Strategic planning and management are paramount for any organization. In business, managers use strategic management to provide effective organizational direction and devise policies that move their businesses to a competitive edge. However, a strategic plan does not always lead to the expected result. As such, Janus, in the case Building a Milky Way from Denmark to Latin America and the Caribbean, is faced with a tricky situation that requires urgent strategic planning for his firm – Alar Foods. The firm has recently entered into the Latin American and the Caribbean (LATAM) market in anticipation of expanding its brands’ presence. The decision was influenced by the failing growth potential in the European Market, following political risks in Venezuela and Argentina (Ramirez & Modrow, 2015). However, the LATAM market is different from the European market, which led to poor decisions. The company must devise efficient strategic management plans to succeed in internationalization and to conquer the LATAM market.
Alar Foods deals with daily products and has significant establishments in Europe, Russia, Africa, the Middle East, and China (Ramirez & Modrow, 2015). The company has a market coverage of more than one hundred countries, selling through three major brands with several product lines. The three brands include Alar, which produces a broad range of dairy products; Lurpak, which is for premium butter and spreads; and Castello, which serves high-end special cheese (Ramirez & Modrow, 2015). The three brands are reasonably strong, and Janus views them as a stronghold for the internationalization process. However, a SWOT analysis reveals all abilities of Alar Food’s internal and external functions.
Alar has many strengths both in its internal and external environment. For instance, the company has a diversified brand portfolio. Alar Foods serves a wide range of customers in its markets through its major brands (Ramirez & Modrow, 2015). For instance, customers from all economic statuses can afford a product from the company on either three brands. Also, the company has succeeded in creating a presence in new markets. It is easy for the company to conquer a market where it is present since leaders have already gained experience. The case reveals that the company is already present in big markets such as Europe, Middle East, and China. Lastly, the company has a strong administrative structure. The organizational structure presented by Ramirez & Modrow (2015) reveals established management, which covers all critical components of the business. All leaders are experts in various fields, which creates a robust organizational knowledge-base.
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Concerning Alar’s weaknesses, the company appears to have limited awareness of the LATAM market. Janus had presumed that since the company has excess milk supply, and the LATAM market has millions of potential customers, it would have easy entry and success. However, this turned out to be challenging. The company did not conduct adequate research to understand that the LATAM market has differences from the European market, requiring a strategic approach. Also, the company is managed by farmers, which had led to an extensive managerial structure. This does not only slow decision making, but it is also prone to poor performance due to laxity and avoidance of participation. These escalate the risk of threats facing the company.
Most threats facing Alar Foods are related to competition and the market itself. For instance, the LATAM market is already served by significant competitors, who are already established. As such, customers’ loyalty to the established dairy companies threatens Alar Foods to get an unsustainable customer base in the region. Besides, the Latin American and the Caribbean climate is not ideal for dairy farming. This threatens Alar Foods to limited milk supply for processing. Also, political instabilities in Venezuela and Argentina threaten to weaken the company in that region. That can be a significant impact since both countries have a high milk production due to favorable climate.
Nevertheless, Alar Foods has the following opportunities. First, the demand for dairy products keeps increasing. In LATAM, the middle-class population is expected to escalate, creating a massive market for Alar Food brands. The company has also been established in countries with significantly large populations, which provides access to many potential customers. Also, there are ongoing market reforms especially regaining the EU milk quota, which will reduce market constrain for Alar.
The analysis above reveals Alar Foods’ potential in succeeding the internationalization process by first conquering the LATAM market and Expanding its European market. Regarding the first strategy, the company ought to understand that historically, the economic environment of LATAM countries has frustrated many multinationals due to socio-economic volatility. There is a need for sufficient market research to amend the entry behavior and products, such that the company alights with the market. On the other hand, the European market has established infrastructure and surplus law milk, making it easier to expand than LATAM.
Following the strategic options identified above, Alar Foods may follow these recommendations to conquer the LATAM market and expand the European market.
- Invest in research about the nature of the LATAM market and the consumption behaviors of its population. That will help to know which brands are viable for the market.
- The company should consider buying a portion of the currently established dairy companies in LATAM. That way, they will learn effective operations and treads in the dairy sector at LATAM and devise an effective entry strategy.
- Evaluate the economic and political stabilities of countries in which they serve. That will enable the company to enter or exit at the most appropriate times.
These recommendations should be implemented through a strategic process covering short-, medium-, and long-term goals.
The immediate goals should entail the expansion of the European market. It will also entail the exploration of a possible increase in export quotas for milk. This will be fairly straightforward since Alar Foods is already established in Europe. One of the considerations for expanding a market is usually the capacity of a business. In this case, Alar Foods has already built a presence in the region, and there is potential for a sufficient milk supply from dairy farmers. As such, the company is in a competitive position to expand. Also, the European market is less complicated than LATAM, and thus, it will need lesser resources. However, the company must invest in research for the new market to ensure no expansion mistakes. This should be done within the next six months.
The medium-term plan should be to research the LATAM market and learn its sustainability factors. This will entail both qualitative and quantitative research processes to learn factors such as the Southern American populations’ consumer behavior. Market research can be done through surveys, interviews with keys stakeholders such as major dairy farmers, observation, or focus group research. That will provide Alar Foods with insights into the preferences of consumers and the LATAM market dynamic. Besides, the company will buy portions of dairy companies in LATAM. This will provide an insider perspective of running and sustaining a dairy business in the market. This should be done within two years. Within this time, the company will collect data on consumer behavior in all seasons at least twice.
The long-term plan will entail entry into LATAM and other markets throughout the world. This will be important since the company will achieve its internationalization goal. The success of internationalization will significantly rely on entry behavior into new markets and the company’s competitiveness. Besides, factors such as the internationalization process’s financial capabilities, the choice of the market to enter or expand, and the long-term scope of the process are imperative to consider. Since the company is in a not so good financial position, it may begin by expanding into more predictable and favorable markets. This may take up to seven years.
To sum up, Alar Foods struggles to maintain its competitiveness in the LATAM market due to poor strategic planning done earlier. Under the leadership of Janus, the company had envisioned conquering the LATAM market due to its vast population. It was also underperforming in Venezuela and Argentina due to political tension. Internal and external analysis reveals that the company should expand the European market and learn new markets such as LATAM before entry. This strategy should be implemented by categorizing short-term, medium-term, and long-term goals. These include expanding in Europe as the immediate plan, conducting market research for the LATAM market, and pursuing its internationalization strategy.
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Figure 1 Trends in dairy Market in LATAM
Expert Market Research. (2021). Latin America Dairy Market Key Insights. Retrieved from https://www.expertmarketresearch.com/reports/LATAM-dairy-market
•Short Term Goals
•Medium Term Goals
•Long Term Goals
Figure 2 Implementation timeline
This is the current trend in financial performance for Alar Foods in Europe, China, and LATAM.
This is the expected trend in financial performance once Alar Foods has begun implementing the suggested strategies.
Ramirez, J., & Modrow, S. (2015). Building a ‘Milky Way’ from Denmark to Latin America and the Caribbean. Retrieved 10 February 2021, from https://www.thecasecentre.org/educators/products/view?id=127241