in
obtaining necessary resources and the time taken to achieve the targets.

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2. Strategic Terminology

In simpler terms strategy refers to the direction and scope of an organization over the long –
term. It is also a plan or a method of achieving a goal or a solution to a problem with the
available resources. Strategic planning is the process of managing the organizational
resources to meet its objectives, with also taking the changing market opportunities into
account.

2.1 Mission of Creamy Yoghurts

A mission is very important to an organization and it is used in almost all the organizations.
A mission will define the present state or the purpose of an organization. This will explain the
reason of existence of the company and what it does, who it does for and how it does. The
mission statement will also help the stakeholders to have an idea on what the company hopes
to do and its overall intension. The mission of Creamy Yoghurts is given below.
‘Offer the customers with the best product in a more innovative way than the rivals and
have more value towards customers, while empowering the employees’.

2.2 Vision of Creamy Yoghurts

Unlike mission, the vision of an organization depicts what an organization want or hope to
achieve in future. This mainly explains about what an organization want to achieve in the
long run, it may be the next five, ten or fifteen years ahead. The vision of Creamy chocolates
is given below.
‘To become the leader in the market, with innovation and added creativity and together
with empowerment’

2.3 Objectives and goals of Creamy Yoghurts

It’s common that any organization that exists is having its own goals and objectives. Before
setting up an organization, it is essential to identify its own goals and objectives and the
purpose of why they are going to carry out operations.
Few of the objectives of Creamy Yoghurts are given below.

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 Profitability and productivity – the ultimate objective of any business is to obtain

profits and to increase its productivity over time. Profit maximizing becomes one of
the most important objectives for Creamy Yoghurts and they hope to obtain a 25%
increment of profits within the next 2 years. The management has to take necessary
actions to increase the labour productivity by providing them with more and better
training, a better and happy environment to work and all the necessary resources to
achieve their targets.

 Employee relation and retention – one theory adopted at Creamy Yoghurts is that
more the employees are kept happy and motivated, the easier for the organization to
achieve its objectives. Both the mission and the vision states about empowerment,
and the company have been empowering its employees. What creamy Yoghurts
really needs is to build up a good relationship between the management and the
employees and to retain them, because employee turnovers costs money and the
productivity will go down and in the other hand more money will have to be spent on
recruitment and training process. So one main objective is to retain its employees.

 Growth – This is one of the most important objectives of the organization. The
company is planning to expand its operation in the coming two years. Few plans
have been laid down and the decision needs to be implemented properly. The
management is planning to set up new branches and also is planning to introduce
new products. So the main goal is to make the name ‘Creamy Yoghurts’ more
familiarize with the people and strengthen the brand name.

 Marketing and customer relations – One main objective of creamy Yoghurts is to

market their products by a giving an important message to its customers. Marketing
is more than creating advertising and getting customer input on product changes. It is
about understanding consumer buying trends, being able to anticipate product
distribution needs and developing business partnerships that help your organization
to improve market share. [ CITATION Geo14 \l 1033 ]. Keeping the customers happy
and satisfied always is one of the main objectives of the organization.

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 CSR – Creamy Yoghurts is an organization which engages heavily in CSR. One

main objective in doing this is to help to make a better and health country and also in
the other hand to improve their band image and promote the company within the
society by doing good things.

2.4 Core competencies of Creamy Yoghurts

Core competencies simply refer to the strengths of an organization over its competitors. It is
about what the company does better than its rivals. Creamy Yoghurts too have some
advantages over its competitors.

 Very experienced staff. Almost all the people have been in the company from
beginning and they are very well adapted to the business environment.
 Creamy Yoghurt is regarded as an organization which gives more opportunities for
young, creative and innovative people. So giving more job opportunities has helped
the company to obtain a good name in the society.
 As mentioned above Creamy Yoghurts is heavily engaged in CSR, mainly helping
out children in rural areas. This is an added advantage for the company over its
rivals, and also it has benefited them by improving their brand image.
 Good strong marketing strategies used to advertise the products.
 Currently having the 2nd largest market share, and is hoping to get to the top within
the next two years.
 A good customer satisfaction. The customers tend to leave their Yoghurt outlets very
happily each time they visit it.

