Ruhunu corporate level strategies and strategic alternatives

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corporate level strategies and strategic alternatives, Ruhunu Foods (pvt) pvt limited

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Ruhunu corporate level strategies and strategic alternatives

  1. 1. 1 Corporate Strategies and Strategic Alternatives of Ruhunu Foods (PVT) Limited Lecturer: Mr.Nuresh Eranda
  2. 2. 2 Table of Contents Table of Contents .......................................................................................................................................................... 2 Ruhunu Foods (pvt) Ltd ................................................................................................................................................ 4 Ruhunu Foods (PVT) LTD Internal Environment ............................................................................................................ 6 Ruhunu Foods (PVT) LTD Organization culture ............................................................................................................. 6 Formal Culture ........................................................................................................................................................... 7 Cultural web: ............................................................................................................................................................. 7 Industry Analysis........................................................................................................................................................ 8 Strategic groups in Spice Industry ............................................................................................................................. 9 Organizational structure.......................................................................................................................................... 10 Corporate level strategy and strategic alternatives .................................................................................................... 11 BCG Matrix............................................................................................................................................................... 13 Business level strategy ................................................................................................................................................ 14 Other products ........................................................................................................................................................ 14 Competitors ............................................................................................................................................................. 14 Value chain .............................................................................................................................................................. 16 Functional level strategies ........................................................................................................................................... 17 Production (operation ............................................................................................................................................. 17 Marketing: ............................................................................................................................................................... 18 Finance: ................................................................................................................................................................... 18 Research & Development: ....................................................................................................................................... 18 Human Resource Management:.............................................................................................................................. 19 Corporate Social Responsibilities (CSR)of Ruhunu Foods (Pvt) Limited ...................................................................... 19 International Strategy.................................................................................................................................................. 20 International Drivers ............................................................................................................................................... 20
  3. 3. 3 Porter’s Diamond .................................................................................................................................................... 20 International Strategies ........................................................................................................................................... 21 Entry Modes ............................................................................................................................................................ 22 Conclusion ................................................................................................................................................................... 23 Recommendations....................................................................................................................................................... 24 They over estimate their organization than actual ............................................................................................. 24 They are neglecting the competition .................................................................................................................. 24 Need new human capital as investment capital to implement current vision ................................................... 24 They spend immensely on international suppliers hence there would be trouble when exchange rates fluctuates or they demand more price ......................................................................................................... 24 Their strategies are not focusing on attracting local customer base .................................................................. 24 Warehouse .......................................................................................................................................................... 25 Their competitive advantage which is quality is imitable, not rare. ................................................................... 25 Though they focus on Corporate Social responsibilities that is not based on their value chain activities ......... 25 Reference .................................................................................................................................................................... 25 Annexes ....................................................................................................................................................................... 26 Annexes 01 .............................................................................................................................................................. 26 Annexes 02 .............................................................................................................................................................. 26 Annexes 03 .............................................................................................................................................................. 27 Annexes 04 .............................................................................................................................................................. 27
  4. 4. 4 Ruhunu Foods (pvt) Ltd The Ruhunu foods (Pvt.) Ltd, Which is Recognized as Sri Lanka’s premier manufacturer of pureauthentic natural spices today .This operates under the Sri Lanka food industry. Sri Lanka food industry is one of the fastest growing sectors in the Sri Lankan economy and has the potential to growth further in short and medium term. The industry generated annual export revenue of US$ 367 million by end of 2011 recording 5.78% average growth rate from 2009 up to August 2012.The Sri Lankan food industry products comply with international standards such as ISO 9000,ISO 22000,HACCP, Halal, Kosher, Organic etc. The Industry has a potential for further expansion utilizing the resources available in the country and also experienced and qualified staff currently engaged in the industry Ruhunu Foods (PVT) was established in 1978 and it’s located at Kundasale Kandy district. It is a subsidiary of Ruhunu group, is one of the largest and leading spices manufacturers in SriLanka. Ruhunu Foods being a domestic market leader for spices, herbs, condiments, flour products, essential oils and relishes to countries such as Australia, Japan, Cyprus, Italy, Canada etc: As mentioned earlier Ruhunu Foods a subsidiary of Ruhunu Group (pvt) Ltd. It consists of following other subsidiary companies.  Ruhunu Exports (pvt) Ltd  R and R Trading (pvt) Ltd  Mahakapuyaya Organic Foods They owned a lot of machines and quality control machines with their manufacture process, and they have efficient and well-trained employees, to provide well quality products to their consumers. Ruhunu Foods stands for “Quality and Value” and is the SriLanka’s first and foremost spice producer to be awarded with quality standard certificates, that includes,  ISO 22000- The Food safety management system certificate  Organic Farming  SLS 143
  5. 5. 5  HACCP  Good manufacturing practice certificate scheme(GMP) Vision “Being the ultimate choice among the spicy food consuming global community” Mission “Being the leading spicy food exporter in SriLanka by providing natural tasty and quality spices and allied products while uplifting the living status of local spices farming community.” commitment to excel * Adhering to strict Hygiene in the production process of food items. Every single product is processed and packed under strict hygienic conditions. * Attention to detail in Quality control measures. Quality control measures adopted from the raw material to the packed end- product. * Highly trained, qualified Team of dedicated personnel. Who work around the clock to deliver . quality goods always * State of the art laboratory facilities and Research & Development team.  Powered with modern equipment & technology that ensures high output on a wide range of products, Ruhunu Foods is ready to cater to the global market.
