WIMM-BILL-DANN STRATEGY

TABLE OF CONTENTS

TITLE 1: WHAT STRATEGY WIMM BILL DANN PURSUED DURING THE TIME PERIOD COVERED BY THE CASE

1) INTRODUCTION

2) LITERATURE REVIEW

3) CONCLUSION

TITLE 2: IS WIMM BILL DANN STRATEGY IS SUSTAINABLE

1) LITERATURE REVIEW

REFERENCES

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1) INTRODUCTION

According to www.1 and David (1998) Strategy is a long term plan of action designed to achieve a particular goal, most often "winning". Strategy is differentiated from tactics or immediate actions with resources at hand by its nature of being extensively premeditated, and often practically rehearsed. Strategies are used to make the problem or problems easier to understand and solve. Johnson and Scholes (Exploring Corporate Strategy) define strategy as follows:

(www.2)"Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations"

WBD is a Russia’s largest food company with a stable of strong brands capable of competing against the largest international players. WBD achieved very difficult macroeconomics and political Environment that prevailed during much of the 1990s. But now WBD lost the macroeconomic stability and they are beliving Long-term choice of the regional growth was the right one. The initial strategies of WBD are they want to become a leading nationwide food producer in Russia. Initially WBD concentrated on product development, distribution, quality, packaging, and marketing. WBD started the business with the juices and the goals are quality control and building the brand image.

2) LITERATURE REVIEW

The very beginning wimm bill dann used the strategy of Merging. According to johnson and scoles (2008) Merging is a mutually agreed decision for joint ownership between the organization. WBD is strart doing the business of milk and other dairy products, by using the strategy of Acquisition. Acquisition means where a organization takes a ownership of another organization. WBD got some advantages of by using the strategy Merging and Acquisition, those are

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· Speed of entry

· The competitive situation may influence a company to prefer mergers

· Consolidation opportunities

· Financial markets may provide conditions that motivate mergers

· Exploitation of strategic capabilities can motivate mergers

· Cost efficiency

· Obtaning new capabilities

Wimm bill dann used product development as a one of the strategy for juices, product development means Existing market with new products. Wimm Bill Dann company entered juice market with tetra packed technology. Wimm Bill Dann became attractive with market growth and market share so Wimm Bill Dan becomes a Star (www.5).

After two years Wimm Bill Dann use a strategy of Diversification. Johnson (2008) Diversification means introducing a new product into New market. Diversification is defined as a strategy that takes an organisation away from both its existing markets and its existing products. WBD generating the money to fund this diversification strategy by shareholders, they were private people, investment groups and banks, food companies and local governments. The advantages are

· Diversification radically increases the orgsnisation’s economies of scopes. Economies of scopes may apply to both tangible resources and intangible resources and competences. Sometimes these scope advantages are referred to as the benefits of synergy.

· A good deal of diversification in practice involves building on relationships with existing markets and products.

· Increasing market power can result from having a diverse range of businesses. With many businesses, an organisation can afford to cross-subsidise one business from the surpluses earned by another, so it is one of the competitive advantage.

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WBD used the strategy of Vertical Integration by having its own subsidiaries and own distribution network in major cities. (www.3)Vertical expansion, in economics, is the growth of a business enterprise through the acquisition of companies that produce the intermediate goods needed by the business or help market and distribute its final goods. Such expansion is desired because it secures the supplies needed by the firm to produce its product and the market needed to sell the product. The result is a more efficient business with lower costs and more profits.

There are internal and external (e.g. society-wide) gains and losses due to vertical integration. They will differ according to the state of technology involved, roughly corresponding to the stages of the WBD lifecycle.

Static technology

Internal gains:

• Lower transaction costs
• Synchronization of supply and demand along the chain of products
• Lower uncertainty and higher investment
• Ability to monopolize market throughout the chain by market foreclosure

Internal losses:

• Higher monetary and organizational costs of switching to other suppliers/buyers

Benefits to society:

• Better opportunities for investment growth through reduced uncertainty

Losses to society:

• Monopolization of markets
• Rigid organizational structure, having much the same shortcomings as the socialist economy
• Monopoly on intermediate components (with opportunity for price gouging) leads to a throwaway society

Dynamic technology

Some argue that vertical integration will eventually hurt a company because when

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new technologies are available, the company is forced to reinvest in its infrastructures in order to keep up with competition. Some say that today, when technologies evolve very quickly, this can cause a company to invest into new technologies, only to reinvest in even newer technologies later, thus costing a company financially. However, a benefit of vertical integration is that all the components that are in a company product will work harmoniously, which will lower downtime and repair costs.

