The Competitive Advantage of Compass Group Food, Associated British Foods - Essay Example

? International Business Environment of affiliation: Review in general terms each company’s growth and performance over the past five years. International business environment Compass group food and associate British foods are two different multinational companies headquartered in the UK. Both companies have registered exemplary performance over the last few years and they have emerged among the top market players in the industry. Below is a summary of the performance of these two multinational companies. Compass Group Food The compass group food has witnessed good and exemplary performance over the past years. The company has maintained at a stable growth of just below 8% in terms of currency revenue and over 5% organic revenue growth. The company has also witnessed a stable profit growth over the past years and last year the company recorded a 9% increase in the operating profit growth margin. Consequently, other business branches in places like North America are performing exceptionally well and are experiencing high levels of customer retentions. Business operations in places like Europe are also firm despite the increasingly harsh economic conditions, which are likely to remain so. The company has also unveiled strategies that will enable it operate competently in the, market and make it own the largest share among their competitors. The current year’s cash flow is quite impressive and is maintained at the top peak. This has enabled the company to indulge in further investment and engage more investors and shareholders in the market. The business also has sufficient amount to award its shareholders. The years also witnessed a number of acquisition in terms of which have also made a significant contribution to the company growth. In addition, the business has experienced growth in some areas due to increased outsourcing from various parts of the world. This enables them to produce a variety, which in return meets various customer needs. The retention rate of the business is high with a 94.3% stand. The company director also attributed the high growth rates to the price increase that was made on the commodities. They are also creating strategies that enable them get high sales in low sales regions such as Japan and Europe. Overall, the company is doing excellent except for the flat sales volumes in Europe and Japan. The company has also instituted strategies to introduce new products that may help in boosting sales in these places. Associated British Foods Associated British foods are equally a very strong player in the food industry. Their multinational effect has grown and they are currently competing very strongly against their worldwide competitors. With over 46 branches worldwide, the company has ensured high productivity in terms of o productivity. In regards to financial performance, the company registered an increase in their turnover rate. In 2009, the company had $9255 while in the year 2012 the company had $12252. This signifies a trend of excellence in performance and the manner in which the company operations are done. There is also an increase in the operating adjusted profits from $664 in 2009 to $1077. The company motivates its employees by paying them 130% of their salaries. This in turn led to an increased 20% in terms of achievement of the company objectives. Consequently, the company has set financial targets in every branch that they have, and these operate competitively to achieve the objectives. The company also capitalizes on bonus reduction to increase its net revenues. Identify and provide an assessment of how the key factors within the international business environment have impacted the industry within which you chosen companies operate. (15%) The international business environment is exposed to a number of factors that determine its growth rate. The environment presented to these businesses for operation greatly determines their level of success. Some of the key factors within the international business environment that have greatly influenced their operations include political factors, economical factors, technological factors, and social factors among others. The above factors are discussed below in details. Political factors These relate to the various state policies, laws, and regulations regarding the operation of businesses in various countries. These factors formulate the basis through which the international trades are regulated, and most of the countries normally impose trade tariffs, technical standards, and quotas through which these businesses operate. Others trade blocks as the European Union dictates that their members be given preferential treatment in trades. Stability in the political scene could greatly determine the operations of a business. Factors like political unrests and coups can easily result in multinationals closing down or suspending their businesses. Thus, political factors play key roles in determining the level of business operations. Economic factors These largely contribute to business growth in a number of ways. For instance, they determine the levels of market demands for the company products. In addition, they determine the various economic growth rates in the industry. For example, many countries experienced stagnated economic growth due to the euro zone debts crises. Disparities of economic growth in most countries make it very hard for the multinational corporations to operate efficiently. Such economic factors can jeopardize the operations of these multinational companies. Similarly, the economic environments can dictate the nature of competition in the market. The various players in the industry can compete favorably in the market due to the nature of competition. Technological factors The availability and levels of technological advancement in the country of business operations need to be well established. The technological infrastructure development levels in most countries are on the increasing end. A business that fully embraces the technological culture is bound to prosper. Most business has implemented the use of technology in marketing their products hence enabling them to have a full time market presence (Phatak, 2008, p.122). The food industry is currently going through various revolutions thus