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Appendicies
Balanced Scorecard
The balanced scorecard refers to the strategic planning and management system that is deployed widely in business institutions, as well as governments with the aim of aligning business operations to the vision as well as strategy of the organization, enhance internal and external communications, and examine organization performance in terms of attainment of strategic goals. (Halbleib, Wormington, Cieslak & Street, 1993).
Rich Picture
A rich picture refers to the process of finding out how to solve a problem situation and depict it through cartoon-like diagrams which are the initial mental representation of the situation.
The mnemonic “CATWOE” is effective in helping one remember with ease the elements of the rich picture: customers, actors, transformation, worldview, owner, and environment. The rich picture is characteristically developed before the analysis stage (Mingers, 2001; Dinesh & Palmer, 1998).
Below is a simple example of a rich picture, exhibiting CATWOE essentials for the process of making coffee:
Swot Analysis
SWOT analysis refers to a strategic planning method used to evaluate the strengths, weaknesses/limitations, opportunities, and threats involved in a project or in a business venture. It entails explicitly specifying the objective of the business venture or project and determining the internal and external factors that are favorable and unfavorable to achieve that objective (Ranch, 51 1979; Stubbs &Diaz 16, 1994).
Swot Analysis For Dairy Crest
Strength
By virtue of Dairy Crest being among the leaders in the field of dairy products, it can only mean that its reputation in the market place is a good one. This can be considered to be one of the strengths of the firm. When customers hold the products of a company in high regard, it can only mean that the company’s products are of a high quality hence the resultant reputation (Travis & Venable, 45 2002; Holt, 56 1999).
When customers like ones products because they are of a better quality, it implies that this particular organization will enjoy the lion’s share of the market provided it maintains the high standards of its products. Its competitors will have a hard time trying to eat into their market share as the firm will have established itself firmly (Howard, 1993; Turoff, 1975).
The other benefit that a firm can derive from having a good reputation is that its expenditure on advertising its products will be on the lower side since its products are well known in the market (Kelly, p.87 1955; Holt, 2000; Von Baeyer, p 88 2002).
This will be beneficial to the firm in that the resources that would have been deployed towards advertising the firm’s products would be channeled elsewhere like in research and development thereby enhancing the quality of its products while at the same time saving on costs (Checkland, p.669 1983; Machol, 1980).
Technological factors
Dairy Crest offers a wide range of dairy products to its customers. This can be considered as strength for the firm since the performance its performance will not be determined by the sale or lack thereof of a single or just a few products.
In case a single product is not performing well in the market in terms of sales, the stakeholders can rest easy with the knowledge that other products will cover for those that are not performing well in the market (McKenzie & Shilling, 1998; Pidd, 1999; Mangelsdorff et al, 1996).
The company manages a couple of robust brands in the UK dairy industry. They include: Clover, Butterfly, Cathedral city and Davidstow. Such strong brands enable the firm to maintain a reasonable level of sales without much effort (Liebl, 2002; Horn, 2001). Strengths:
- The demand profile for Dairy Crest’s products is not only fairly optimistic but keeps increasing with every passing day. This can be considered as strength since the firm will always find a market for its products.
- The firm offers a wide range of products to its customers. This flexibility of product mix allows customers to have access to a variety of products from which to choose from. This ensures that they stay loyal to the firm.
- The firm has deployed state of the art equipment to carry out the various processes involved in manufacturing or processing their end products. In addition to this, they have at their disposal highly skilled staff running the various departments within the firm. This will go a long way to ensure that the firm keeps innovating new products hence it can keep on adding to their product line.
- The fact that Dairy Crest can easily raw material in this case milk puts it in a better position relative to its competitors who do not have the same privilege. The firm will always be able to meet the demands of its customers due to this fact.
Opportunities
The opportunities that exist for Dairy Crest include a well established position with a well defined market niche. The operations of Dairy Crest are not limited to its local market in the United Kingdom only (Schalkwyk, 1998; Erikksdon & McFadden, 450 1993).
It operates in other countries such as Ireland and France. This provides the company an opportunity to access a wider market and subsequently the company will have a chance to increase its sales as well as its profits (Mason & Mitroff, 1981; Sullivan, 1983; Weber, 2001).
The firm can capitalize on nutritional as well as health related benefits of certain dairy products. Organic dairy products are highly nutritional in addition to being on demand. The firm can tap this line to increase its sales.
Value addition
There is a phenomenal opportunity for innovations in product development, packaging as well as presentation. Below are potential areas of value addition:
Measures should be put in place to introduce value-added products into the firm’s product portfolio. This will result to a greater presence as well as flexibility in the market place together with opportunities in the field of brand building.