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3. Issues involved in planning strategic direction for the organization

under the current business conditions

It’s true that organizations set up goals and objectives, but they should bear in mind that the
roads towards achieving these objectives are full of barriers and it is not an easy ride. It is
easy to discuss, plan and set up objectives but it is not easy when implementing and
achieving them. Everything that is planned might go horribly wrong for the organization, this
is mainly due to the business conditions, and I would rather call it due to ‘changing business
conditions’. Few issues that are involved are listed down.

 Time – Time is considered to be one of the major factors to be considered in

planning strategic direction. More time will be needed to adapt to the market and
also to identify the potential customers and competitors.

 Resources – what can an organization do without resources? It is a challenge to an

organization to find the most suitable man power, get the required machinery,
equipments and also the new technology. Organizations might face certain issues
when getting these resources; it is not an easy task to get all the necessary resources
perfectly all the time.

 Economic condition – One must also understand that the economy is not stable
always. It is common that there are economic downturns, so during this time nothing
will work in favor of you. Things will not go according to the plans and the goals and
objectives that are set will be unachievable. So the Economic condition of the
country will play a huge role and will create a lot of issues to an organization.

 Customers taste and preferences – Customers are the key to success of any
organization and it is the responsibility of the organization to identify, understand
and cope up with the changing customer tastes and preferences. A small change in
customer taste can create huge issues to the organization and this will affect their
strategic direction.

 Decisions of the rivals might also be an issue involved in planning strategic decision.

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 Sometimes the top management might not be aware of certain decision and might not
be willing to help or to approve it any further, so this might create issues within the
organization.

 It is also understood that the organization is not able to predict the external
environment.

4. Different planning techniques that could be adopted by the organization

‘Planning before doing’, is one important rule that all the business should follow. It is better
to plan things, identify the gaols and targets and then work according to those plans to
achieve the desired objectives. Any business functioning without a proper plan is likely to fall
down than succeeding. Using proper planning techniques are likely to provide a large number
of benefits to the organization. Few would be; better time management, have more control
over staff and use of resource, better and effective coordination with the employees, helps to
become more focus and more flexible. There are a number of different techniques that could
be used by the organization. Following are a few techniques.

 SWOT analysis
 Gap analysis
 Boston (BCG) matrix
 Value chain
 Porter’s five forces

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4.1 SWOT analysis

SWOT, Strengths, Weaknesses, Opportunities and Threats these are common things that is
there in any organization. It is always advisable to do a good SWOT analysis before starting
operations. SWOT is a strategic planning tool that helps a business owner to identify his or
her own strengths and weaknesses, as well as any opportunities and threats that may exist in a
specific business situation.

Diagram 1 – SWOT Analysis [ CITATION unk \l 1033 ]

The following is a brief SWOT analysis which has been done for Creamy Yoghurts.

STRENGTHS
 A good unique and strong name “CREAMY YOGHURTS” which has the ability to
attract customers.
 Well experienced staff.
 Innovative ideas. Decision taken to give free gifts for the kids and also monthly
competitions are held, which helps to attract more customers.
 Attractive and eye catching packaging which helps to attract kids and a wider variety
of products with the availability of more Yoghurt flavours.

WEEKNESSES

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 Higher costs.
 Need to find ways to obtain funds.
 Need to invest more in new technology to compete effectively with the competitors.

OPPORTUNITIES
 Possibility to expand into other areas of the county.
 Collaboration with a small snack/juice bar.
 Technological advancements in machinery, which makes the production faster and
efficient.
 Possibility of having arrangements with snack and juice bars to supply their Yoghurts
only
 Ability to capture higher market share and to get a high customer base since all the
high income, middle income and the low income people are targeted.
 Possibility of a merger or a takeover of a small company, which would help them to
achieve their main objective of becoming the organization with the highest market
share.

THREATS
 High competition.
 Changes in customer taste and preferences
 Various government policies and legislations

4.2 Gap analysis

Gap analysis is a technique used to determine what steps need to be taken in order to move
from its current state to its desired future state.[ CITATION Bus143 \l 1033 ]. Under the gap
analysis the organization will compare its actual performance with the expected performance,
this will help the management to have a clear view whether the resources are being used
effectively and whether they are heading towards the correct path and meeting expectations.

