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Strategic Management MBA AIB (2016)

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Strategic Management MBA AIB (2016)

  1. 1. QUESTION Your task is to undertake strategic planning for your own organization or for an organization you are familiar with in your country or region. Locate the vision statement, mission statement, statement of values and formal objectives of your chosen organization. Not all organizations have a statement of values; if that is the case, you can do without the statement of values. Not all organizations have formal objectives; if that is the case, you will be required to develop some appropriate objectives as part of the assignment. Write a report in which you:  Briefly describe the organization and its industry.  Identify the vision statement, mission statement and statement of values; explain their appropriateness for the organization; suggest potential improvements.  Identify the objectives; analyze their appropriateness for the organization; suggest potential improvements, or develop some appropriate objectives and discuss why they are applicable. Undertake an internal analysis of the organization and an analysis of its external environment using appropriate strategic management tools.  Develop an appropriate strategy for the organization. Make sure you explain why the strategy is relevant and how it relates to vision/mission/objectives. Clearly justify your argument. You do not need to develop implementation processes, but you should mention the critical importance of implementation, execution, and evaluation of the strategies you come up with for this assignment. ASSIGNMENT COVER SHEET AIB student ID number: A001646577 Student name: W.Dimithri Sadeepa Jayamali Course name: Master of Business Administration Subject name: Strategic Management Subject facilitator: Mr. Samitha Perera Teaching Centre: Oxford College of Business No. of pages: 15 Word count: 2053
  2. 2. 2 Strategic plan for Cargills (Ceylon) PLC Executive Summary This document provides an analysis of the strategic plan of Cargills Ceylon plc which is one of the leading company in Sri Lanka. Basic introduction provides the overview of company and the market background whilst describing its vision, mission, objectives and the values which provides the company a future direction. The critical analysis shows the importance of each concept and the suggestions to make them perfect as theoretically explained. In order to build up correct strategy for the business development, there should be a good understanding of the company environment in both internal and external perspectives. Moreover, the tools for separate analysis, the importance of them and how they can be used to analyze the Cargills Ceylon plc are described to understand the environment. Taking them into the consideration it has been suggested an appropriate strategy for the organization relating to the vision mission and objectives of the company.
  3. 3. 3 Table of contents Executive Summary......................................................................................................................... 2 Table of contents ............................................................................................................................ 3 1. Organization and the background........................................................................................... 4 2. Vision, mission, objectives and statement of values............................................................... 5 Vision........................................................................................................................................... 5 Mission........................................................................................................................................ 5 Objectives.................................................................................................................................... 5 Values.......................................................................................................................................... 7 3. Internal environment analysis................................................................................................. 7 a. SWOT.................................................................................................................................... 7 b. VRIN ..................................................................................................................................... 9 4. External environment analysis .............................................................................................. 10 a. PESTEL................................................................................................................................ 10 b. Five forces model............................................................................................................... 11 5. Appropriate strategy ............................................................................................................. 12 Conclusion..................................................................................................................................... 14 References .................................................................................................................................... 15
  4. 4. 4 1. Organization and the background Cargills Ceylon plc is one of the main FMCG company enlisted in the Colombo stock exchange. The beginning of the Cargills name runs in to 1844 when William Miller and David Sime Cargill commenced a general warehouse, import and wholesale business in Colombo, Fort naming the establishment as the 'House of Cargills'. Sir Chittampalam A. Gardiner brought the House of Cargills forward as a Public Limited Liability Company on 1 March 1946. After In 1981 Ceylon Theatres acquired controlling interest of the Company, under the new management, Cargills explored the potential of innovating on its trading legacy. As a result, in 1983 Cargills established the first supermarket chain in Sri Lanka with the opening of its first outlet at Staple Street (cargillsceylon, 2017). Cargills has segregated its retail stores as Cargills Food City™, Cargills Express™, Cargills Book City™, and Cargills BIG CITY™. Also, Cargills maintains 15 KFC™ franchise restaurants, 10 its own vegetable and perishable food processing units, Cargills Magic™, Fresh milk and Ice-cream factories, Cargills Suprimo™ meat factory, Cargills KIST™ factory and more than hundreds of product lines and its own household brands such as Cargills Home™ cleaners, detergents, Milca™ milk powder, Cargills spices™ , beverages etc. Specially with lots of developments, Cargills has become a successful supermarket chain in Sri Lanka specially owning their own dairy farms and crops screening the use of backward integration in their value chain. Another step is acquiring of Millers Limited consolidating its marketing and distribution operation with forward integration. Today the Cargills retail operation is spread across the island in two formats as ‘Cargills Food City’ supermarkets and ‘Cargills Food City Express’ convenience stores. When considering the current industry, the supermarket industry in Sri Lanka is set out for an explosive growth in the recent years this is with the western lifestyle of modern Sri Lankans where convenience is a key benefit sought (Perera, 2004). Cargills Food City, Kings Supercity, Sentra, Keells Super, EH Super Pola, Sunup are some of the supermarket chains that have expanded operations. In addition other operators such as park n' Shop, Arpico Super Centers, Crystal and Sathosa chain witness a dramatic growth in the modern trade, which is taking center stage over the traditional trade. Cargills Food city footprint has reached 297 stores covering all 24 districts of Sri Lanka.