If the firm adds cultured products such as yoghurt and cheese into its product portfolio, the firm stands to derive additional benefits in terms of efficient utilization of resources as well as increased presence in the market place.
Export potential
Efforts to exploit export potential are already on. Amul is exporting to Bangladesh, Sri Lanka, Nigeria, and the Middle East. Following the new GATT treaty, opportunities will increase tremendously for the export of agricultural produce.
Threats
Dairy Crest has to contend with the increasing number of competitors in the dairy industry. Fierce competition from an ever increasing number of competitors within the dairy industry arm twists the company to price its products competitively in order for it to compete on an equal footing with its rivals.
The disadvantage with competitive pricing is that it will lead to drop in the profit levels or worse still, may force the company to compromise on the quality of its products in order for their prices to be fair (Perusich & McNeese, 1998; Canadian Defense Force, 1999; Holt, 1999).
The increasing popularity of private labels poses a threat to Dairy Crest. This development implies that the dominance of Dairy Crest in the dairy industry will be challenged and in order to retain it, the firm has to use a lot more resources than it did initially.
Environmental legislations pose a major threat to the firm. Firms are required by the law to carry out their day to day operations in compliance to stringent environmental laws. This is no mean feat as firms need to dig deeper into their coffers in order to comply with these laws.
There is also the threat of regulatory bodies controlling the industry in which the firm is operating in. Regulatory bodies eat into the control that a firm has over its affairs. This reduction in the level of control on the part of the firm results into the firm struggling to comply with the directives of these regulatory bodies despite some being not in sync with the firm’s goals and objectives.
Climate change also poses a major threat to Dairy Crest as a firm. This is because almost all the products that are manufactured by the firm are by-products of milk. The phenomenon of global warming that has been witnessed the world over is not conducive for the breeding of dairy cows that produce milk ((Levis, & Wagenhals, 112 2000; Sullivan, 89 1988).
Weakness
One weakness that Dairy Crest has to contend with is high inventory. The nature of products that the company produces do not allow for low inventory levels. High levels of inventory are very costly to manage (Munro, & Mingers, 2002; Textor, 1979; Daellenbach, 2002).
This implies that the company will incur additional costs that will go towards inventory management rather than the resources being deployed to add value to the company’s products had they been channeled in research and development.
All of Dairy Crest’s products are dairy products. This overdependence on a single product area increases the culpability of the firm’s growth trends to be disrupted should there be any drastic developments in the dairy sector. Considerable amounts of investments are necessary to improve the firm’s dairy divisions in order to enhance the firm’s profitability in future (Tan, Xie & Chia, 56 1998; Sanger, 19 1998; Roest, 87 1997).
The firm has got poor quality training opportunities for the development of business skills. This means that the quality of staff it has is not the best thus their work will also not be top notch.
Perishability: The core product of the firm is perishable in nature although pasteurization has addressed this problem partially. However, a lot of new processes will have to be invented and deployed to enhance the quality of the firm’s core products and also elongate its shelf life.
Minimal control over yield: Hypothetically, there is minimal control over the quantity of milk yielded. Nonetheless, increased awareness of developments such as embryo transplant, artificial insemination and properly managed animal husbandry practices, together with higher income to remote milk producers should automatically result to improvement in milk yields.
Hectic distribution: Distribution of the firm’s products presents a new set of challenges to the firm. The firm has opted to distribute its products to supermarkets by virtue of the fact that they are larger retailers than the small retailers that the firm used to distribute its products too initially.
Pestel analysis
There are various factors in the environment that will influence the decisions of the managers of any organization. Tax alterations, new laws, trade barriers, demographic change and government policy changes are all examples of macro change. To assist analyze these factors managers can group them using the PESTEL model (Rosenhead, 1998; Carter & Price, 2001; Hudlicka et al, 2001).
Political factors
These refer to government policies such as the scale of intervention in the economy. The products and services a government wants to provide. The degree the government believes in subsidizing firms.
Its priorities in terms of business support. Political decisions can impact on many crucial areas for business such as the level of education of the workforce, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system (Saunders-Newton, 2002; Press, 1978; Weihrich, H. 1982)
Economic factors
These include interest rates, taxation changes, economic growth, inflation and exchange rates. As you will see throughout the “Foundations of Economics” book economic change can have a major impact on a firm’s behavior (Checkland, 1999; Yates, Burke, 2001; Turoff & Hiltz, 1999; Sparks, 1997; Rosenhead, 1980).
Social factors
Changes in social trends can impact on the demand for a firm’s products and the availability and willingness of individuals to work. In the UK, for example, the population has been ageing (Howard & Matheson, 1981; Omerod, 2001; Schwartz, 1996).