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Diagram 2 –
Gap analysis [ CITATION sim141 \l 1033 ]

Well, it is true that Gap analysis is a great project management tool, but it is clearly in the
hands of the management to provide necessary arrangements and resources to help to reduce
the gap. Two key words used under gap analysis are ‘What is’ and ‘what should be’. The
organization should list down factors such as attributes, competencies and performance levels
of the current situation and then should identify the factors that need to be implemented in
future to achieve the desired objectives.

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4.3 Boston (BCG) matrix

An organization is most likely to engage in the production of large number of products and it
is the duty and the responsibility of the organization to identify and decide which products
you should focus more on investment. Simply this means that the business needs to allocate
its investment on each and every product, so in order to make things easier for the
organization a BCG matrix could be prepared. It is a simple, visual way to examine the likely
financial performance of your product or business portfolio. [ CITATION Min14 \l 1033 ].

Diagram 3 – BCG Matrix

As shown in the above diagram, two key terms used in BCG matrix is ‘Market Growth’ and
‘Market Share’. And the products can be categorized as stars, question marks, cash cows or
dogs. When taking Creamy Yoghurts into consideration they too have a number of products
and they could be categorized into these four segments.

 Stars – Normal milky Yoghurts, honey Yoghurts

 Problem child – Fruity Yoghurts, Curd, Chocolate Yoghurt
 Cash Cow – Yoghurt drink, Non – fat Yoghurts
 Dog – Yoghurt Iced packets

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The Following diagram clearly shows the characteristics of Stars, Problem child, Cash Cow
and Dogs.

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Diagram 4 – Characteristics of the segments of BCG Matrix [ CITATION

tut141 \l 1033 ]

So finally this analysis is very beneficial to Creamy Yoghurts and helps them to identify and
understand which brands the firm should invest in and which ones should be divested

4.4 Value chain

It is a true and a common fact that the businesses add value to their products at each stage of
production. The production or the manufacturing process is divided into various segments
and at each stage a certain value should be added to the product. For example when the raw
materials are transported for manufacturing a value is added, when package is done a certain
value is added and also when the final product is transported another amount is added. It is
the responsibility of the organization to identify and add value effectively. This is where the
value chain developed by Michael Porter comes into play.
A value chain is a set of activities that an organization carries out to create value for its
customers. Porter proposed a general-purpose value chain that companies can use to examine
all of their activities, and see how they're connected. The way in which value chain activities
are performed determines costs and affects profits, so this tool can help you understand the
sources of value for your organization. [ CITATION Min141 \l 1033 ]

The following diagram clearly explains how a value chain would look like.

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Diagram 5 – Porter’s value chain [ CITATION fac14 \l 1033 ]

As mentioned in the example above Creamy Yoghurts also adds value for their products. This
value chain has come in handy for them and they tend to follow the following steps.

 Activity Analysis: First, you identify the activities you undertake to deliver your
product or service.

 Value Analysis: Second, for each activity, you think through what you would do to
add the greatest value for your customer.

 Evaluation and Planning: Thirdly, you evaluate whether it is worth making changes,

and then plan for action. [ CITATION Min142 \l 1033 ]

4.5 Porters 5 forces

The Porter's Five Forces tool is a simple but powerful tool for understanding where power
lies in a business situation. This is useful, because it helps you understand both the strength of
your current competitive position, and the strength of a position you're considering moving
into. With a clear understanding of where power lies, you can take fair advantage of a
situation of strength, improve a situation of weakness, and avoid taking wrong steps. This
makes it an important part of your planning toolkit. Conventionally, the tool is used to
identify whether new products, services or businesses have the potential to be profitable.
[ CITATION Min143 \l 1033 ]. The following diagram clearly explains Porters 5 forces.