  6. 6. 6 Ruhunu Foods (PVT) LTD Internal Environment Internal environment of the Ruhunu Foods (PVT) LTD is determined by its resources like; tangible resources and intangible resources following manner, Tangible Resources Financial Intangible Resources Internal funds Human resources resources Trust of employees, managerial capabilities Organizational Flat organization structure, Innovation resources Scientific capabilities, resources reporting structure Physical resources Factory, warehouses, Reputational Employee machine & equipment, resources name: wfmau rfgs ri iqjo, creative ideas organic farm, vehicles, loyalty, brand customer loyalty etc. laboratory, Technological Trademarks resources  And its capabilities focuses on research & development functional area by discovering new products relate with herbs & spices. Finally its core competence involve in producing wide variety of spicy & allied Quality products to gain competitive advantage over its competitors. Ruhunu Foods (PVT) LTD Organization culture Ruhunu has a strong organization culture that allows their employees to innovate with their new products. Ruhunu annually organized a reward ceremony to motivate their employees to come up with their own innovative ideas. (Annexes 1) This helps them to drive their corporate level strategies as product development and related diversification.
  7. 7. 7 Formal Culture: This includes Ruhunu vision, Mission Product portfolios, procedures, and management. All the information included in our company profile. Cultural web:
  8. 8. 8 Industry Analysis – The industries, most become unattractive in the market place with their rivary, suppliers bargaining power, and customers bargaining power. Hence considering overoll anaysis Therefore spice industry is an Unattractive industry.
  9. 9. 9 Strategic groups in Spice Industry HIGH  This analysis is doing before the competitor analysis of spice industry. Arpico, Keels, Food city MAS, CIC, Agro Ruhunu , Wijaya, MODERATE Araliya , Nadee cinnamon Mc Currie Dilfoods Village Cottage LOW Quality Ceylon Spice Company, McCurry, Ishana Spice Exports, Freelan LOW MODERATE Price HIGH
  10. 10. 10 Organizational structure
  11. 11. 11 Corporate level strategy and strategic alternatives Corporate level strategy based on the direction given by Vision statement of Ruhunu Foods (PVT) LTD as “Being the ultimate choice among the spicy food consuming global community”, which is explain thoroughly by the mission statement “as leading spicy foods exporter in Sri Lanka by providing natural tasty and quality spices and allied products while uplifting the living status of local spices”. This was the base for 5 year plan of Ruhunu Food (PVT) LTD setting as strategic objectives for next 5 year of time starting 2013.  Expand the customer base for RUHUNU products  Increase the current product volume eg:- will introduce new range of product items  Increase labour force eg:- Recruit new workers to the company  Introduce new machine technology eg;- new machine plants will export  Expand the export market eg:- by introducing their products for new international countries  Shift up their organization to an INDUSTRIAL ZONE, because they are isolated company. Since time to time they have been practicing Market Penetration , Market Development and Market Product Development all together without focusing one strategic direction we found is hard to identify which growth directions they hold in present. They say they are more focus on how to achieve their final destination of being ultimate choice of global spice market hence focusing one strategic direction will make it harder to accomplish their for using combination of direction strategies serve had been serve them well in past and will be serving them well to attain their vision. And using above information wh it comes to main strategic alternatives, considering details it should come under Limited Growth as it fulfills,  Market Penetration  Market Development  Market Product Development