Technological factors
New technologies lead to the creation of new products and new processes. MP3 players, computer games, online gambling and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided design are all improvements to the way we do business as a result of better technology (Holt, 1988; Passig, 1998; Rosenhead, 1996).
Environmental factors
Environmental factors include the weather and climate change. Changes in temperature can impact on many industries including farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider (Rosenhead, 1992; Pyke, 1970; Silverman et al, 2002).
The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries (for example, more taxes being placed on air travel and the success of hybrid cars) and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities ( Loh, 47 1998; Moreno-Luzon, and Peris, 45 1998; Sullivan, 130 1983).
Legal factors
These are related to the legal environment in which firms operate. In recent years in the UK there have been many significant legal changes that have affected firms’ behavior (Holt & Pickburn, 141 2001).
The introduction of age discrimination and disability discrimination legislation, an increase in the minimum wage and greater requirements for firms to recycle are examples of relatively recent laws that affect an organization’s actions. Legal changes can affect a firm’s costs (e.g. if new systems and procedures have to be developed) and demand (e.g. if the law affects the likelihood of customers buying the good or using the service).
Dairy Crest Group plc (Dairy Crest) is one of the leading dairy product providers in UK. The company engages in the production, manufacturing and trading of milk based food and dairy products. The company’s product range is categorized into foods division and milk division.
Dairy Crest offers cheese, spreads, ingredients, household and liquid products. It also involved in the distribution of these products through a devoted global sales team. The company’s products are marketed under various brands such as Cathedral City, Country Life, Clover and FRijj. The company through its subsidiaries operates in the UK, France and Ireland. Dairy Crest is based in Surrey, UK. (Lee, p.12 1998).
Problem and solution for balanced scorecard
Problem
Consumer demand for organic dairy products has surpassed industry expectations growth predictions that once seemed overly optimistic are lower than actual growth. Yet, despite the market potential, dairy companies are failing to cash in on the demand. There simply is not enough organic milk to keep meet the demand.
The problem appears to be in the transition period. Transitioning to organic production is an extremely costly process and farmers do not receive a higher premium until their milk is certified organic. Organic feed costs 40 to 50 percent more than usual feed.
The law requires that cows be fed organic feed for a year before their milk will be certified organic. In addition, farmers who save money by growing feed on their own land are subject to a longer certification process. If the farmers use prohibited substances such as herbicides or pesticides, the land will not be certified organic for three more years.
The cows must be fed the organic feed for an additional year. For many of the farmers, four years is too long to wait for a higher premium.
Unfortunately conventional farming has left so many in dire straits that they have a real hard time getting through transition. There are farmers that even though they made the transition it was too late. They could not hold any longer since they were debt ridden. Small farms may not be able to cash in on the organic market because they may not have the cash reserves or the option to take out a loan to pay for the transition period.
The challenge now is to persuade farmers that undertaking organic farming is a prudent business decision. The farmers who had an ideological motivation to produce organic milk have already transitioned.
Solution
Dairy Crest should consider launching a fund which provides financial assistance to farmers who transition to organic. This is done with the hope that offering assistance will convince dairy farmers that are unsure about organic to sign on.
Problem and solution for swot analysis
Problem
The dairy industry that Dairy Crest operates in has become very competitive. There are new entrants into market every other day offering the same kind of products as those of Dairy Crest.
This development has the implication that the more competitors there are in the market, the dominance of well established firms such as Dairy Crest is going to be challenged eventually. The market leaders will inevitably register reduced sales that will lead to a dip in profits.
As a manager in charge of a company such as Dairy Crest, one is expected to look for ways and means that would be deployed by the firm in an attempt to stay ahead of competition.
Solution
Electronic Commerce refers business transactions taking place by way of telecommunications networks, particularly the Internet. Electronic commerce entails doing business electronically. E-commerce, ecommerce, or electronic commerce is defined as the engaging in financial transaction through electronic means.
E-commerce can be deployed by firms to ensure that they stay ahead of or at least keeps up with competitors and industry leaders. Therefore, in order to address the challenge of an extremely competitive market, the managers of Dairy Crest should consider transacting their businesses online because of the potential benefits that they stand to enjoy.
Problem and solution for pestel
Problem
In the recent past the world has witnessed a drastic change in the weather patterns. The weather is no longer predictable with some parts of the earth experiencing unusually warm temperatures. There are accounts of melting glaciers, a phenomenon which is unprecedented.
The aforementioned climatic changes can be attributed to unsustainable practices by human beings that led to environmental pollution.
Practices such as deforestation have an extremely profound impact to the environment. Emission of toxic pollutants into the atmosphere by factories and motor vehicles into the atmosphere has also had a major impact on the climate.