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Diagram 6 – Porters five forces [ CITATION Min144 \l 1033 ]

5. Organizational and Environmental audit

It is a common fact that almost all the organizations carry out an organizational or an
Environmental audit. It has now become a necessity for the organizations to identify their
strengths and capabilities within the organization and also to have an understanding about
what is happening in the outside world. These both internal and external factors can have a
huge impact and the organizations decisions, plans, goals and objectives. It is always
advisable for an organization to consider and take into account all these internal and external
factors before setting up plans or starting operations. When talking about an organizational
audit usually a SWOT analysis could be done, like the one which has been done above.
According to Environmental audit or scanning a PESTEL analysis could be carried out.

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Environmental scanning could be defined as Careful monitoring of an organization's internal

and external environments for detecting early signs of opportunities and threats that
may influence its current and future plans. In comparison, surveillance is confined to a
specific objective or a narrow sector.[ CITATION Bus144 \l 1033 ]
PESTEL stands for Political, Economical, Social, Technological, Environmental and Legal
factors.
The following diagram shows the PESTEL factors very clearly.

Diagram 7 – PESTEL Analysis. [ CITATION pro14 \l 1033 ]

 Political – Political factors play a huge role for an organization and will have a huge
influence on its decisions. They might place obligations and duties on an organization.
Some other factors under this would be tax policies, safety regulations issued by the
government, international laws, etc. Creamy Yoghurts will have to produce products
according to given standards. There will also be several market regulations. Company
will also have to adhere to trade agreements, tariffs or restrictions.

 Economical – The market condition or the economy of the country is bound to change
from time to time. The economy might be in a boom, in a recession or in a growing
inflation problem, these can influence an organization and it will change the future
plans set up by an organization. Creamy Yoghurts will have to cope up anything
because depending on the economic condition they might not get to market their

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products well and the sales will not increase. It is clearly understood that if an
economy is in a recession, then it will have high unemployment levels, low spending
power and lower stakeholder confidence. Vice versa will happen if the economy is in
a boom. The successfulness of the business will depend on how they react and
respond to economic conditions. If Creamy Yoghurts have the power and confidence
then they will be successful in the long run.

 Social – This mainly looks into or considers people’s lifestyles and behavior.
Different people have different choices and their tastes and preferences differ. A
company should always try to produce a product and market it effectively which can
capture a wider customer range. Factors such as mood and demographics should be
taken into account. The company should always consider the population changes in
the country. Changes in the structure of a population will affect the demand and
supply of goods and services. Creamy Yoghurts will have to produce products that
will suit different segments in the market.

 Technological – Almost all the organizations around use modern technology to

manufacture products and also they use them to market their products. Moving on
technology has created a society which expects instant results. Due to modern
technology the exchange of information is faster and this can help the business as they
can react quickly to changes. In order to be more competitive in the market Creamy
Yoghurts should use modern technology to produce goods and use modern techniques
to market the goods. Internet shopping is widely used and Super Taste Biscuits could
open up their own site which helps customers to shop from home, and mobile apps
could be created as part of technological methods to market a product.

 Environmental – Organizations should always concern about the environment.

Products should be produced, that will not harm the environment. This is a major
factor that Super Taste Biscuits consider; they should keep the environment clean.
And also other factors such as natural disasters should be considered here; natural
disaster could disrupt production and supply operations.

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 Legal – Company will have to adhere to certain rules and regulations which are set up
by the government. Labor laws will have to be taken into account and also other laws
such as sale of goods act should be considered here. Creamy Yoghurts will have to
produce products according to a certain standard, should advertise legally,

6. Significance of stakeholders and stakeholder analysis

Stakeholders could be identified as the group of people who are interested or affected by the
decisions taken by the organization.
Stakeholder analysis is the review and consideration of the impact stakeholders have on your
business. This is becoming increasingly important, as non-shareholder entities, including
customers, employees, communities and business partners, have become more key to
business success. Companies need to understand the interests of each stakeholder and
strategize on how to address them in business practices.[ CITATION sma14 \l 1033 ]
Few benefits stakeholder analysis would be:
 Get to know stakeholders better.
 Relative importance, power and interest
 Better managed relationships
 Risks identified
 Make better strategies and decisions
 Greater acceptance of organization actions by stakeholders [ CITATION San14 \l 1033 ]

Organizations should understand that it is not all about generating sales and obtaining higher
profits, they should also operate or take actions in way that could or should satisfy a large
number of people. Organizations should also understand that it is not an easy task to keep all
the stakeholders satisfied at once and full fill the needs of all the stakeholders.
Creamy Yoghurts have identified a large number of stakeholders who are interested or are
affected by their decisions. The following table shows possible stakeholders and their
concerns.

