Case Study Description of Arla Foods - Matching Structure With Strategy
In early 2013, the head of business development and commercial operations of Arla Foods, a dairy enterprise focused on Northern European markets, is examining, in the light of a new five-year strategy, alternatives to the existing organization structure. His dilemma is to determine the best structure that can deliver the strategy, which is focused on renewed international expansion. The new structure must support the company's strategy in relation to both the existing core markets in Northern Europe and also the growth markets of the future in countries of Asia and Africa. It must ensure that Arla Foods has the right competitive stance in individual markets, which vary widely in terms of customer buying habits and retail formats. It must also ensure regular innovation of dairy categories developed from local resources and marketable globally.
Swot Analysis of "Arla Foods - Matching Structure With Strategy" written by Jean-Louis Schaan, Ramasastry Chandrasekhar includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Arla Foods facing as an external strategic factors. Some of the topics covered in Arla Foods - Matching Structure With Strategy case study are - Strategic Management Strategies, Globalization, Innovation, Organizational structure, Strategy and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Arla Foods - Matching Structure With Strategy casestudy better are - – digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, increasing commodity prices, there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies,
technology disruption, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Arla Foods - Matching Structure With Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Arla Foods - Matching Structure With Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arla Foods, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arla Foods operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Arla Foods - Matching Structure With Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Arla Foods - Matching Structure With Strategy case study
2. Improving business portfolio management of Arla Foods
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arla Foods
Strengths Arla Foods - Matching Structure With Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arla Foods in Arla Foods - Matching Structure With Strategy Harvard Business Review case study are -
Effective Research and Development (R&D)
– Arla Foods has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Arla Foods - Matching Structure With Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Arla Foods is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Arla Foods has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Analytics focus
– Arla Foods is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Jean-Louis Schaan, Ramasastry Chandrasekhar can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Strategy & Execution field
– Arla Foods is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Arla Foods in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Arla Foods has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Arla Foods has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Training and development
– Arla Foods has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Arla Foods - Matching Structure With Strategy Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– Arla Foods has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arla Foods to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Arla Foods is one of the leading recruiters in the industry. Managers in the Arla Foods - Matching Structure With Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Arla Foods
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Arla Foods does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Arla Foods in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Arla Foods has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Arla Foods - Matching Structure With Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Arla Foods - Matching Structure With Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arla Foods - Matching Structure With Strategy are -
Capital Spending Reduction
– Even during the low interest decade, Arla Foods has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Arla Foods supply chain. Even after few cautionary changes mentioned in the HBR case study - Arla Foods - Matching Structure With Strategy, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Arla Foods vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Arla Foods has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Interest costs
– Compare to the competition, Arla Foods has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to strategic competitive environment developments
– As Arla Foods - Matching Structure With Strategy HBR case study mentions - Arla Foods takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High operating costs
– Compare to the competitors, firm in the HBR case study Arla Foods - Matching Structure With Strategy has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Arla Foods 's lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Arla Foods - Matching Structure With Strategy, in the dynamic environment Arla Foods has struggled to respond to the nimble upstart competition. Arla Foods has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Arla Foods needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow decision making process
– As mentioned earlier in the report, Arla Foods has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Arla Foods even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High bargaining power of channel partners
– Because of the regulatory requirements, Jean-Louis Schaan, Ramasastry Chandrasekhar suggests that, Arla Foods is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Increasing silos among functional specialists
– The organizational structure of Arla Foods is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Arla Foods needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Arla Foods to focus more on services rather than just following the product oriented approach.
Opportunities Arla Foods - Matching Structure With Strategy | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Arla Foods - Matching Structure With Strategy are -
Building a culture of innovation
– managers at Arla Foods can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Arla Foods can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Arla Foods to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Using analytics as competitive advantage
– Arla Foods has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Arla Foods - Matching Structure With Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Arla Foods to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Arla Foods can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Arla Foods - Matching Structure With Strategy suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Manufacturing automation
– Arla Foods can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Learning at scale
– Online learning technologies has now opened space for Arla Foods to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Arla Foods can use these opportunities to build new business models that can help the communities that Arla Foods operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Arla Foods to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Arla Foods to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Arla Foods can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Arla Foods in the consumer business. Now Arla Foods can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Arla Foods can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Arla Foods to increase its market reach. Arla Foods will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats Arla Foods - Matching Structure With Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Arla Foods - Matching Structure With Strategy are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology acceleration in Forth Industrial Revolution
– Arla Foods has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Arla Foods needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Arla Foods - Matching Structure With Strategy, Arla Foods may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Environmental challenges
– Arla Foods needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Arla Foods can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Arla Foods can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Arla Foods needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Increasing wage structure of Arla Foods
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Arla Foods.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Arla Foods can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Arla Foods - Matching Structure With Strategy .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Arla Foods with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Arla Foods needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
High dependence on third party suppliers
– Arla Foods high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arla Foods in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of Arla Foods - Matching Structure With Strategy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Arla Foods - Matching Structure With Strategy needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Arla Foods - Matching Structure With Strategy is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Arla Foods - Matching Structure With Strategy is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Arla Foods - Matching Structure With Strategy is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Arla Foods needs to make to build a sustainable competitive advantage.