making it paramount for these multinational corporations to embrace the technology. The nature of market competition is largely determined by the level of technology in the given country as well as the number of businesses using that technology. Research also established that countries of high technology levels normally create very good environment for businesses as compared to those of low technological levels. As a result, these multinational companies operate efficiently in such countries. Social factors A country’s demographic cultures such as their religion, their culture, and ethnicity largely affect the performance of these multinational corporations. They determine the quality, the demand levels, and functional levels of the products these companies offer. In most countries, factors like time, names, objects, colors, and attitudes offer various meanings to culture. People of various communities do not consume certain foods, for instance the Chinese may not be able to consume food from other cultures. This therefore may make demand for other food low. Thus, it is important for a multinational to interpret and have a full understanding of the company’s operation. Proper understanding of this livelihood pattern can help them know what to give their audience in the market satisfactorily. You should discuss how the factors identified in b. have impacted each company’s recent performance (last 2 financial years) and the forecasted performance for each company. (15%) The above discussed factors have greatly affected the performance of these two multinational companies. Since they are among the most dominant in the market, they have branches in many countries, which they have extended their services. Political situation in various countries have largely led to demean of businesses of compass group foods in the same. These countries are always at wrangles and at constant loggerheads. As a result, the business operation in them is very poor. Places like Europe have largely recorded a decrease in business revenue. Such places probably face political disturbances, which as a result are causing the economy to collapse. Multinational corporations fins it very difficult to operate well in economies that are sinking hence recording under performance. Associated British foods have equally faced a number of political interferences in their operations. Most recently, the US accused the company of invading taxes a factor that could easily lead to collapse of their functions. With such allegations, the company image is ruined and greatly lowered hence making it difficult to operate efficiently. In addition, the company spends a lot of time in resolving such issues and in the long run they end up losing a lot of money. The way forward for these companies to curb such is by ensuring that they comply with the states rules and regulations. Similarly, the company has been noted to be in the horsemeat scandal, which greatly scared customers from using these products. As a result, the sales volume has decreased over the past few months hence making it very difficult for the company to restore its previous market reputation. In addition, the company competitors are currently capitalizing on such weaknesses to pin down this company. It is therefore important for the company to lay down strategies that will help in ensuring that the company’s lost reputation is gained. Economic factors These companies face a number of economic problems and therefore they significantly need to improve on their performance levels. Some of the economic factors include the demands levels in the market. For the compass group, Food Company, the demand levels in some countries have greatly led to decline in business. The company therefore cannot fully sell what they produce; their profit forecast is also in accurate since they cannot predict the market trend. There are also very low economies of scale, which makes the business not to compete fairly like the rest. Most economies are self-sufficient and may not rely so much on imported food products (Wettstein, 2009, p.66). This also has led to decline in profits that the company could have gained. Associated British foods being a multinational is faced with a number of economic issues to solve. For instance, the company has to perform a market evaluation every time to check on the product that sell excellently. Countries like Japan and Europe holds very poor market for this company’s product. In most cases, the company gets very little revenue from these hence making them plateau economies. However, in the UK, the company experiences a boost in performance since their products have great sales (Phatak, 2008, 133). Economic implications like non tax payments and the horsemeat scandals have worked to lower the company reputation but overall the company has the best performance. Market economies also dictate demand levels in any given market, the regions that these businesses operate need to have large market economies to enable them get the target profits. Technological factors In regards to technology, these companies are fast adopting the latest techniques in production and customer satisfaction. Companies like the compass group foods have embraced the latest technologies, which enables their customers to make payments easily for their products. In addition, the company has opened a website through which customers can gain access to their products globally just at the click of a button. A well-structured customer care system has also been put in place to ensure that customer’ questions and other inquiries are met fully and satisfactorily. This in return has led to improvement in their quality services as well as addressing the various customer complaints (Lozada & Polonsky, 2003, p.209). The associated British foods company has also engaged various aspects of technology to ensure excellent performance in the market. For instance, they have developed a website that helps them advertise their products to customers globally. In addition, the company uses a system to track down the levels of customers demands for their products; this makes it easy for them to forecast their performance in the market and strategies effectively against their competitors (Jensen, 2010, p.290). Similarly, the company has also involved the use of social media marketing to attract customers. The