  12. 12. 12 Relating these objective towards Ansoff Matrix with Ruhunu Food (PVT) LTD, Product Existing New  Market Penetration: providing existing products for existing market Exiting  They have conducted a promotion campaign during the period April to September “Ranwasi” Product Development  They will introduce 4 new products to the existing market  Have been introduce 3 products within last month  Introducing different pack sizes to increase usage rate of their products  Advertise in Newspapers, Television and newly added bill boards in Kandy region. Markets  Distribution vehicles are consist of displaying their logos  Pastry shop Market Development  Export Ruhunu Foods including spices, herbs, condiments, relishes, flour products, essential oils and to countries as Japan, Australia, Cyprus, Italy, Canada.  Al-Maya super market chain have been in strategic alliances New  Research done to choose which products to set to the Trincomalee, Jaffna, Gampaha (last month) Diversification *focuses on related diversification From spices and herbs Flour types Vinegar Salt Coffee Soya meat Plums
  13. 13. 13 BCG Matrix And discussing product with references to the Market share spice oils SPICES CHILI PASTE COFFEE FLOUR MMaldives’ fish sambol, seeni sambol, katta sambol, Rasam cream SALT SOYA MEAT Market growth VINEGAR
  14. 14. 14 Business level strategy Business unit level concerns how to compete among competitors, SBU wise, in order to achieve the competitive advantage, within an organization’s context. As we discovered, Ruhunu’s competitive advantage is none other than its supreme quality embedded in its processes and products. Even they say that their brand is a “symbol of quality”. Hence, they perform various strategies in order to follow and maintain the quality standards throughout their value chain. According to the Porter’s Generic model, Ruhunu’s competitive strategy is “differentiation”. Since their ultimate intension is to offer the highest quality product to customers, they do not go for cost leadership. In fact, they offer their customers a unique product that is different from competitors. Their main three product lines are;  Spices  Flour  Seeds (Further information on products in the product lines are in Annexes 2) Other products  Maldives’ fish sambol, seeni sambol, katta sambol, Chinese chilli paste, special noodles, plums, vinegar, table salt, coffee, curry soya meat, chicken soya meat, cuttle fish soya meat, rasam cream, sago, spice oils and oleoresins. Competitors Spices Flour Seeds Wijaya Harischandra CIC Ceylon Spice Company Alli (Pvt) Ltd Nature’s Agro Products Lanka Company Ma’s Tek organic Wayamba Traders McCurry Freelan Anthon Trading Ishana Spice Exports Serendib Flour Mills Freelan Nadee cinnamon
  15. 15. 15  Ruhunu’s flour and spice product lines are a hybrid of manual and automated processes. Almost all the functions inclusive of packing are done by using machines. However, their entire line of seeds, is completely handled manually. There is no such big process, seeds are washed and packed manually.  Since their solitary focus is on differentiation, they achieve their competitive advantage “quality”, by performing various value chain activities to achieve differentiation opportunities. Ruhunu is maintaining its quality in performing their value chain activities from A-Z.  Purchasing and procurement wise, they maintain their own 100 acres organic farm called “Mahakapuyaya”, which is situated in Dambulla. Their products are organic products, since they use dung fertilizer in their farms.  They also have an OBT Centre- a separate farm, which fresh fruits are also grown. If raw materials from these sources are not sufficient, they import raw materials from India. Through these procurement activities, they achieve the highest quality.  Product R&D is one of their major concerns. They have their own microbiology laboratories. Their chief researcher is Mr. Saman de Silva, who is a very qualified lecturer from University of Jayawardenapura. Moreover, their piece of researches is done but lecturers from agriculture and engineering faculties. They implement updating technologies to attain the highest quality. This is also achieving differentiation through value chain activities.  They also have obtained SLS,ISO,HACCP,Soorya quality assurance certificates, ensuring the highest quality.  Through differentiation, they command a premium price for their quality products and they have already built a strong brand loyalty and sustainability in the market, by offering the best quality, which is their competitive advantage.