  5. 5. 5 2. Vision, mission, objectives and statement of values Vision, mission and objectives lays out the future direction, performance targets and strategy. Specially the direction is provided through the vision describing managements’ aspiration for the future in long term. The mission describes the current business and purpose specifying the company’s approach to satisfy customer needs. Below are the vision and mission of Cargills Ceylon plc. Vision To be a global corporate role model in community – friendly national development. Mission Serve the rural community, our customers and all other stakeholders, through our core business – food with love – and other related businesses, based on the three main principles of • reducing the cost of living • enhancing youth skills • bridging regional disparity by enhancing local and global markets When considering the above vision it gives a wide picture of the future expectation of the company operation but it does focus on the way how the company become the role model. And it says the community friendly national development which a company alone cannot build up the status of national development. The mission of Cargills Ceylon plc has identified that the rural community is very important which all the corps are bought from. Compared to the vision, the mission has widely described how the company current status is and what they do to enhance the long term strategies. Objectives The objectives display the performance targets of the company. The Cargills has showed the below statement as the objective in the annual report.
  6. 6. 6 “Our work to advance environmental sustainability in terms of minimizing our environmental footprint and working towards a more sustainable use of natural resources, support for rural economic empowerment, and offering healthier food choices for our customers are further demonstrated by our commitment to report our actions and results. We continue to look for more ways to lead and have an even greater impact on the communities that we serve. The performance of the year concluded is indicative of the future course of the Cargills Group. On the strength of the positive business environment Cargills would continue to invest in value chains across the Group, focused on regional community development as the building block of growth while looking to exceeded consumer and shareholder expectation” (Cargillsceylon, 2016). Also, they are looking in to opening around 100 outlets in every district in the island in the next three years. They are also more in to enhancing youth skills and bridging regional disparity. The purpose of objectives is to convert vision and mission into specific, measurable, timely performance targets. The objectives have to be SMART as below definitions. According to Cargills they have stated specific objectives which are achievable in the near future. It would be more ideal if the time period was given.  S -Specific  M -Measurable  A -Achievable  R -Realistic  T -Timely
  7. 7. 7 Values The values are the behavior patterns expected from employees when conducting company’s business.  Diversity and Opportunity  Employee Volunteerism  Non-discrimination  Freedom of association and collective bargaining  Human Rights and Child Labor  Forced and compulsory labor  Anti-Corruption  Insider Trading  Governing Laws Cargills Ceylon plc has developed a multinational work environment by making connections across business units, at every location in every district across the island. Also, Cargills supports employees to build exciting and stable communities where the employees live and work. The company does not tolerate any discrimination or corruption. No child labor is used and labor compensations are provided with applicable provinces. 3. Internal environment analysis Company’s internal environment is evaluated to see how well the firms present strategy working. The tools used for internal environment analysis are SWOT, VRIN and the Strategy map as below. a. SWOT SWOT identifies the strengths, weaknesses, opportunities and the threats of a company. Strengths and weaknesses ae connected with the internal environment while the opportunities and threats towards external environment.
  8. 8. 8 Strengths Opportunities  High reputation and goodwill  Large outlets network  Developed technology in use  Strong logistics  Assets and financial stability  Strong relationships with suppliers  Strong brands in relation.  Expanding outlets in north and east provinces  Growth in modern technology in trade  The Albert A Page Institute of Food Retailing builds a base of well-trained employees for the future.(the 1st and food processing diploma in the country) Weaknesses Threats  Lack of labor in maintenance and store during operation  High staff turnover  Storage issues at outlets  Lack of focus on other retail formats  Delays in payments to small suppliers.  Parking issues at some outlets  Global economic down time and increasing inflation rates  Government policies and price standards  State officials with lack of knowledge of modern trade  Growth of other competitive food city chains and store standalone companies
  9. 9. 9 b. VRIN The company resources are described in detail under; V (Valuable) ,R(Rare), I(inimitable), N(Non-substitutable). Valuable Rare Inimitable Non- substitutable Core- competency that provides sustained CA Huge outlet network Yes Yes Mostly Yes Yes- Long term CA High technology Yes Yes Yes Yes Yes- Long term CA Strong logistics Yes Yes Yes Yes Yes- Long term CA Advanced technology Yes No Yes No Yes- Temporarily CA Strong brands in relation Yes Yes No Yes Yes- Long term CA
