A case Study on EuroFreeze
- Strategic positioning
Looking at Eurofreeze’s SWOT analysis in the case study, there is an indication that the organization is pressured by a high competitive market. However, the company has key recourse advantage over its leading rival, such as its brand names and its European leadership on its branded meat and fish products. The strategic positioning is indicated in this table.
| Strengths | Weaknesses |
| One of Europe’s large frozen food company with sales in 2003 of $1.05 billion
Lower rates than rival Refrigor The company has core competence, in developing branded food, recipe development for new frozen dishes, freezer technology and purchase of raw materials such as vegetables |
Eurofreeze is not a market leader in savoury dishes
Eurofreeze is second from its rival Refrigor and many large grocery chains wanted only 1 market leading frozen brand to put along with their own brands |
| Opportunities | Threats |
| Build Technology to preserve the products for over 5 years
Rise its return on capital from current of 12 % by 15 % in 6 years Hold overall market share by moving from low value added items i.e. frozen vegetables to higher value i.e. pizza dishes |
High competition from companies such as Refrigor and Grocery supermarket own brands
McCain is the leader in savoury dishes a 30 % share and Sara Lee in gateaux, with a 25 % share Increasing freezer space was given to company’s own branded products |
- Criteria selection
Scoring criteria to assess each option
Eurofreeze should develop negotiating environment to different supermarkets.
Suitability
Most supermarkets use their own products in the freezers space or a high branded product. Though looking at the strength of Eurofreeze, it shows that its prices are lower than Refrigor’s. Therefore, negotiating with supermarkets on the price will be advisable as it will help Eurofreeze to negotiate prices with supermarkets as most businesses look for cheap prices.
Feasibility
Limited shelf spaces means that branded products are replaced with Supermarkets own brands, as they are more profitable for the supermarkets. Therefore, becoming the lowest cost producer would be advantageous for Eurofreeze as they will be able to compete effectively against its strongest competitor. Eurofreeze is equipped with good resources such as, supermarket negotiation and excellent service. These resources will help the company get its products into more supermarkets.
Acceptability
Eurofreeze has to make sure its fortunes are not all pegged on a single supermarket, as this is an extremely risky strategy. They have to spread the risk by dealing with different supermarkets and to ensure the loss of one contract would not be disastrous to the firm. This criterion will only be practical if Eurofreeze becomes low cost leader because it serves as a powerful motivation tool to all its stakeholders.
The strategy in use must be consistent with current branding
Suitability
This criterion is suitable as it will enable the company to grow, and increase its market share. Eurofreeze has market share of 30% on branded meat and fish, 10% more than its rival Refrigor. Therefore, building consistency would help the business stay competitive than its rival.
Feasibility
This strategy will work for Eurofreeze because they currently operate at a larger capacity than its rival. It’s also great for the company because it means its products will gain popularity in the marketplace. Therefore, building consistency on the current branding would create positive brand image to increase Market Share.
Acceptability
Stakeholders expect good brand image and for this reason, a priority for Eurofreeze is projects that are consistent with the branding. If this is carried out well, it will create customer loyalty, commitment and collaboration for which and hence make Eurofreeze be successful in the current competitive environment.
Innovate with products that have sustainable growth
Suitability
This action is suitable for Eurofreeze since this firm is seeking to extend its range of specialist branded foods such as, pizza and gateaux. The firm needs to take up market leadership position where its role will be to be innovative in order to continually grow and differentiate from competitors.
Feasibility
Innovation would work for Eurofreeze as they have core specialization in recipe development for new frozen dishes; also, they have competence in developing branded food products. By extending to pizza and gateaux, it would enable Eurofreeze to gain sales of $50 million each year $10 million more than its rival Refrigor.
Acceptability
Developing new products would require good resources from Eurofreeze as well as efforts to differentiate it from competitors. Adding value from new products would increase sales and allow the company to grow. The innovation of affordable quality products provides value which will deflect the competition and ensure market share retention (Reicheld, Sasser, 1990, 112).
Increase Profitability through Market Penetration
Suitability
Market penetration is suitable because it can attract new customers to try out Eurofreeze’s products. This means that new clientele will get to know the product and hopefully embrace it thus increasing market share. Clients might like the product, and become loyal which will lead to a longer term market share increase.
Feasibility
This criterion will work if monitored properly, since the competitors might do the same. If competitors cut prices Eurofreeze may have to consider reducing its own prices further downwards to maintain its customers and also exploit the opportunities to growth.
Acceptability
Since this is a highly competitive market, price wars are always around the corner. However, in the end the most affordable supplier will survive. Bearing this in mind, Eurofreeze must use this strategy in a short term and occasionally in order to stay competitive.
Merging with a rival organisation to strengthen competitive position
Suitability
Since the market is highly competitive, Eurofreeze may consider merging with McCain who control a 30% market share in savory dishes. Merging will be a much cheaper option to consider since it will help the company decrease the amount of competition. This will also, help Eurofreeze to compare notes with McCain and work together to resolve weak areas.
Feasibility
This strategy will work, because if the company merges with a rival, it will improve on quality and hence gain more customers. Eurofreeze must however consider the sentiments of its employees; as such a move may make them dissatisfied or insecure about their jobs. This strategy will help Eurofreeze to capitalize on its strengths and minimize its weaknesses.
