Royal Dairy

Strategic Management

Amira Elsayed Sara Mohamed

Bassem Safwat Wael Ezzat

Index
Company Profile Company Vision Company Mission External Assessment Opportunities and Threats Porters Five Forces Model External Factor Evaluation (EFE) Matrix Internal Assessment Strengths and Weaknesses Internal Factor Evaluation (IFE) Matrix Long Term Objectives SWOT Analysis Space Matrix Alternative Strategies Michael Porters Generic Strategies Tactics Conclusion

Company Profile
Profile
Founded by the Lindner family in 1940, Royal Dairy, Inc., remains a closely held family business managed by Robert Lindner, Sr., and his sons Brad, Robert, Jr., and David. The company manufactures and distributes branded milk, ice creams, and dairy products under the Royal Dairy trademark, as well as the following branded items; Homemade Brand Premium Ice Cream, Krazy Kreams, and Micro Shake. In addition, the company owns and operates almost 200 dairy/convenience stores in with ice cream parlors, which are famous for their made-to-order, hand-dipped malts, shakes, freezes, sundaes, and ice cream sodas

Company Vision
Vision
To be the leading, competitive, nutrition, health and wellness dairy company in the market through considerable value creation.

Company Mission
Mission
Our mission is to provide customers with natural milk based products that create inspiration, confidence and well-being Your wishes and requirements as a customer of dairy products are important to us. When you buy a Royal Dairy product, we wish to give you a sense of well-being by offering you environmentally friendly, high quality dairy products produced in dairies where food safety is second to none Our aim is to produce and supply profitable and superior quality dairy products and exceptional customer service along with the ability to adapt to and exceed our customers needs.

External Assessment Opportunities and Threats

Opportunities
Cheap labor (For Plants and dairy stores) Free trade treaty with the United States in 2006 Tax rate is 32% (Low in comparison with other countries) Tariffs are reduced by 2010 The country enjoys the political and financial support of Western countries and USA Weak position of the Egyptian Pound related to the US Dollars Well implementation of the telecommunication infrastructure Population is high Cows feed of corn and grain are cheap 65% of population is under 20 years Dairy industry are growing over time U.S. District Vandalism and Theft Population below poverty line almost 25% Unemployment rate is 11.6% in 2011 The budget deficit climbed to over 8% of GDP and Egypt's GDP growth slowed to 4.6% The interest on public debt increased Literacy Rate is very low The healthcare system in Egypt is underdeveloped Weak Stock Market Interest rate is high relative to other countries

Threats
Instability of Political Situation

External Assessment Porters Five Forces Model

External Assessment Porters Five Forces Model

Rivalry Among Competing Firms
Rivalry is strong for several reasons: Large number of competitors Competitors become more equal in size and capability Consumers can switch brands easily Exit barriers are high Fixed costs are high The weapons of competition are: Price Quality Package attractiveness and appeal Location Advertising and promotion (including celebrity endorsements in some instances) Brand and recognition

External Assessment Porters Five Forces Model

Potential Entry of New Competitors
A moderately strong force and growing stronger as existing manufacturers look to new geographic markets for expansion, there is significant growth potential for Dairy enterprises to establish new locations. New comers (especially new start-up) have several formidable entry barriers to overcome: High costs of market entry (to build outlets, recruit/train franchisees, and fund advertising/promotion efforts) Established competitors with well-known reputations and menu selections. Existing brand loyalties. High cost to exist, thereby increasing resistance of existing competitors to new entrants.

External Assessment Porters Five Forces Model

Potential Development of Substitute Products
A strong competitive force as follows Large number of substitutes as Soy milk, Rice milk, Almond milk, Non-dairy ice cream, Non-dairy chocolate, Non-dairy cheese and Non-dairy yogurt Switching cost is low

External Assessment Porters Five Forces Model

Bargaining Power of Suppliers
The suppliers to Dairy industry have very little leverage and bargaining power for numerous reasons: Their customers are large and buy in bulk The item supplied are generally commodity items (paper products, plastic products, etc., are fairly standard items) The items being purchased are offered by many different suppliers and can, in many instances, be sourced from several different suppliers (based on who offers the best prices, delivery, and other terms and conditions) Backward integration by Dairy Manufacturer is sometimes an option. Purchaser switching costs tend to be fairly low in the case of many items obtained from suppliers.

External Assessment Porters Five Forces Model

Bargaining Power of Consumers
A moderate to weak force in terms of individual bargaining power and leverage over the terms and conditions of sales. Consumers as a group do have some bargaining power in the sense that if Our Product is unable to attract a sufficient volume of traffic and sales, it must respond by improving the attractiveness of its product offering or go out of business. There can be no denying that: Dairy consumers are price sensitive. Dairy consumers want convenience and are location sensitive. Dairy consumers are quality sensitive Dairy consumers switching costs are low.

