Chicheportiche Raphael
Rasio’s Strategic Diamond Model
before Stanol Ester
Arena
Staging
&
Pacing
Vehicles
Differentiators
ECONOMIC
LOGIC
Q1
Diamond Model - ARENA
Q1
Product Category:
- Grain milling company
(cereals, vegetable oil)
- Animal feeds
- Malt producti...
Diamond Model - VEHICLES
Q1
Vehicles
Internal development:
- Expand to animal feeds
- Malt production
- Potato starch
- Ma...
Diamond Model - DIFFERENTIATORS:
Q1
Differentiators
Market Leader in flour, pasta and Musli in all area of Russia and Esto...
Diamond Model - STAGING & PACING:
Q1
Staging
&
Pacing
Speed of expansion:
- From 1987-1991 increase income average 10%.
- ...
Diamond Model - Conclusion:
Q1
Before the Stanol Ester, Raisio was a company with
good food products and a great potential...
Financial performance of the Raisio group
in the period 1987-1996
Q2
DuPont Analysis - ROE
1987-1996
Years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
ROE (%) 15.5 15.3 5.4 0.1 6.9 10.3...
DuPont Analysis - Detailed ROE
1987-1996
Q2
ROE =
Net _Profit
Equity
=
Net _Profit
PreTax_Profit
*
PreTax_Profit
EBIT
*
EB...
Years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Net income**
103.85 152.082 60.642 12.24 85.974 128.338 156.251 14...
Q2
Dupont Analysis - Net Margin
1987-1996
Years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Net Margin (%) 5.1 6.9 2...
Value chain of the Benecol Business
Unit in years 1997-2000
Q3
Poter’s Value Chain: Support activities
Firm Infrastructure
Separate department for Benecol unit
headed by Jukka Kaitarant...
Poter’s Value chain: Primary activities
Inbound logistics Cooperation with UPM-Kymmene for extraction and
productions of p...
* In order to calculate ROA we used balance sheet total as total Asset.
** In order to calculate Net income. We did ROE x ...
Q4
Dupont Analysis - Net Margin
1996-2000
Years 1996 1997 1998 1999 2000
Margin profit 1.98 2.7 3.5 0.15 - 4,8
-6
-5
-4
-3...
DuPont Analysis - ROE
1996-2000
Q4
-20
-15
-10
-5
0
5
10
15
1995 1996 1997 1998 1999 2000 2001 ROE(%)
Years 1996 1997 1998...
DuPont Analysis - Detailed ROE
1996 - 2000 (inEm)
ROE =
Net _Profit
Equity
=
Net _Profit
PreTax_Profit
*
PreTax_Profit
EBI...
Q5
Resources Importance Relative Strength
R1 8 8
R2 8 7
R3 8 5
R4 8 3
R5 9 9
R6 8 8
R7 7 7
CAPABILITIES Importance Relativ...
Q5
RelativeStrength
Strategic Importance
Superfluous Strengths Key Strengths
Zone of Irrelevance Key Weaknesses
1
1
5
5
10...
Q6
Dynamic capabilities Raisio’s Capabilities
Sensing
• being aware of new developments in
technology
• identifying custom...
Q6
• Although having timing advantage compared to the other companies, the
opportunity wasn’t seized as expected.
• Making...
Q7Q7
Reasons for Raisio’s failure after the year 2000:
Dynamic capabilities of the Raisio’s group:
• Making the wrong cont...
Q7Q7
• The unavoidable competition
• The communication was minor about the future of their key
ingredient, the sterol and ...
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Raisio - Study Case

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Raisio - Study Case

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Raisio - Study Case

  1. 1. Chicheportiche Raphael
  2. 2. Rasio’s Strategic Diamond Model before Stanol Ester Arena Staging & Pacing Vehicles Differentiators ECONOMIC LOGIC Q1
  3. 3. Diamond Model - ARENA Q1 Product Category: - Grain milling company (cereals, vegetable oil) - Animal feeds - Malt production - Potato starch Geographic Area: - Finland - Sweden - Soviet Union - Estonia. Core Technologies: - Considerable entrepreneurial initiative technical ingenuity. - Plan construction with innovative improvisation. - Active program of R&D Arena
  4. 4. Diamond Model - VEHICLES Q1 Vehicles Internal development: - Expand to animal feeds - Malt production - Potato starch - Margarine - Paper Industry (1960). Joint Ventures: In 1987 Raisio group (Vehna oy) merged with oil factor Oy Kasxioljy-Vaxtoljhe Ab.