Stakeholder Stakeholder concerns

Shareholders Return on investments, income, future plans

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Employees Wages / Salaries, Job security, Compensation, Respect, Truthful

communication, Job role

Customers Value, Quality, Customer care, Ethical products, Information about the
company, Type of promotion done

Suppliers Equitable business opportunities, Credit period,

Creditors Credit score, New contracts, Liquidity

Community Jobs, involvement, Environmental protection, Shares, Truthful

communication,
Trade unions Quality, Worker protections, jobs

Government Taxation, VAT, Legislation, Employment, Truthful Reporting, Diversity,

Legalities, Externalities

Table 1 – Stakeholder concerns.

After Creamy Yoghurts have identified their Stakeholders, then they should prioritize the
stakeholders. Usually this prioritization will be divided into four parts as high influence low
interest, High influence low interest, Low influence low interest and Low influence high
interest.

The following diagram clearly shows how an organization should prioritize its stakeholders.

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Diagram 8 – Prioritization of stakeholders

 Latent’s (Keep satisfied) – High influence, low interest

 Promoters (Manage closely) – High influence, high interest
 Apathetics (Monitor) – Low influence, low interest
 Defenders (Keep informed) – Low influence, high interest

Next, it is in the hands of the management to categorize these identified stakeholders into the
4 groups mentioned. This needs to be done carefully and effectively and should identify the
ones who should get more priority and ones who should get less.
Creamy Yoghurts have divided some of their stakeholders into the four groups as follows.

 Latents - Government, major customers, media

 Promoters - Shareholders, Existing and potential investors
 Apathetics - Small customers, small shareholders
 Defenders - Employees, local community, environmental groups, suppliers.

7. Alternative strategies that the organization can adopt to grow the business

One main objective of any organization would be to grow over time. Organizations start in
small scale and gradually they grow. Growth is a one main goal to be considered but
achieving this is not a walk in the park. This takes time, need more resources and the
organization should use several strategies which would help them to grow. Given below are
few growth strategies that an organization could adopt to achieve growth in future.

 Ansoff growth vector

 Porter’s generic strategies
 Mergers, Acquisitions and take over’s

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 Scenario building

7.1 Ansoff growth vector / matrix

Ansoff growth matrix is a strategic marketing planning tool that links a firm’s marketing
strategy with its general strategy direction and presents four alternative growth strategies.
These strategies are seeking growth. [ CITATION Bus145 \l 1033 ]

Diagram 9 – Ansoff Growth matrix [ CITATION inn14 \l 1033 ]

After studying the growth matrix we can understand the following.

 Market development – developing new markets for the existing products
 Market penetration – Pushing existing products in their current market segments
 Diversification – developing new products for new markets
 Product development – developing new products for the existing markets

In the context on Creamy Yoghurts, they too have been adopting this strategy and have been
successful; one likely area that they would like to move into would be diversification. This is
the mostly risky method, but it is said that a business should be willing to take risks and it is
also known that more risks you take the more rewards you get. A totally new range of

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products could be introduced into new markets. When taking product development into
consideration, Creamy Yoghurts could produce other dairy products such as milk packets
with various flavours and also when talking about market development they could move into
a new market such as targeting a different segment or maybe move into international trade.

7.2 Porter’s generic strategies

Any organizations aim would be to gain a competitive advantage over its competitors. With
hard work, effective planning and usage of knowledge and resources this would be
achievable. To make it easier for the organizations Michael Porter introduced some generic
strategies, which were called “Cost Leadership" (no frills), "Differentiation" (creating
uniquely desirable products and services) and "Focus" (offering a specialized service in a
niche market). He then subdivided the Focus strategy into two parts: "Cost Focus" and
"Differentiation Focus".[ CITATION min14 \l 1033 ].