So WBD having a well developed distribution systems and having a geographical advantage by locating the production facilities in four regions from there 15% of all raw milk was produced Russia. In 2000 WBD use the strategy of positioning the company in Ukraine and Kyrgyzstan by using the strategy of Acquisition. WBD used the strategy of cost Leadership, cost leadership is to become the lowest-cost producer in the industry for a given level of quality. By this cost leadership, the firm sells products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share. WBD strategy usually targets a broad market. WBD get succeed by getting some cost advantages, they are lower cost materials, vertical integration decisions, using the quality package at lower price, Lower transport and production costs was price competitive. In 1998 consumers are become price conscious because national currency lost 75 per cent of its value, the other Russian dairies faced a problem but WBD not faced any problem because by slight reduction in profitability, active regional expansion, growth of product portfolio and continuous advertising. Johnson (2008) According to strategic clock model, WBD used the strategy of hybrid strategy, hybrid strategy seeks to achieve differentiation and low price relative to competitors. By using this strategy WBD get succeed because they are having the ability to deliver enhanced benefits to customers together with low prices and achieved sufficient margins for reinvestment to maintain and develop bases of differentiation

In 2000, WBD attracted by the fast growth of the beer market in Russia, WBD acquired several breweries across the country. The main objectives of acquisition of breweries are similar to the dairies because dairies are brought very good profits to the

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company. Another drawback for WBD is merging with Hungarian cannery to do the business of jars of pickled vegetables under the brand name of WBD, but it is not work out properly by this company got loss. The strategy of core competence was not successful because lack of skills and lack of knowledge in pickled market.

Two strategies are WBD following and believing are product development and diversification. In 2001, WBD launched a juice and dairy umberilla brand Ginger up, it is aimed for children aged at 5-9. By this product development the objectives of WBD are promotion of dairy and juice consumption culture. In 2003, WBD launched its own mineral water sanctuary valdai and in the same year WBD acquired Healing spring limited. And then they start doing the business of cheese by using the strategy of cost leadership. So continuous acquisition and diversification WBD loosing the dairy leadership in Russia and potential acquisition by Danone( the competitor), so that leads to loosing the shares. The weaker commercial performance of WBD the sales of the juices also declined. The sale was declined it result to increase commercial expenses by 34.3 per cent, when compared this figure with 2002 net profit decreased by 36 per cent.

(www.6) Wimm-bill-dann is one of the most extraordinary success stories in business history. Wimm-bill-dann superior profitability reflects a competitive advantage that is based on the successful implementation of a number of strategies. Its strategies and the advertising were prepared internally by the company marketing and advertising departments, the companies over all aim is to promote the companies brand nationally and to strengthen its image as a Russian number one producer of the quality product. The distribution is held through the independent distribution, it has two largely independent distribution systems for its products. The (www.7) strategy making process is the process that done by which managers select and then implement a set of strategies that is aimed to achieve a competitive advantage, where as the selecting strategies of the task is strategy formulation and the task of putting strategies in to action is called as strategy implementation that which includes supporting products, delivering and designing; improving the effectiveness of operations and the efficiency, designing a companies

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organization structure and control systems. Philip(1985) and Bob (2004) Strategic planning is a systematized way of relating to a future. “Planning is a job of making things happened that may not have otherwise occurred”. The well known saying that “success is 10 percent inspiration and 90 percent perspiration”, in the strategic management arena this might be, “success is depend on 10 percent formulation and 90 percent implementation.” The selection of strategies is easy but it requires good analysis and inspiration, the crucial is that putting those strategies in to effect. How ever some times the strategy making process might be go wrong. The strategy making process is to increase the performance of a company, and there by increasing its shareholders, increasing the value of the enterprise to its owners. To increase the share holder value managers must pursue some strategies that increase the profitability and ensure that profits grow, in order to this a company must be able to outperform its rivals; it must have a competitive advantage. As the higher its profitability relative to rivals, the greater is the competitive advantage will be “A company has a sustained competitive advantage when its strategies enable to maintain above average profitability for a number of years.” (www.4) WBD used the one of the important strategy Product development. Product development means entering a new product into a existing market. Always product development have the advantages of extension of an organization but it require some product development.