External Assessment External Factor Evaluation

Key External Factors Weight Opportunities Cheap labor (For Plants and dairy stores) Free trade treaty with the United States in 2006 Tax rate is 32% (Low in comparison with other countries) Tariffs are reduced by 2010 0.03 0.04 0.01 0.02 0.04 0.1 0.01 0.02 0.07 0.1 0.06 1 3 2 1 4 2 1 4 3 2 4 0.03 0.12 0.02 0.02 0.16 0.2 0.01 0.08 0.21 0.2 0.24 Rating Weighted Score

The country enjoys the political and financial support of Western countries and USA
Weak position of the Egyptian Pound related to the US Dollars Well implementation of the telecommunication infrastructure Population is high Cows feed of corn and grain are cheap 65% of population is under 20 years Dairy industry are growing over time

External Assessment External Factor Evaluation

Key External Factors Threats Instability of Political Situation U.S. District Vandalism and Theft Population below poverty line almost 25% Unemployment rate is 11.6% in 2011 The budget deficit climbed to over 8% of GDP and Egypt's GDP growth slowed to 4.6% The interest on public debt increased Literacy Rate is very low The healthcare system in Egypt is underdeveloped Weak Stock Market Interest rate is high relative to other countries 0.04 0.1 0.01 0.01 0.02 0.06 0.07 0.03 0.1 0.04 0.02 3 4 3 2 4 1 3 2 3 4 1 0.12 0.4 0.03 0.02 0.08 0.06 0.21 0.06 0.3 0.16 0.02 Weight Rating Weighted Score

Total

2.75

Internal Assessment Strengths and weakness

Strengths
Stakeholders are all family members which minimizes conflict within management layer Lower price than all competitors due no nonedelivery policy Wide range of dairy products varieties and in containers volume Strong planes for reoperation profits by financing other projects Increased sales due to targeting new segments in the market

Weakness
Low competence and lack of competence development plans Increase of debt and lack of financing Weak competence in HR resulting in many internal conflicts and employee strikes Failed advertising campaign Failure of culture adaptation in new international markets by Marketing Dep

Diversity in paying options (cash or credit)

Constant increase in product diversification positively affecting sales Steady execution of expansion plans Increase in stock value by 12000$ Increase in gross profit by 863000$

Low employee moral

Decrease in cash and in bank by 4000$ Decrease in net current assets by 17,970,000$

Internal Assessment Internal Factor Evaluation

Key Internal Factors Strengths Stakeholders are all family members which minimizes conflict within management layer Lower price than all competitors due no none-delivery policy Wide range of dairy products varieties and in containers volume Strong planes for reoperation profits by financing other projects Increased sales due to targeting new segments in the market Diversity in paying options (cash or credit) Constant increase in product diversification positively affecting sales Steady execution of expansion plans Increase in stock value by 12000$ 0.05 0.10 0.05 0.15 0.05 0.05 0.05 0.05 0.05 4 4 3 4 3 3 3 4 3 0.20 0.40 0.15 0.60 0.15 0.15 0.15 0.20 0.15 Weight Rating Weighted Score

Increase in gross profit by 863000$

0.05

0.15

Internal Assessment Internal Factor Evaluation

Key Internal Factors Weakness Low competence and lack of competence development plans Increase of debt and lack of financing Weak competence in HR resulting in many internal conflicts and employee strikes Failed advertising campaign Failure of culture adaptation in new international markets by Marketing Dep Low employee moral Decrease in cash and in bank by 4000$ 0.025 0.025 0.05 0.05 0.05 0.05 0.05 1 1 2 2 2 1 1 0.025 0.025 0.10 0.10 0.10 0.05 0.05 Weight Rating Weighted Score

Decrease in net current assets by 17,970,000$

0.05

0.05

Total

2.8

Long term objectives

Finalizing the current expansion plan by five years Establishing a new factory within two years serving the Middle East and Gulf Area Growth in sales by 15% within 3 years Achieving a new milestone within 2 years in regards of product diversification by entering the beef products industry (this will serve the fast food industry) Reviewing all company policies within one year and creating new ones that will help achieve a more stable working environment and less internal conflicts