The following clearly shows Porter’s generic strategies.

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Diagram 10 – Porter’s generic strategies

 Cost leadership strategy – This strategy is about reducing or minimizing the costs of
the organization of delivering products and services. Under this strategy an
organization will aim to become the leader in terms of cost.
The motive of Porter’s generic strategies is about gaining a competitive advantage.
Creamy Yoghurts could use the following two methods to achieve competitive
advantage within a cost leadership strategy

 Increasing profits by reducing costs, while charging industry- average prices

 Increasing market share through charging lower prices, while still making a
reasonable profit on each sale because you have reduced costs. [ CITATION
min141 \l 1033 ]

There are three main ways that Creamy Yoghurts could use to become the cost leader in the
market.
 Achieving high asset turnover
 Achieving low direct and in direct costs
 Control over value chain encompassing all functional groups to ensure low
costs

 Differentiation strategy – As the name suggests ‘differentiation’ would mean being

different from the rest, it is more about developing or producing products that are
different from its competitors and this is also about being innovative and creative.
Any organization trying to be different from its competitors will give them an added
value, more recognition and more attractiveness.
If Creamy Yoghurts is planning to get the most of differentiation strategy, then they
would need to;

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 Good research, development and innovation.

 The ability to deliver high-quality products or services.

 Effective sales and marketing, so that the market understands the benefits
offered by the differentiated offerings.[ CITATION min142 \l 1033 ]

 Focus strategies – There are two main types of focus strategies that are being cost
focus and differentiation focus. Focus strategy is all about targeting a particular
segment of the market and concentrating more on that market. In the meantime we
can identify four main market positions as ‘Market leaders, Market challengers,
Market followers and Market niche.
Generally focusing means concentrating, so in here Creamy Yoghurts should
decide on what should they concentrate more on, either to focus more on being
differentiated or being more cost effective. Few more decisions that should be
taken would be to identify the target markets and then ways that should be
implemented to achieve them.

7.3 Mergers, acquisitions and take over’s

One of the best methods that an organization could adopt to expand or grow would be to
merge with a similar company or takeover a company. Going for merger with another
company or buying another company is not icing on cake, it needs careful planning, effective
research, innovativeness, risk bearing ability and more finance and larger share in the market.
When one company takes over another and clearly established itself as the new owner, the
purchase is called an acquisition. A merger happens when two firms, often of about the same
size, agree to go forward as a single new company rather than remain separately owned and
operated. [ CITATION inv14 \l 1033 ]
When we take Creamy Yoghurts into consideration they are currently raked 2nd and one of
their main objectives is to become the Yoghurt manufacturer with the highest market share.
So if they want to make their dream a reality then they could go for a merger with another
small company, which would give them edge over the current leader. There are three major
types of mergers which Creamy Yoghurts would like to consider. They are Horizontal
merger, Vertical merger and Conglomeration. Few benefits that Creamy Yoghurts would gain
due to a merger would be:

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 Economies of scale
 Greater investment in research and development
 Acquiring new technology
 Greater efficiency and productivity
 Diversification
 Reduction of costs due to reduction of staff
 More protection from multinationals and more ability to compete on an international
scale

7.4 Scenario building

Scenario building can be described as a story which is based on the analysis and
understanding of current and historic tends and events. It includes a consistent description of
possible future situations. The development of sets of narrative scenarios helps to identify
possible pathways towards a vision of the future. Scenario building can be done by an
individual or by a stakeholder group and should focus on the main issues covered by the
vision.[ CITATION Sil14 \l 1033 ]. The main steps used in Scenario building are as follows.

 Identifying crucial issues or decisions

 Identifying forceful factors
 Rank importance and uncertainty
 Select scenario logics
 Flesh – out scenarios
 Select indicators for monitoring
 Assess impacts for different scenarios
 Evaluate alternative strategies

The following diagram would give a clear idea on scenario building

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Diagram 11 – Scenario building [ CITATION ssw14 \l 1033 ]

Scenario building would be one growth strategy Creamy Yoghurts would be interested in.
This will help them to identify their current position and will help them to plan for future and
will give the organization ideas on how to expand in future. The advantages for Creamy
Yoghurts of using Scenario building are given below.