advantage of using social media is that it is fast and viral in nature. A single lucrative product can easily attract many people hence making it sell fast. This has greatly benefitted the company since they get a new chain of followers for their products. Payment options are also another thing that normally challenges customers. The company ahs however introduced a number of payment methods to help its customers make easy payments (Wysokinska, Z., & Witkowska, J 2005, p,272). Social factors Social factors just like the economic factors greatly determine the direction that any business takes. Many aspects of culture can easily lead to improvement or downfall of a business in nay environment. The compass group foods have set up a procedure, which enables them to bring products that are culturally acceptable in the country of operation. For example, in countries where the Jewish culture is practiced, they provide halal foods. Bring products that are culturally unacceptable in any country can easily lead to collapse of a business since the demand will be low. In addition, the names given to various meals are culturally acceptable in the countries of their operations. Names in any culture can translate to anything based on people's level of allegiance to that culture. Sometimes the products may, or may not find a ready market (Heinecke, 2011, p.77). The associated British foods have also put cultural practices into consideration. Since they operate in many countries, they tend to try and adjust to products that are culturally acceptable in such societies. For instance, they cannot introduce pork foods in their branches at Muslim countries. This is because such foods are prohibited and their religion does not allow them to consume. The company therefore has the only option of choosing foods that totally do not have pork so as to enable them succeed. Most recently, the company was ensnared with the horsemeat scandal, which is a taboo in the US. Such like cultural atrocities can lead to a full collapse of a business and totally prevent them from achieving their desired goals. The company must therefore come up with strategies that will enable them achieve their desired market share and compete favorably in the market (Kagan, 2010, p.220). Part 2 The competitive advantage of the Associated British Foods The associated British foods have been in the market for a long period. This has made earn and attract many customers from different parts of the world thus making them compete favorable in the market. One of the competitive advantages of the company is that it has a large market share. This comes because of customer loyalty that has been developed over time since their operations (Rugman et al, 2009, p.88). In most cases, the customers identify the company through certain brands that are unique to their products hence not confusing them with other counterfeits in the market. In addition, their large market share results in large sales volume, hence give them the ability to expand widely in the market. As compared to other competitors, the company has many branches in other countries apart from the UK making it one of the best performing multinationals in the stocks exchange. Similarly, they have large operating capital, which can make them easily venture into any market successfully. The revenues generated can also help them in advertising their products and services in different countries. The sales promotion is important in ensuring that the company retains its stable market position and captures even more market shares (Haley, 2011, p.33). For the company to be more successful there is a need to venture into other markets. The chosen market in this case is the Asian countries (Heck, 2010, p.72). The Associated British Foods have not fully ventured into the Asian countries. Most of these countries strictly observe cultural laws and ethics hence require a multinational business that will operate at equal levels. Various food companies have not exploited the Asian countries like India. They offer a very viable opportunity for this company to open and invest in their economy. Since the continent is well endowed with resources, they stand a better chance of benefiting and attaining the best for them. In terms of political, social, economical, technological and environmental attractiveness, India offers a perfect market for the food products. The political scene is cool, and very welcoming without discrimination. The country’s populations are also very large offering some of the best market opportunities around the globe (Chaudhun & Das, 2008, p. 288). In terms of economy, Indians economy is self-reliant since they produce most things internally, the company will therefore find easily available raw materials for trade. Furthermore, the social lifestyle of the country ranges between the poor and the rich. The rich form a better part of the economy hence making the market environment conducive for operations. Moreover, India’s cultural practices are strict and the business must put this into consideration (Cherunilam, 2010, p.329). The country also has a high technological percentage; most people in the country embrace the use of technology in their daily lives. The embrace of technology makes it easy for them to access various items in the market hence placing the business in the right position to enjoy their products. Analysis of the company’s Market Entry Strategy Analysis Strategies that the company can use to venture into the Indian market, these strategies come with various opportunities, risks, advantages, disadvantages, and legal obligations among others many market entry. Since entrepreneurship is all about risk taking, the business will proceed and use any of the market entry strategy, beginning with the most viable one. Below are some of the most common and viable market entry strategies that the company can apply to venture into the Indian market (Tielmann, 2010, p.448). Local office Under this, the company can establish a simple foreign investment through a local office. The office will act as a distribution point for their products through the branch or the office. In the office, the company can hire staff, which will help them manage the premises (Aggarwal, 2012, P.174). The spaces can then increase over time and expand into a large company. The company can