SWOT Matrix

Strengths
Weaknesses Opportunities

Threats

Strengths
1- Stakeholders are all family members which minimizes conflict within management layer 2- Lower price than all competitors due to none-delivery policy 3- Wide range of dairy products varieties and in containers volume 4- Strong planes for reoperation profits by financing other projects 5- Increased sales due to targeting new segments in the market 6- Diversity in paying options (cash or credit) 7- Constant increase in product diversification positively affecting sales 8- Steady execution of expansion plans 9- Increase in stock value by 12000$ 10- Increase in gross profit by 863000$

Weaknesses
1- Low competence and lack of competence development plans 2- Increase of debt and lack of financing 3- Weak competence in HR resulting in many internal conflicts and employee strikes 4- Failed advertising campaign 5- Failure of culture adaptation in new international markets by Marketing Department 6- Low employee moral 7- Decrease in cash and in bank by 4000$ 8- Decrease in net current assets by 17,970,000$

Opportunities
1- Cheap labor (For Plants and dairy stores)
2- Free trade treaty with the United States in 2006 3- Tax rate is 32% (Low in comparison with other countries) 4- Tariffs are reduced by 2010 5- The country enjoys the political and financial support of Western countries and USA 6- Weak position of the Egyptian Pound related to the US Dollars 7- Well implementation of the telecommunication infrastructure 8- Population is high 9- Cows feed of corn and grain are cheap

10- 65% of population is under 20 years

11- Dairy industry are growing over time

Threats
1- Instability of Political Situation
2- U.S. District 3- Vandalism and Theft 4- Population below poverty line almost 25% 5- Unemployment rate is 11.6% in 2011 6- The budget deficit climbed to over 8% of GDP and Egypt's GDP growth slowed to 4.6% 7- The interest on public debt increased 8- Literacy Rate is very low 9- The healthcare system in Egypt is underdeveloped

10- Weak Stock Market

11- Interest rate is high relative to other countries

SWOT Matrix
Strengths-Opportunities (SO)
Weaknesses-Opportunities (WO) Strengths-Threats (ST) Weaknesses-Threats (WT)

Strengths-Opportunities (SO)
1- Build more outlets and plants (S4, O1) 2- Make In-store Promotion frequently (S3, O10) 3- Invest 10% of profit in R&D (S10, O11)

Weaknesses-Opportunities (WO)
1- Build a new farm (W1, O9) 2- Hire new employees (W3, O1) 3- Initiate Web site and telesales department (W5, O7)

Strengths-Threats (ST)
1- Build a factory outlet (cost price) (S2, T4) 2- Invest in a security system and early alarm (S8, T3)

Weaknesses-Threats (WT)
1- Add training programs(W6, T5)

Space Matrix
Financial Strength Ratings

Gross Profit changed from -5,126,000 to -6,433,000

Total operating profit is 4,656,000 (Decrease)/Increase in cash is -4,563,000 Net debt is -20,867,000

1
6 2 2

Net cash inflow from operating activities is 5,870,000

Average Financial Strength Industry Strength Financial Stability

6
3.4 Ratings 2

Market share
Resources utilization in the industry Average Industry Strength Environmental Stability

1
2 1.6666667 Ratings

Economic slow down can reduce the demand

Fluctuating rate of inflation in the country Average Environmental stability Competitive Advantage

-2
-4 -2

Royal dairy enjoys customer loyality

Royal dairy is the market leader Royal dairy control on suppliers and distributors Average Competitive Advantage

-3
-5 -2 -2.5

Space Matrix
Stay close to competencies Dont take excessive risks Market penetration Market development Product development Concentric diversification

FS

CA

IS

ES

Alternative Strategies
Concentric Diversification
As space matrix diagram shows that the company should use one of the conservative strategies which will lead to implement one of long term objective by make related diversification in product and start to produce meat and beef products

Market Penetration
Markets are not saturated Usage of consumers can be increased Economy of scale is considered as an competitive advantage Trying to increase the market share for the present products through greater marketing efforts

Michael Porters Generic Strategies

In this project we will use mix of cost leader ship and differentiation strategy in order to maintain the market share and increase sales. Cost leader ship we will play on Type 2 best value strategy by sell to customer same dairy products but by adding more benefits

Differentiation will use Type 3 to keep the segment of insensitive customer price.

Tactics
Competitive Tactics will be used Eager to implement a plan to be conservative when and where to be implemented in order to increase our profit.

Conclusion
Royal dairy is about to formulate a stability strategy which is characterized by the absence of significant change. A stability strategy is best known for what it is not; that is, the stability strategy is characterized by an absence of significant changes. With this strategy an organization continues to serve its same market and customers while maintaining its market share. When is a stability strategy most appropriate? It is most appropriate when several conditions exist: a stable and unchanging environment, satisfactory organizational performance, a presence of valuable strengths and absence of critical weaknesses, and non-significant opportunities and threats.