 Improves strategy development by making stakeholders more aware of risks and

constraints.
 Helps to think about number of possible alternative developments
 Raises awareness for possible future situations and helps people to be prepared for
those situations. [ CITATION Sil141 \l 1033 ]

Few other methods that Creamy Yoghurts could use as growth strategies would be; Joint –
ventures, organic growth, Franchising, Licensing

8. Appropriate future strategy of Creamy Yoghurts

It was identified that the company needs growth to achieve its future objectives and Creamy
Yoghurts have a few strategies that should be implemented. What needs to be done is to
select the best and the most effective strategy out of the list and then find effective ways of
implementing them and achieving the desired objectives.

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Introducing a new range of products, moving in to a new market, merger with a small
company are some of the decisions that are listed down and out of it ‘Moving into a new
market’ is selected.

8.1 Creamy Yoghurts decision on moving to a new market –The roles and
responsibilities

According to the Ansoff growth matrix this decision could be identified as Market
development, which is pushing the existing products to new markets. This is a bit risky one
but this is likely to succeed if done effectively and carefully. The decision will be to move
into international market, which they can mainly export their Yoghurts with honey into
international market. When implementing a growth strategy few important factors should be
considered. The organization will have to be more concerned on HR, finance, marketing,
production / operations, structure and systems

 Human Resource – This will mainly concern about finding the perfect people to be
employed to the organization. Since the decision is to move into a international
market, then there no requirement of recruiting new employees into the business only
an agent would be sufficient. It would be great if the organization could first send
someone from Creamy Yoghurts to the foreign country and then carry out an effective
market research to identify what is happening in the economy and what are the tastes
and preferences of the people living there. It would be better to use an existing
employee as the agent rather than hiring one from the foreign country.

 Finance – the most important element would be finance and in here Creamy Yoghurts
will have to consider about the exchange rates since they are exporting products. The
legal constraints have to be considered here and also should have a brief idea on
tariffs and exchange rate controls. The agent will have to be given a financial
commitment for his services and charges on sales will have to be identified and also
the rate of sales commissions should be considered.

 Marketing – In here Creamy Yoghurts should decide the marketing strategies that
they are going to use in their new market to market their products to the customers.
First Creamy Yoghurts should have an understanding on the laws that are imposed by

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the foreign government on advertisements, because the same advertisements might

new different meanings in different countries so the same advertisements that are used
back in here could not be used there. The agent could help to carry out the marketing
activities. Creamy Yoghurts could advertise their products mainly over the internet.
The use of Social media could be helpful in marketing their products.

 Production / operations – In here a decision should be taken whether to do production

in the local country or in the foreign country. The days taken for production, the days
taken for exporting should be considered and is very important on deciding on whose
going to do the production.

9. Evaluation of the resource requirements

Resources could be identified as the main elements required in completing a particular given
task. Good and effective use of resources will help the organization to achieve their targets,
but the problem is how the organization is going to get the necessary resources effectively.
As mentioned above Creamy Yoghurts is going for a new market, where they will be moving
into International trade. In here the organization might face few problems when trying to
obtain theses necessary resources
It is in the hands of Creamy Yoghurts to get the necessary resources effectively. Resources
need to be prioritised with the best opportunities in the most effective way. The best
opportunities can be ranked by an organisation using appropriate criteria and weighing up
risk and reward. When a strategy choice has been made it is also necessary to closely monitor
the results of that strategy in order to consider future resource allocation.[ CITATION
uke14 \l 1033 ]
The key resources would be: finance, human resources, materials and time.

. Creamy Yoghurts will have to consider the.