  5. 5. Diamond Model - DIFFERENTIATORS: Q1 Differentiators Market Leader in flour, pasta and Musli in all area of Russia and Estonia.
  6. 6. Diamond Model - STAGING & PACING: Q1 Staging & Pacing Speed of expansion: - From 1987-1991 increase income average 10%. - R&D extensive research on fat metabolism and plant sterol.
  7. 7. Diamond Model - Conclusion: Q1 Before the Stanol Ester, Raisio was a company with good food products and a great potential but it missed a real differentiation which could help avoiding threats, its extension, international exportation and make it a leading branch of its kind.
  8. 8. Financial performance of the Raisio group in the period 1987-1996 Q2
  9. 9. DuPont Analysis - ROE 1987-1996 Years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 ROE (%) 15.5 15.3 5.4 0.1 6.9 10.3 10.3 9.4 6.8 5.8 Q2 0 2 4 6 8 10 12 14 16 18 1986 1988 1990 1992 1994 1996 1998 ROE(%) ROE(%)
  10. 10. DuPont Analysis - Detailed ROE 1987-1996 Q2 ROE = Net _Profit Equity = Net _Profit PreTax_Profit * PreTax_Profit EBIT * EBIT Sales * Sales Assets * Assets Equity YEAR 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 SALES 2011 2184 2487 2557 2315 3070 3549 3518 3224 3928 TOTAL ASSETS 1831 2257 2493 2872 2702 3268 3302 3071 3175 3678 NET INCOME 103.85 152.082 60.642 12.24 85.974 128.338 156.251 147.016 112.064 114.434 EBIT 214 247 232 213 316 431 492 428 383 420 PRETAX PROFIT 97 98 91 64 63 114 185 35 140 162 PRETAX/EBIT 0.453 0.396 0.392 0.30 0.2 0.27 0.37 0.081 0.365 0.385 NET INCOME/PRETAX 1.07 1.55 0.66 0.19 1.36 1.12 0.84 4.2 0.8 0.7 EBIT/ASSET 0.12 0.11 0.093 0.074 0.12 0.13 0.15 0.14 0.12 0.11 ASSET/EQUITY 2.73 2.27 2.21 2.34 2.16 2.62 2.17 1.96 1.92 1.86 ROE 15.5 15.3 5.4 0.1 6.9 10.3 10.3 9.4 6.8 5.8
  11. 11. Years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Net income** 103.85 152.082 60.642 12.24 85.974 128.338 156.251 147.016 112.064 114.434 ROA(%) * 5.67 6.73 2.43 0.42 3.18 3.92 4.73 4.78 3.52 3.11 * In order to calculate ROA we used balance sheet total as total Asset. ** In order to calculate Net income. We did ROE x Shareholders Equity. Q2 DuPont Analysis - ROA 1987-1996 0 1 2 3 4 5 6 7 8 1986 1988 1990 1992 1994 1996 1998 ROA(%)
  12. 12. Q2 Dupont Analysis - Net Margin 1987-1996 Years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Net Margin (%) 5.1 6.9 2.4 0.4 3.7 4.1 4.4 4.2 3.5 2.9 0 1 2 3 4 5 6 7 8 1986 1988 1990 1992 1994 1996 1998 Net Margin
  13. 13. Value chain of the Benecol Business Unit in years 1997-2000 Q3
  14. 14. Poter’s Value Chain: Support activities Firm Infrastructure Separate department for Benecol unit headed by Jukka Kaitaranta. Human ressource Management Scientists employees for the lab. Technology Development R&D, laboratories, Patents for protect its product. Procurement Purchasing and construction of new plants and laboratories Conducting research Q3
  15. 15. Poter’s Value chain: Primary activities Inbound logistics Cooperation with UPM-Kymmene for extraction and productions of plant sterols. Operation • Production of stanol ester from plant sterols to Benecol margarine. • Conducting Researches in metabolism fat and cholesterol. Outbound logistics Special own-label packaging, delivery to countries. Marketing and sales Marketing cooperation with Johnson & Johnson for USA. Strategies for different markets. Services Regular services with distributors costumers. Q3
  16. 16. * In order to calculate ROA we used balance sheet total as total Asset. ** In order to calculate Net income. We did ROE x Shareholders Equity. Q4 DuPont Analysis - ROA 1996-2000 Years 1996 1997 1998 1999 2000 ROA(%) 2.11 3.6 4.2 0.16 -5.1 Net Income 13.095 23.244 29.167 1.216 - 38.74 -6 -4 -2 0 2 4 6 1995 1996 1997 1998 1999 2000 2001 ROA(%)
  17. 17. Q4 Dupont Analysis - Net Margin 1996-2000 Years 1996 1997 1998 1999 2000 Margin profit 1.98 2.7 3.5 0.15 - 4,8 -6 -5 -4 -3 -2 -1 0 1 2 3 4 1995 1996 1997 1998 1999 2000 2001 Margin profit
