Strategic Management Case Analysis: MMICC 2014 Case

Company Overview

Saputo is a dairy processing company that is located in Canada and has the largest cheese manufactory there. It is one of the largest 10 dairy processing companies in the world. In USA, Saputo is ranked among the highest 3 cheese producers. Saputo was founded in 1954 by Lino, from Canada who is the Chief Executive Officer (CEO), as well as the Chief Financial Officer (CFO).

In Montreal, Canada 1957, the first major production facility was established. For Saputo to expand beyond the Canadian market, the company has had to establish operations beyond Canada’s borders – through the acquisitions in the U. S. , Europe, and South America. (Polushin W. , Cook A. , Cardenas A. ,2013 ). Nowadays, Saputo’s plants are in the United Kingdom and Germany running purely with a local focus. The workers in Saputo are committed to innovation and excellence in all of its branches. Towards fulfilling the broader corporate objectives, the company has established a number of commercial and operational targets, which including (Polushin W. , Cook A. ,Cardenas A. ,2013 ):

• To be the most efficient dairy processor in the industry
• To be among the top dairy processors in all the markets in which it operates
• To expand in growing dairy markets like Latin America, Africa and Asia. Since Saputo has large manufacturers in certain countries that serves a medium to large region, its industry is concerned to be consolidated.

After reading the case study of Saputo we did not find a mission and a vision for the company. Therefore, we derived a mission and a vision for the company since it is important in strategic management.

The company’s Mission

To provide high quality and nutritious dairy products that enrich consumers’ lives every day at affordable prices. The company’s Vision To be the world’s most profitable dairy processor factory and the consumer’s first selection by taking the lead in the global markets with outstanding dairy products.

We derived this mission and vision based on these characteristics: Characteristics of Mission Explanation

A mission should be succinct and precise A mission statement should be as short and rapid in reading - as possible. A mission should be unique Focusing on what it is that you strive to do differently, and how you achieve excellence. A mission should be realistic A mission statement is a summary of why you exist and what you do. It is a description of the present. A mission should be memorable A mission statement should be easy to recall and quick to catch by eye.

Characteristics of Vision Explanation

A vision should be ambitious Setting your sights on not only being within the top 10 or 5 best companies in the world, instead being the first. A vision should be inspirational The vision statement is supposed to challenge, enthuse and inspire, by using powerful words and vivid phrase. A vision should be consistent It should not show any conflict between the mission statement and the vision statement. A vision should be clear Keep sentences short and to the point and use precise, uncluttered language. A vision should be future focused An effective vision answers the question “what will our business look like in 5 to 10 years’ time?” It describes the organization’s desired future. A vision should be vivid An effective vision provides a vivid mental image of what the organization will be like in the future.

PEST Analysis

Political Forces:

• Non-strict government rules and regulations helped them in launching their business and found their first production facility. Also, they were able to expand their network across the town and go globally.
• As Canada’s supply management system limit the milk production to domestic nation, the company acquired some other local businesses to grow domestically.
• The obligation to follow Canada’s supply management system rules and regulations strictly.
• The establishment of trade barriers around the country.

Economical Forces:

• The revenue which the company generates help them in launching their first initial public offerings which later on used to finance the acquisition in US.
• In order for the company to grow globally, they acquire the most competitive milk producer in Argentina and the world’s largest cheese market in Europe.
• The company start to trade in Toronto Stock Exchange and enhance their financial performance.
• The company offers their employees benefits that are equal or higher than other companies in the same industry.

Social Forces:

• The availability of Italian-Canadian community in Canada was the first reason to encourage Saputo to start their business where they start producing cheese and catering it to that community specifically.
• The sudden and rapid interest growth among people for pizza, cause a significant increase in Saputo’s sales.
• The company produces variety of products including cultured products that matches each global market’s interest and under different brand names.
• The company emphasizes on social and community programs for their employees.
• Focus on the huge market of milk production.
• Technological Forces:
• The introduction of IT to facilitate all corporate levels functions.
• The use of logistic system to contact their distributors in the retail or restaurants.