 Types of labor required
 Roles and key responsibilities of each labor type
 Items of equipment to be used

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 Identifying the required amount of raw materials

 The amount of time taken to complete each task
 The required amount of finance needed to complete the tasks

10.Targets and timescales for achievements of the strategy

It is a common fact that the organizations set targets and they wish to achieve them within a
certain period of time, but this is not easy as it seems. Creamy Yoghurts have decided to
move into a new market that is to engage in international trade as their growth strategy.
According to the Ansoff growth matrix this is called Market Development. When trying to
implement this strategy, Creamy Yoghurts might face typical implementation problems such
as
 Implementation takes longer than expected.
 Major unexpected problems arise.
 Implementation activities are inadequately coordinated.
 Employees do not have the necessary capabilities or training.
 Managers fail to give a sense of direction.
 Implementation tasks are not defined properly.
 Information systems are not adequate. (Business strategy handouts)

It is important to have monitoring procedures when implementing a strategy as information

can then be used to –

 Assess resource allocation choices.

 Monitor implementation progress.
 Evaluate performance of managers in achieving implementation tasks.
 Monitor any environmental changes from those that were projected.
 Provide a feedback mechanism.[ CITATION uke141 \l 1033 ]

Next what Creamy Yoghurts should do is to build up a timescale for the selected Growth
strategy. This will enable them to have a estimated and a rough idea on the amount of time
taken to complete each task and then the time taken to implement the strategy. The following
table is an example showing the estimated time scales for Creamy Yoghurts.

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Activity Expected time

Finding a suitable person(Agent) to be involved in overseas 2 weeks
operations
Market research 2 months
Necessary documentation work 1 month
Finding a proper premises for operation 2 weeks
Initial advertising and promotions 1 month
Market development 1 month

Table 2 – estimated timescales

11.Conclusion and recommendations

It is true that the main motive of any organization is to achieve the goals and objectives
which are set up before operations and also to grow over time, but the question is whether
this is always possible. Do all the organizations end up in their desired places? Well for some
it might work out but some might decline. This is where strategic planning comes into play.
A good, effective planning will give more chance for an organization to succeed than to fail

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in future. How many organizations successfully act according to their mission and vision?
Creamy Yoghurts have done all the planning techniques before taking up decisions and this
will come in handy for them in future. One should also understand that achieving objectives
is not straight forward; they have to travel in a road with lots of obstacles. Organizations
might use different planning techniques just like Creamy Yoghurts have used, but still this
might not work out due to few issues that may arise due to the changing market conditions, so
because of this the organizations might have to cope with it or adjust themselves. Moving on
the organizations can use several methods to grow, but selecting the best option is risky and
involves proper and effective planning. A decision taken by the organization will largely
affect a number of people, the so called, ‘Stakeholders’ of the organization. The company
will always have to meet the expectations of the stakeholders and the interests and
expectations of the stakeholders will differ from one another. The organization will always
have to find certain ways to keep all the stakeholders happy and satisfied.
In conclusion the decision taken by Creamy Yoghurts to move into a new market after
considering all the growth strategies available is a bit tricky and a risky one, because
according to the planning, they will move into international trade and export their products so
in doing this they might face a number of problems. Creamy Yoghurts will have to carry out
an effective market research to find details about what is happening in the foreign market.
Should identify the customer tastes and preferences, the standards of the country, legality, the
political structure and the restrictions on exports will all have to be studied carefully and
should consider all these factors. It takes time, more money will be needed, but if it’s done
properly even though it is risky it is likely to bring the organization more success in future.

12.References

BusinessDictionary. (n.d.). Retrieved 07 13, 2014, from

http://www.businessdictionary.com/definition/environmental-scanning.html

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BusinessDictionary. (n.d.). Retrieved 07 14, 2014, from

http://www.businessdictionary.com/definition/Ansoff-matrix.html

BusinessDictionary. (n.d.). BusinessDictionary. Retrieved 07 11, 2014, from

http://www.businessdictionary.com/definition/gap-analysis.html

fac.ksu.edu.sa. (n.d.). Retrieved 07 12, 2014, from

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George N. Root, Demand media. (n.d.). smallbusiness. Retrieved 07 10, 2014, from
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http://smallbusiness.chron.com/importance-stakeholder-analysis-management-plans-
61850.html

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Santosh Karkhanis. (n.d.). Retrieved 07 13, 2014, from

http://www.karkhanisgroup.com/consulting/management/project-management/stakeholder-
management/163-advantages-and-disadvantages-of-stakeholder-analysis.html

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Business strategy handouts

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