  18. 18. DuPont Analysis - ROE 1996-2000 Q4 -20 -15 -10 -5 0 5 10 15 1995 1996 1997 1998 1999 2000 2001 ROE(%) Years 1996 1997 1998 1999 2000 ROE(%) 4.5 7.8 9.2 0.4 - 14.90
  19. 19. DuPont Analysis - Detailed ROE 1996 - 2000 (inEm) ROE = Net _Profit Equity = Net _Profit PreTax_Profit * PreTax_Profit EBIT * EBIT Sales * Sales Assets * Assets Equity YEAR 1996 1997 1998 1999 2000 SALES 661 858 833 763 800 TOTAL ASSETS 619 643 690 744 750 NET INCOME 13.095 23.244 29.167 1.216 - 38.74 EBIT 33 41 52 16 -32 PRETAX PROFIT 27 20 39 -2 -47 PRETAX/EBIT 0.818 0.487 0.75 -0.125 1.468 NET INCOME/PRETAX 0.485 1.162 0.747 -0.608 -0.824 EBIT/ASSET 0.053 0.063 0.075 0.021 -0.0426 ASSET/EQUITY 2.127 2.157 2.17 2.44 2.88 ROE(%) 4.5 7.8 9.2 0.4 (-14.90) Q4
  20. 20. Q5 Resources Importance Relative Strength R1 8 8 R2 8 7 R3 8 5 R4 8 3 R5 9 9 R6 8 8 R7 7 7 CAPABILITIES Importance Relative Strength C1 9 8 C2 6 7 C3 8 7 C4 8 9 C5 9 8 C6 8 9 C7 9 4 Benecol’s resources and capabilities 1997-2001
  21. 21. Q5 RelativeStrength Strategic Importance Superfluous Strengths Key Strengths Zone of Irrelevance Key Weaknesses 1 1 5 5 10 R1 R2 R3 R4 R5 C1 C2 C3 C4 C5 C6 C7 R6 10 Map of strategic importance vs. relative strength
  22. 22. Q6 Dynamic capabilities Raisio’s Capabilities Sensing • being aware of new developments in technology • identifying customers needs • Organizational learning • Raisio Group aimed at studying the effect of rapeseed oil on blood cholesterol level and came up with the new cholesterol lowering margarine. Seizing • determining your business model • understanding resource needs • making decisions • pertaining to investing in technology and other resources • leading others to make the appropriate changes • Signing partnership contracts with the leading firm- J&J • An agreement for achieving a major increase in its sterol production supply, with a French company • Joint venture • Following the J& J deal, Raisio began construction of a Stanol Ester plant at Charleston, South Carolina. • Benecol was introduced as a dietary supplement, which was rejected. Reconfiguration: • Maintain competitiveness • reconfiguring the business enterprise’s intangible and tangible assets • J&J shifted the emphasis of its marketing strategy from consumer advertising • Raisio made safeguarding long term availability of sterol. • Replacing CEOs • Making a new contract of new relationship with J&J • Benecol acquired global rights to sell and market sterol ester Dynamic capabilities:
  23. 23. Q6 • Although having timing advantage compared to the other companies, the opportunity wasn’t seized as expected. • Making the agreement with J&J was Raisio’s main problem • Replacing the CEO and a new contractual relationship with J&J helped Raisio to re enter the market. • Benecol acquiring of global rights helped them with saving the potential of the firm Raisio’s Groups dynamic capabilities we’re not enough to manage its innovative products at first when they had the opportunity, but after the year of 2000, they had better chances to succeed world wide. Conclusion:
  24. 24. Q7Q7 Reasons for Raisio’s failure after the year 2000: Dynamic capabilities of the Raisio’s group: • Making the wrong contractual deals with inexperienced companies. • Inability to adapt fast to changes and reconfigure competencies. • Inability to get ahead of competition although the advantages. • Difficulty to move fast due to delay of supply and problems of coordination. • Inability to sense the market: limited themselves to a unique product- margarine and ineffective partnership with J&J.
  25. 25. Q7Q7 • The unavoidable competition • The communication was minor about the future of their key ingredient, the sterol and what to do about it in the market. • The limited resource of its ingredient and the poorness of the brand equity Additional Reasons to Raisio’s failure:
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