  16. 16. 16 Value chain
  17. 17. 17 Functional level strategies Functional level strategies are based on corporate and business level strategies. Functional level strategies deals with separate functions in organization but those strategies should be suitable with organization’s overall corporate and business level strategies. Functional level strategies include,  Production  Marketing  Finance  Human resource  Research & development Production (operation): Mostly Ruhunu foods maintain good operation strategies based on the quality of the product. Mahakapuyaya is their main raw material supply place and if there, any shortages they import it. They have inventory control methods, 5’s system; especially they check the quality of imported raw materials, packing and end product check by Ruhunu itself. In addition, there are separate quality plans for each and every product. There is a particular uniform to wear when they go for operation activities. According to the production, they maintain high quality in their product to accomplish their corporate strategies like related diversification and market development strategies. They export most of their Ruhunu foods by maintaining better quality in the operation activities. They have several quality control levels such as imported raw materials, packing, end-product and quality controls related with the employees. Through these experiences they develop new markets, differentiate their product based on their corporate level strategies.
  18. 18. 18 Marketing: According to their marketing “push strategy” is the main promotion strategy of the Ruhunu foods company. Because they only have short distribution channels and few print or electronic media as their advertising methods. TV ads, DJ for villages, musical shows, unit announcers, contests like “Ranwaasi” (Annexes3), sponsor for housewife association’s annual meetings. According to their distribution they are practicing selective distribution strategy because they only have 7 vehicles in Kandy for the distribution. But for the island wide they have sub distribution agents to distribute their product. In here all of their marketing level strategies are based on the market penetration. They conduct promotion campaigns, musical shows, distribution channels, and competitions like Ranwaasi to penetrate their existing market by using existing products. And to meet their strategy on ultimate choice global market they develop industrial relationship between foreign super market chains like Almaya and retain those relationships with mutual benefits sharing . Finance: They only have few financial strategies as monthly internal audits and specially they don’t have strategic alliances with other competitors but they expect to use those financial resources (funds) for the future purposes like strategic partnerships, merger and acquisition, research and developments and for location changes. They always focus on product development by using their unused funds as we mentioned above. Research & Development: According to the Ruhunu food they have a good quality in the product. They maintain their quality by obtaining ISO, SLS, HACCP, certificate from central environment authority etc. they perform research & development for each and every product before allocate financial resources for a production. As a result of that they never fail any of their products. And also they have microbiology laboratory and they have quality human resources like university lectures in faculty of agriculture and engineering. (Mr. Saman de silva– visiting Lecturer University of Sri jayawardanapura). They do research Ruhunu foods to adapt to the new technologies. Their research
  19. 19. 19 and developments always focus on corporate strategies like product development & related diversification. Mainly they focus on introduce new products to the market. As a result of that they have been introduced 3 new products within last month. They have never failed in their products because of the quality of their research & development findings. And research done before entering to Jaffna market as a part of market development. Human Resource Management: HRM strategies are mostly important to the Ruhunu foods because they consider much more about the quality of their product. They have a separate training division, highly skilled labor force, well paid and check their medicals before recruit employees because it may adversely affect for the quality of the product. And also they have motivation strategies like annual bonus schemes, open door policy for grievance handling, suggestion box, daily 1 hour training before start production, giving houses and lands annually for the employees and select best employee of the year. When we consider about these human resource strategies like 1 hour training, highly skilled labor force and motivation strategies are based on corporate level strategies to create diverse product portfolio in best possible quality. Corporate Social Responsibilities (CSR)of Ruhunu Foods (Pvt) Limited These followings are the CSR as for the information given by management of Ruhunu Foods (Pvt) Limited.  Welfare society  Funding Nanuoya Lord Buddha’s statue.  Aims giving for children’s’ homes, hospitals  Once a year build one employee a house  Building bus holts and sponsor printing for road signals.