SWOT Analysis:

Strength:

• Products are sold in over 40 countries under well-known brand names such as Saputo, Alexis de Portneuf, Armstrong, Baxter, Dairyland, Danscorella, Dragone, etc.
• Saputo has global revenues and net earnings of C$6. 0 billion and C$461. 7 billion.
• Saputo has consistently realized positive sales and earnings growth over the years.
• The company ensures that its programs are effective at hiring and retaining top talented employees by placing an emphasis on community and social programs for their employees and focuses on their career development.
• Saputo use its own logistics system for distributing product to its retail and restaurant customers which will insure the lower transportation cost for the company in addition to operational efficiency, higher sales volumes, and better product mix.
• Saputo places a high level of importance on market knowledge.
• The company diversify its export across countries to ensure minimum market and financial risk with selling not more than 10% of its total export to one particular market.
• Saputo is willing to take risk.

Weaknesses:

• Saputo does not use hedging contract and is not particularly flexible on terms of payment.
• The cost of promotions has been increased, in addition to the higher milk costs resulting from the revised milk pricing formula in California.
• There is a high competitiveness of selling price in the export market.
• Saputo does not take anything at face value and to insist on doing business on its own terms.
• Dairy processors have little control over milk flow as a raw material or in terms of available milk inventory, and they are typically locked into long-term contracts with farmers.

Opportunities:

• Create a business strategy that ultimately drive Canada’s competitiveness agenda by understanding how and why Canadian businesses succeed in dairy processing environment.
• Focus on increasing sales volumes in the snack-cake category.
• Being the lowest cost producer in every market in which the company operates in.
• Anticipated increase in prices and demand for dairy products in the export market in Argentina.
• By either improving the efficiency of its distribution network and factory operations, or by improving its marketing and product innovation, the company can gain the competitive advantage.
• Capital investments in the growing specialty cheese and value-added milk categories will help increase capacity and strengthen the Company’s market presence.
• Demand for dairy products is projected to grow globally in emerging markets that have limited domestic production.
• With a lower cost of goods sold Saputo is able to ensure its export prices are as competitive as possible, without realizing margin erosion.
• The companies need to fully understand what their competitive advantage is and leverage it to their benefit as they expand into foreign markets to be successful internationally.

Threats:

• Due to the fact that Canada’s supply management system effectively limits milk production nation-wide, the company’s domestic growth has been developed through complementary lines of business that Saputo would not otherwise be in.
• Fluctuations in exchange between the Canadian and therefore the U. S. dollar.
• Decrease in consumer milk consumption.
• The pressure on both sales and logistics departments to optimize their efficiency in order to be the best price in producing cheese.
• Challenges with regard to getting milk provide at costs competitive with the price of cheese in Europe.
• The current supply dynamics in Canada do not enable Saputo to realize a supply advantage over its key competitors in the Canadian market.
• Very few dairy products are currently traded across borders. This is a function of the product (perishable), raw milk supply constraints, and the trade barriers that have been established by countries around the world, including Canada, to protect its domestic industry.

Five Competitive Forces

1. Risk of Entry:Saputo is in a good shape, they have a powerful base in the market they are the third largest company for dairy processor in US, and they are the second in cheese production. In Argentina, they are the third in dairy processor against local competitors.
2. The Bargaining Power of Buyers: As Saputo there are focusing on three type of customers retail, restaurant and foodservice and industrial. Also, Saputo will deliver the branded product by their own logistic and for the unbranded they will make it through third party or the customer will buy it directly from Saputo.
3. The Bargaining Power of Suppliers: Beyond animal care, Saputo aim to promote responsible business practices by working with suppliers across the value chain and engaging them to achieve our objectives. We launched our Saputo Supplier Code of Conduct, which sets the minimum standards of business conduct we expect from our suppliers. We believe our relationships with suppliers are vital to our ability to make high-quality products. We aim to create an environment where we can build strong, sustainable and long-term relationships with our suppliers and we will monitor progress related to responsible sourcing.
4. Threat of Substitutes: Saputo will always have threat from other competitors, customer can easily substitute Saputo product with other suppliers like Kraft and Leprino or any other company that will be batter in advertising their product and having better quality and customer services but with Saputo effort to satisfy their customer by after sales services and diversity in their brand it will minimize this kind of threat.
5. Power of Complement of Providers: Even thou the main product of Saputo is cheese and whey protein product but because of the government regulation in limiting milk production they growth and developed through complementors like Culinar in 1999 expert in snack cakes, tarts, and cookies, also Neilson Dairy to adventure interactions in dairy areas such as fluid milk and yogurt.