Acceptability
There are some risks involved in the option of merging because stockholders decide on whether or not a merger should take place. If the majority of a firm’s stockholders do not agree on a merger then Eurofreeze cannot proceed with a merger. Therefore, Eurofreeze must convince the stockholders about this decision, though this may take a long time.
Must increase quality on basic frozen products (such as vegetables and fruits)
Suitability
This action is suitable for this business, because they stand to gain sales of $400 million in a year. Stopping the sale of these products will weaken the firm, as its sales will decline by $600 million in 6 years’ time. Building quality on these products and using low price option would enable the company to have a competitive advantage.
Feasibility
The merging option will work, because it will enable the company to have a variety of products, and adding quality on these products would enable Eurofreeze to gain a competitive edge. In addition to this, Eurofreeze has a technology to preserve the food stay longer; this is good for the company as it will reduce the amount of wastage.
Acceptability
Improving the quality of these products will oblige the company to incur more overheads. The implication of rising overhead expenses will force Eurofreeze to raise the prices of its products. Though the company can overcome this implication by controlling its overheads there is still the challenge of possibly reducing the capacity of its warehouses which may result in the laying off of some staff.
Scoring criteria
| Options scale 1, 3, and 5. 1 has the lowest desirability, 3 middle levels, and 5 is the highest desirability. | ||||
| Criteria | A | B | C | Total
|
| Must Develop negotiating environment to different supermarkets. | 5 | 3 | 4 | 12 |
| Must be consistent with current branding | 3 | 5 | 1 | 9 |
| Innovate with products that have sustainable growth | 5 | 5 | 5 | 15 |
| Increase Profitability through Market Penetration | 2 | 3 | 2 | 7 |
| Merger with a rival company to strengthen competitive position. | 2 | 2 | 2 | 4 |
| Must increase quality on basic frozen products | 5 | 3 | 4 | 12 |
Innovating of products that have sustainable growth scored more, and would be the best criteria for Eurofreeze. This firm cannot address all the criteria at the same time because it is time, cost and labor intensive. Eurofreeze is operating in a competitive environment. If it does not carry our innovations on its present products, other companies will do so and claim Eurofreeze’s market share.
- Strategic statement
The strategy in option 3, which is best suitable for this company, involves the organization reinventing and expanding its product ranges. For instance, the company plans to extend its range of meat, fish, frozen cakes as well as gateaux. Although this is presumed to consume a substantial amount of money, it is projected to add some value to the organization’s marketing system. This option will see the company uphold all their branded items including those considered to be of little value. This will increase the sales and also reduce its branded expenditure. However, this organization will need to invest on extra working capital. Additionally, there would be need for other major investment in new warehouses, new transport networks, and new factories to handle the extra sales margin.
Since Eurofreeze would need to invest more on its working capital, there is also a need to improve its management so as to achieve more efficiency in handling this extra working capital. To avoid problems and unexpected inconveniencies, Eurofreeze’s management ought to make both economical and physical adjustment in order to accommodate this extra working capital, as well as the anticipated operations. The company should also invest in companywide systems that are more efficient such as the IS which are more effective than old means of recording or disseminating information (Freelock, 2011, 3).
For capital management to be effective, the management at Eurofreeze should work together at all levels in a coordinated manner for the success of the project. Indifference on the part of the management will influence how this working capital is managed (PNC, 2012).
Part 2: Strategic Formulation
In evaluating its business strategies as well as the subsequent performance of its main competitors, it becomes clear that Euro Freeze employs a purposeful movement that are geared towards a defense of a winning position either at a reduced cost or high price justified differentiation (Unrwa, 2012, 12). This should be the basic long term objective for Euro freeze. It has been acknowledged that clarity and consistency are very helpful mechanisms in coordinating and mobilizing internal resources of companies in defending and improving their management strategies (Craig, 2011, 2). Therefore, Eurofreeze should employ the aspect of clarity and consistency in its operations and management.
In addition, the company must focus their strategies in emphasizing current, and process technology that is automated(Griffin, 2010, 1) They should also invest heavily in this their distribution mechanisms so as to gain scaled economies as well as other reduced costs in their distribution and delivery systems (Sullivan, 2012, 2).
Bibliography
Craig, 2011.’How to Create More consistency and Clarity in Your Business’ Available on
http://smartsimplemarketing.com/how-to-create-more-consistency-and-clarity-in-your-business.
Eurofreeze. 2003. ‘Developing the Strategy, the prescriptive Process’
Freelock, 2011. ‘Information Technology in Business, the big picture’
Available on http://www.freelock.com/information-technology-business-big-picture
Griffin, 2010. ‘Latest Trends in Industrial Automation’ Available on
http://www.control.com/thread/1284380101
Reicheld, F. and Sasser, W 1990. ‘Zero Defections: Quality Comes to Services’
Harvard Business Review, (September-October), 105-111
PNC, 2012. ‘Perspective on Working Capital’ Available on
http://content.pncmc.com/live/pnc/corporate/pncideas/articles/Financial_Leadership_Report Working_Capital.pdf
Sullivan, F.2012. Distribution Channel Analysis Available on
http://www.frost.com/prod/servlet/our-services-page.pag?sid=190172046
Unrwa, 2012. ‘Resource mobilization strategy’ Available on
http://www.unrwa.org/userfiles/201211217364.pdf