3) CONCLUSION

WBD used number of strategies to tolerate the business, they are succeeded till 2002 and they are the leader in Russia market. But then the trend was changed because of continuous diversification and DANONE Company dominated in dairy sector because they are concentrated on yoghurt production but WBD do not concentrate much on yoghurt.

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Is Wimm Bill Dann’s strategy sustainable?

WBD strategies are sustainable because the strategic capability of WBD is good. Strategic capability can be resources and competences of an organization needed to survive and proposer. Resources can be tangible and intangible. Tangible resources are physical assets of an organization and intangible resources are non-physical assets. Johnson (2008) WBD is strong in the following resources

• Physical resources- WBD having very good production capability, number of plants, new technology machines. The nature of these resources, such as age, condition, capacity and location of each resource. WBD having the number of dairy plants in all main regions of country in Russia, so it will help the WBD to build the strategies and to become popular.
• Financial resources- WBD having the strong financial support by capital, debtors and suppliers of money, so it is not thread to the company.
• Human resources- WBD employee’s personnel having very good knowledge about the market, product and experience. So it will help WBD to become stronger in the market.
• Intellectual capital- WBD having a intangible resource of patents and very good brand image, reputation, business systems and customer databases.

The above resources are very important, if WBD employs and deploys all these resources in a correct way there is a chance to bounce back in the business environment. WBD having one more advantage of cost efficiency, WBD offering the products for appropriate level of value at an acceptable price if they are concentrated on this strategy they can get lot off benefits like

· Economies of scale- WBD is having the capability of producing high volume of output, and having the capability of own distribution network. So it gives the keeping the prices at an acceptable price, so WBD can saturate the market easily compared to other.

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· Supply costs- WBD production plants are located near to the raw material where it is produced, so it is one of the cost advantage to WBD.

· Product/process design also influences the cost. WBD can gain efficiency in production by improving the capacity-fill, labour productivity, yield and working capital utilization.

· Experience can be a key source of cost efficiency and it may provide competitive advantage in terms of the relationship between the cumulative gained by an organization and its unit costs.

At present WBD want to use the strategies of product development, increasing the productivity, reducing operational expenses. These strategies are sustainable because according to SWOT analysis WBD having some strengths, those are WBD is a largest producer of dairy products and juices, and having a 1,100 types of dairy products and over 170 types of juices and 17,000 employees. WBD is very strong in vertical integration strategy. WBD weakness is continuous diversification of products, so at present they have to concentrate on improving productivity not on the diversification. At present they have to get back their leadership in dairy market and juice market in core competence of business. According PEST analysis WBD is strong in politically, economically, socially and technologically. So WBD is a strong company established 1992 and showing continuous development till 2002 it indicates how strong the WBD company was.

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REFERENCES

1) Bob de wit and Ron meyer (2004), Strategy, Process, content,context, Italy, Canale & c.

2) David hussey (1998), Strategic management, From theories to implementation, Uk, British Library.

3) Philip R. cateora (1985) strategic international marketing, USA, Dow jones- irwin.

4) San, onkvisit and john shaw.(1997) International Marketing; Analysis and strategy.new jerky.prentice-hall.

5) Gerry Johnson, Kevan Scholes and Richard Whittington (2008), exploring corporate strategy, 8^th Edition, Europe, Pearson Education Limited.

6) Gerry Johnson, Kevan Scholes and Richard Whittington (2005), exploring corporate strategy, 7^th Edition, Europe, Pearson Education Limited.

7) http://www.quickmba.com/strategy/porter.shtml

8) http://tutor2u.net/business/strategy/what_is_strategy.htm

9) http://en.wikipedia.org/wiki/Vertical_integration

10) http://tutor2u.net/business/strategy/ansoff_matrix.htm

11) http://www.marketingteacher.com/Lessons/lesson_boston_matrix.htm

12) http://www.marketwatch.com/tools/quotes/profile.asp?symb=WBD&sid=1033823

13) http://college.hmco.com/instructors/catalog/walkthroughs/pdf/0618641629_ch01.pdf

Accessed by Gopikrishna and Ashok .

WORD COUNT IS : 2557

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