  10. 10. 10 4. External environment analysis Analysis of macro environment is equally important for a company as it includes strategically relevant important components which the company has no direct control. The external environment analysis can be done with the tools o PESTEL and Porters five forces model as below. a. PESTEL PESTEL analysis describes a framework of macro environmental factors used in the environmental scanning component of strategic management (The institute of chartered accountants Sri Lanka, 2013). Political Government regulations on goods transportation High transportation cost to deliver vegetables, fruits from central province Fluctuating VAT Economical Unsteady pricing system for goods High import export tax expenses Economical condition of consumers due to high inflation Economic condition of suppliers Social Consumer interest towards organic fresh products Social media advertising campaigns for products Technological Developed technological equipment, ERP and MIS s to handle the operation Home delivery businesses online markets Environmental Environment friendly business process Increment in consuming natural food Weather and climate changes Legal Food safety acts Quality certifications Consumer law
  11. 11. 11 b. Five forces model Cargills is having low bargaining power of suppliers from around 2000 suppliers who produce more than 20000 products. Earlier Cargills main supplier was Millers and in 2008 Cargills could acquire Millers through backward integration and therefore Cargills could use millers limited s’ sophisticated distribution channel in an optimum manner for the business. Also Cargills get their products using own concept call “farm to shelf”. With this concept Cargills collects vegetables, fruits, milk, eggs, meat, fish, spices, rice, and lot of other food products directly collected from rural farmers. Acquisition of Kist which is the second largest manufacturer of Jam, cordial, souse and beverages in Sri Lanka retained more market share compared to other rivals. To reduce the impact of bargaining power of customers Cargills reduces price. They constantly commencing promotions and rapidly developing communication channels with millions of budget on adverting too. Since the substitutes have low quality and accessibility the threat is considerably low. Also being the market leader for past 26 years they have gained market leadership through low cost and a new entrant cannot easily survive or come up to that level very easily. Rivalry among competitors is considerably high but Cargills is developing strategies to maintain their market leadership. Rivalry among existing firms - High Threat of new entrants - Low Threat of substitues - Low Customers' Bargaining power - High Suppliers' bargaining power - Low
  12. 12. 12 Major competitors of Cargills Ceylon plc 5. Appropriate strategy Company’s strategy helps to achieve the competitive advantage for a company to deliver the value to the customer. It’s based on,  the market size whether it’s broad or narrow and  the way competitive advantage is persuaded via low cost or differentiation. Accordingly, there are five generic competitive strategies as  Low cost provider  Broad differentiation  Focused low cost  Focused differentiation and  Best cost provider Large Small Cost Differentiation VFM
  13. 13. 13 According to the company vision its target is to become a global corporate model and therefore the low-cost strategy would help a lot as it helps to attract more sales and increase the market share. For that the total costs in the overall value chain has to be lower than the rivals. Cargills have already taken steps to reduce their costs at level best in order to get the use of company resources and capabilities. They have already bypassed the value chain activities by forward and backward integration. Also, the value chain activities have to be performed quickly, cost effectively and accurately. Also, the operation has to be streamlined by removing additional and unnecessary steps. Moreover, it has to reduce the handling costs and delivery costs in order to become successful with low cost strategy (Thompson, 2016). In order to strengthen the strategy, the Cargills Ceylon plc can be engaged much more in enhancing the scope like it has already followed up few concepts of integration. Growing the business, it can take up the existing businesses and expand the portfolio too. It can outsource 3rd party IT facilities and develop virtual markets in the near future where the customer can log in and order goods to be delivered to their home. The market trends are moving so fast and in order to cope up the business it has to be updated with new technology and move forward with best strategies to deliver the best value to the customers.
  14. 14. 14 Conclusion Based on the above information the company is following a great vision mission and objectives with company values and it needs to become success in achieving low-cost edge over the above- mentioned rivals. Also the environment analysis is utmost important with correct tools to get through the correct future direction. Aligning with correct analysis of the environment, it has to identify the correct needs of the company and proceed with the actions to drive costs out of the business. Not only that it has to have correct estimations for new investments prior spending money on them. Not only that it is more important to keep us the extreme quality by reviewing cost saving resources to develop the business in strategic manner.
  15. 15. 15 References Cargillsceylon. (2016). Annual report 2015-2016. Retrieved 02 11, 2017, from https://cdn.cse.lk/cmt/upload_report_file/457_1465472557985.pdf cargillsceylon. (2017). OurHistory. Retrieved 02 11, 2017, from www.cargillsceylon.com: http://www.cargillsceylon.com/AboutUs/OurHistory.aspx Perera, P. (2004). Bus19. Retrieved 02 11, 2017, from dailynews.lk: http://archives.dailynews.lk/2004/01/06/bus19.html The institute of chartered accountants Sri Lanka. (2013, 11 26). System and strategy. Retrieved 02 13, 2017, from https://www.casrilanka.com/casl/images/pdf/businessschool/2%20project.pdf Thompson, P. G. (2016). Crafting & Executing Strategy (Vol. 20). McGawHill. Retrieved 02 13, 2017

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