use various marketing techniques to get ready market for their products. Some of the advantage of using this approach is that the business will experience direct contact with their customers, they will also have a better control of distribution and marketing, and they will also have access to various local ventures capital and finally will help them improve their credibility in the eyes of their customers (Evans, 2008, p.55). Projected sales and other financial implications The projected sales of the company in this new business could be good since the market do not have many competitors. In the first year, the company needs to seek to attract at least 30% of the market share as it advances slowly into other considerable positions. Thus, the company can also engage the use of various marketing techniques to help them venture into the market. Offering promotions and free samples at the initial stages of their business can help in establishing a large market share (Rutherford, 2006, p.97). Consequently, the company needs to ensure that all the rules and regulations are followed to prevent any form of contradiction from the government (Quelch & Deshpande, 2009, p.110). The business operations will be on a daily basis. The business will also ensure online presence through social media campaigns to create awareness of their products. The operation of the business will include locals to facilitate the process and help the business gain sufficient grounds for operation. The ingredients used in preparation of food materials will include locally processed food products since the Indian culture is strict and they follow it strictly. The human resources to be used in the daily running of the business needs to be people from the local community. The top management will include officials (managers) appointed from the company headquarters while the subordinates will include Indian citizens to give them easy acceptance by the community (Ambang, 2010, P.85). The choice of citizen as the human resource is a good idea since they will know how to interact with their fellows. As mentioned, there are many market entry strategies. These include use of local office or branch, formation of strategic alliances with other already established companies. Such companies normally give an easy through pass into the market hence making the company exist as though it has been in the market for long. Another option that the company may have included is the joint venture where the company seeks coalition with other firms to help it establish in the market (Aswathapa, 2010, P.122). The advantage of this joint venture is that the individuals involved acquire various skills which enable them perform better in their tasks. Also through this, the project risk is spread over many firms always, thus making it easy to bear the risk and its effects. Finally, the company can decide to acquire an already existing firm then introduce its products slowly into their system. Finally, the company will have to institute various marketing campaigns that are available in the market. For instance, since social media use has been largely spread over the population, the company can engage in an online campaign to enable it capture the market. Similar, the company can run crusades, promotions, and even charity programs to help in the creation of awareness of the company and its products. This will earn the company a significant level of publicity hence making them get the hest in terms of performance. Following these will enable the company get the best of the market share and attract a large portion of the company. References Aggarwal, R 2012, Goodell, John W. Developing Global Awareness in International Business Education. Journal of Teaching in International Business. Vol. 23 Issue 3, p173-175. Ambang, T 2010, Influences of International Management Trends on Business Organisations in Papua New Guinea. Contemporary PNG Studies. Vol. 13, p81-94. 14p. Aswathapa, D 2010, International Business 4E, Tata McGraw-Hill Education. Chaudhun, S., & Das, R 2008, Entry strategies and growth in foreign markets: texts and cases in the Indian context, Oxford University Press, Delhi. Cherunilam, F 2010, International Business: Text and Cases, PHI Learning Pvt. Ltd. Evans, D 2008, The Legal Environment of International Business: A Guide for United States Firms, McFarland & Company Incorporated Pub, California. Haley, U. C. V 2011, Multinational corporations in political environments: ethics, values and strategies, World Scientific, New Jersey. Heck, H 2010, The international business environment: a management guide, American Management Association, Michigan. Heinecke, P 2011, Success factors of regional strategies for multinational corporations appropriate degrees of management autonomy and product adaptation, Physica-Verlag, Berlin. Jensen, N. M 2010,. Nation-States and the Multinational Corporation a Political Economy of Foreign Direct Investment, Princeton University Press, Princeton. Kagan, R 2010, Regulatory encounters: multinational corporations and American adversarial legalism, Berkeley, Calif. [u.a.], Univ. of California Press. Lozada, H, & Polonsky, M 2003, Environmental issues in the Curricula of International Business: The Green Imperative, Psychology Press. Phatak, A. V 2008, Managing multinational corporations, Praeger, New York. Quelch, J. A., & Deshpande, R 2009, The global market developing a strategy to manage across borders, Jossey-Bass, San Francisco. Rugman, A, Lecraw, D, Booth, L 2009, International business: firm and environment, McGraw-Hill. Rutherford, P 2006, How Have International Business Discourses on the Environment Changed over the Last Decade? Global Social Policy. Vol. 6 Issue 1, p79-105. 27p Tielmann, V 2010, Market Entry Strategies International Marketing Management, GRIN Verlag GmbH, Mu?nchen. Wettstein, F 2009, Multinational Corporations and Global Justice Human Rights Obligations of a Quasi-Governmental Institution, Stanford University Press, Palo Alto. Wysokinska, Z., & Witkowska, J 2005, International Business and Environmental Issues - Some Empirical Evidence from Transition Economies. Polish Journal of Environmental Studies. Vol. 14 Issue 3, p269-279. Young, S 2007, International market entry and development: strategies and management. Hemel Hempstead, Hertfordshire, Harvester Wheatsheaf. Read More