  20. 20. 20 International Strategy International Drivers  Ruhunu Foods is practicing Market driver as their Internationalization Drivers. It can be shown as following reasons: – They are sharing similar customer needs for herbs and spices worldwide. Eg: Australia, Cyprus, Japan and Middle East countries. – They try to attract global customers with giving standard of market products – They attend of similar customer needs and tastes of global through quality not just based local consumer needs – the attendance of global customers like Nestle, and Almaya Supermarket chain – Their marketing promotes market fits to global with Ceylon spicy gifts, elephant spice Mix, Spice set, Hexa Spice mix (Annexes4) Porter’s Diamond According to Porter there are four determinants to gain advantage in domestic and global industries,
  21. 21. 21 Demand conditions From above diagram Ruhunu is following Demand condition as their advantage to win local and foreign market. Dealing with sophisticated and demanding customers who requires quality products in local helps train a company to be effective in international markets. Because they are having high quality Spices and allied products for consumers globally use. Also not only by dealing with customers like Munchee, Arpico and Cargill’s food city chain but also Neste in local level create vast experience and even relationships to step in the international market. That experience must be driven them to enter to markets like Japan, Australia, Cyprus, Italy, Canada, UAE and in future to meet markets like Europe and USA as their future strategic move. International Strategies Global Strategy for Need integration global HIGH LOW Transnational strategy Multi Domestic Strateg y LOW HIGH Need for local responsiveness
  22. 22. 22 Ruhunu are highly response (adapt) to their customer requirements and give a low priority to global integration. Therefore, they are promoting the Multi domestic strategy as their international strategy for their success. Entry Modes Staged international expansion  Ruhunu is undertaking primary level exporting activities. Therefore still they are in exporting level in the stage international expansion. They are looking for more stages ahead in the future. Eg: Strategic alliance etc:
  23. 23. 23 Conclusion Firstly we grateful for our lecturer in charge, Mr: Nuresh Eranda for guiding us all the way to make this assignment, a success. Ruhunu Food was started in 1978 and one of the largest and leading spices manufacturers in SriLanka. Ruhunu Foods currently operating export activities at primary level while being a local market leader and reputed brand name. Here we mainly focused on corporate level strategy of Ruhunu Foods. We identified it has good potential in global market and they also have collaborative partnership with Al Maya group of companies. We found that their corporate level strategy is mainly based on three main strategies, namely:  Product Development  Market Development  Market Penetration We observed that they are not following the Diversification strategy at all. Hence we hope that you can get better idea about Ruhunu Foods by referring our assignment. ----THANK YOU----
  24. 24. 24 Recommendations They over estimate their organization than actual  Do proper market analysis and state the real position of the organization in order to take functional decision like market position and capital funding.  Recruit management level positions with broader experience and qualifications.  Analyze the positioning done by competitors They are neglecting the competition  Analyze the positioning done by competitor  Do proper SWOT analysis and see the treats of completion  Change their comparative advantage in to sustainable comparative advantage. Need new human capital as investment capital to implement current vision  Their recruitment policy is to get employees through recruitment agencies hence the employees have high rate of initial turnover, as they didn’t receive rewards they were promised by recruitment agency so implement proper recruitment strategy  Do a Human resource demand and supply for cast according to their 5 yr plan and implement i  Train the top level management also on the use of quality They spend immensely on international suppliers hence there would be trouble when exchange rates fluctuates or they demand more price  Expand their organic plan and start backward integration instead of depend on import supplies.  Can start to do direct-buying from local farmers.  Can give local farmers quality seeds and all the other necessaries to develop quality productso they could meet Ruhunu food Product requirements make that their CSR also. Their strategies are not focusing on attracting local customer base  They could use proper promotion channels and make more effort to attract local consumers  Can start strategic alliances with food manufacturing industries as a supplier.
  25. 25. 25 Warehouse  The have only two ware houses one in Kandy and other in Colombo, so for the continuous of production they could state another warehouse. Their competitive advantage which is quality is imitable, not rare.  Identify what are their other core capabilities  Go through their value chain activities and create a sustainable comparative advantage in future. Though they focus on Corporate Social responsibilities that is not based on their value chain activities  Can give local farmers quality seeds and all the other necessaries to develop quality product so they could meet Ruhunu food Product requirements.  Since they are in herbal processing industry they could sponsor need of Ayurvedic hospitals Reference       http://www.ruhunufood.com/ Ruhunu foods hand leaflets Broaches and news letter Journal of Ruhunu Johnson G. Scholes, K. and Whiting, R 2011 “Exploring Corporate Strategy” http://en.wikipedia.org/wiki/Strategic_management Direct information from Ruhunu Foods personnel
  26. 26. 26 Annexes Annexes 01 Annexes 02 Spices Flour Seeds Chilli powder White rice flour Cumin seed Roasted chilli powder Red rice flour Fennel seed Chilli pieces Undu flour Mustard seed Curry powder Kurakkan flour Black pepper seed Roasted curry powder Gram flour White pepper seed Meat curry mix Atta flour Dill seed Fish curry mix String hopper flour (white) Turmeric powder String hopper flour(red)
  27. 27. 27 Pepper powder Goraka Coriander Cinnamon sticks Nutmeg Mace (Jaffna style) Maldives’ fish (chips) Cardamom Cloves Annexes 03 Annexes 04 *Attached to the hard copy.

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