The various forms of pollution occasioned by unsustainable human practices gradually corroded the ozone layer. As a result, the porous ozone layer allows harmful rays of the sun to reach the earth hence causing global warming.
An increasing number of people has is becoming aware of the implications of climate change. That is why there is a lot of lobbying nowadays concerning environmental conservation by adopting sustainable practices and using renewable sources of energy. The green initiative bug has also bitten governments of majority nations around the world.
This fact underlines the seriousness with which this state of affairs is being considered. There are governments which have been prompted to pass environmental legislations that serve as guidelines on how to exploit environmental resources as well as carrying out other activities while causing as little environmental damage as possible.
These legislations come with extremely severe punitive measures for those organizations or individuals who flout the environmental legislations.
As a manager for a manufacturing firm such as Dairy Crest these developments are external yet they profoundly affect the way the daily operations of the firm. The manager is charged with the arduous responsibility of ensuring that his firm complies with the rules and regulations laid down by the government while registering profits for his firm at the same time.
This may appear to be easy on face value but when one gets into the details, they will be astounded to realize how much of a laborious task it is. For starters, any firm that is in the business of manufacturing anything knows that it is extremely costly to adopt sustainable ways carrying out its operations.
The cost implications together with public perception with regard to environmental conservation are the reason why environmental conservation has practically become a priority for many firms.
With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider (Poolpatarachewin, p11 1980).
Pressure is being put on firms especially those involved in manufacturing products to do so in a way that does not harm the environment. Dairy Crest is also leading in the initiative of undertaking its operations while causing as little harm as possible to the environment (Eash, 14 2002).
Solution
Environmental conservation has become a priority for any organization or institution worth its salt. The reason is because the present generation owes it to the future generations to conserve the environment for them.
As a manager of a manufacturing firm like Dairy Crest one is obligated to ensure that the operations of their firm is in compliance with all laws and regulations in the environment that the firm is operating in. It is either one complies with these legislations or their firm is punished severely for being non-compliant.
These punitive measures may come in the form of hefty fines or in extreme cases the closure of the errant firm indefinitely (Pitman, Motwani, Kumar & Cheng, 47 1996).
Environmental conservation and, particularly, how it can be applied to business operations, can be overwhelming daunting. Dairy Crest should first of all try to understanding how their day-to-day operations impact the environment with the aim of creating a wide-spread change and facilitate environmental action.
Information is empowering, and can lead to idealistic decision-making. Dairy Crest should look for tools and information that are needed to mitigate negative impacts on the environment.
A clear understanding of what aspects of their day to day operations are causing the greatest Greenhouse Gas (GHG) emissions is of extreme necessity. They should go farther acquaint its staff and stakeholders with opportunities on how to lessen those impacts and set targets.
Benefits of e-commerce to organizations
International marketplace
What used to be a single physical marketplace located in a geographical area has now become a borderless marketplace including national and international markets. By becoming e-commerce enabled, Dairy Crest can have access to people all around the world. In effect all e-commerce businesses have become virtual multinational corporations (McAdam & O’Neill, 16 1999).
Operational cost savings
The cost of creating, processing, distributing, storing and retrieving paper-based information will reduce drastically.
Mass customization
E-commerce has transformed the way consumers buy products and services. The pull-type processing allows for products and services to be customized to the customer’s requirements. In the past when Ford first started making motor cars, customers could have any color so long as it was black. Now customers can configure a car according to their specifications within minutes on-line via the www.ford.com website.
It enables reduced inventories and overheads by facilitating ‘pull’-type supply chain management – this is based on collecting the customer order and then delivering through JIT (just-in-time) manufacturing (Lee, Roberts, Lau & Bhattacharyya, 77 1998).
Lower telecommunications cost
The Internet is much cheaper than value added networks (VANs) which were based on leasing telephone lines for the sole use of the organization and its authorized partners. It is also cheaper to send a fax or e-mail via the Internet than direct dialing.
No more 24-hour-time constraints
Businesses can be contacted by or contact customers or suppliers at any time. This means that time is no longer a factor when it comes to transacting business. Business continues to operate no matter what time of day it is. The business will register more sales as a result.
E-commerce enables more flexible working practices which enhances the quality of life for a whole host of people in society, enabling them to work from home.
Not only is this more convenient and provides happier and less stressful working environments, it also potentially reduces environmental pollution as fewer people have to travel to work regularly. Any client who purchases any product from Dairy Crest online and experiences the additional benefits that come with it will be won over and become loyal customers.
E-commerce enables people in developing countries as well as remote areas to enjoy and access products, services, information and other people which otherwise would not be so easily available to them. Through e-commerce, Dairy Crest is going to tap into a new market that did not exist before hence increase its sales.
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