Cooperate Strategy Analysis - Case Study Example

Evaluate TATE & LYLE international strategies and how they have managed their strategic challenges and strategic changes within this. You will in your evaluation need to consider the key factors of success in relation to the different strategic groups within food additive industry. Support your evaluation with relevant theory and academic models. International strategies adopted at Tate and Lyle As one of the world's largest producers of sweeteners and starches, the UK based company Tate and Lyle has been in the forefront in adopting international strategies and making it big in the industry. From 1988 to 97, it grew from a Uk/European food company into one of world's largest producers of sweeteners and starches in the world. Strategies adopted at Tate and Lyle Expansion through Acquisition Tate and Lyle took over Staley Industries in the US in 1988 and Bundaberg in Australia in 1991.They also purchased the well-known citric acid company, Haarman and Reimer from Germany's Bayer. Global Reach Through a series of expansions and mergers, Tate and Lyle have expanded their functions in various parts of the globe. They have operations in Americas, Africa, Asia, Australia and Europe. Utilizing Local resources Wherever Tate and Lyle started their operations through mergers and acquisitions, they have tried to maximize the locally available resources. Catering to emerging demands With globalization, profits were expected to soar. However, inspite of the major expansion programme, profits were down by 60million from 1991 to 97.This made the company think of new products, which could give them an edge over the competitors. Strategic Changes Research and Development Tate and Lyle has invested a substantial amount to fund its in-house R&D division. This has shown rewards in the form of launch of new and specialized products like low-calorie sweeteners. Sucralose, which is marketed under the trade name SPLENDA, was the result of over 30 years of research by Tate and Lyle and is now the subject of over 30 patents, which describe its manufacture. The sweetener is not manufactured under license by anyone else and is only produced at Tate and Lyle's two sites - in the US, and now in Singapore too. The sweetener has found use in over 4,000 products including drinks, breakfast bars and ice creams. Monopoly over product To combat the risks associated with demand downturn for sweeteners and sugar products, Tate and Lyle moved to higher-value-added products, which would help them increase their margins. Today, they are the sole producers of Sucralose in the world. Sucralose is a low calorie /zero calorie sugar alternative used in a wide range of zero-sugar drinks and food products. Growing demand for new product According to research by The Freedonia Group1 "Increased food production and gains in value-added sweeteners, nutraceuticals and natural additives will drive US food additive demand up 4.8 percent annually through 2008. Flavors and flavor enhancers will remain the largest segment, while alternative sweeteners will grow the fastest. Grain mill products, pet food and snack food show best market prospects." Expansion in Production Capacity To double production capacity and meet the demand of sucralose, a 42m ($75m) expansion project was completed in June 2006 in the US. To help Tate and Lyle meet the global demand for Sucralose, another plant was opened in Jurong Island, in Singapore in April 2007. Utilization of Local resources The new facility at Singapore is expected to cater to the Far Eastern markets, which is predicted to be a lucrative one. Availability of skilled workers, cheap labor and tax breaks by the government are other factors, which led to the setting up of this unit in Singapore. Key Factors of success in Food Additives Industry Sucralose, the sweetener has been passed as fit for use in over 80 countries around the world and has been found to be more stable than Aspartame, the previously favoured sweetener for food manufacturers. Though derived from sugar, Sucralose is 600 times sweeter than sugar. Another advantage of Sucralose is that it seems to be a more versatile food additive than other sweeteners as it is also stable to heat. 70% (circa 900 words) Debate whether companies outside this industry sector can draw any useful lessons from the strategies used in this, the food additive industry. Provide examples of strategic areas that might be of interest to other industries and any limitations of using such information. 400 words In my opinion, companies outside the food additives industry can definitely draw a lesson from the strategies followed at Tate and Lyle. A business is a business, whether a stock-broking one or a sugar additive one. The basic factors, which influence and govern any business or industry, remain the same. The basic factors, which drive any industry or a company's bottom line will always remain the same: namely, demand, supply, pricing factors, use and cost of using resources, and in today's world, "globalization". Drawing upon Tate & Lyle's wonderful case study, I would suggest the following strategic areas for companies outside the sector too: 1. Carefully study and analyze the market. Before planning the production and launch of any new product, a creful study of the market needs to be carried out to determine the actual demand and supply gap for that particular product. 2. Timing the Market To launch a product or service, the timing must be just right. The market should be mature, consumers must be aware of the product and its benefits; the product must be readily lapped up. 3. Invest in R&D. Even though the cost of R&D might seem high at the time of setting it up, the returns accrued from the product's sale can be worth the while, once it is launched and carves a niche for itself. 4. Strategic Marketing To launch a product, a strategic marketing plan has to be put in place and meticulously followed. If the company is already a successful one, its brand image can be leveraged to launch a new product, as in the case of sucralose. 5. Go global Demand is not constrained to a region in today's businesses. As soon as a product is launched in the US, there are customers ready to lap it up in the Middle East. So, instead of restricting the market to a region or country, companies have to be aware of the demand on a global scale. 6. Make use of local resources While expanding on a global level, the company could look to areas or countries that provide cheap, skilled labour, tax incentives, land allocations and other benefits to foreign investors. 7. Unique products or unique selling formula If a company were able to bring a unique product into the market, it would be way ahead of its competitors. The company could then command its own price for the unique product or formula. Limitations Though Tate and Lyle have been acclaimed as the world's largest producers of sweeteners and starches, a strategy that probably did not work very favorably was the extensive expansions globally. While the company carried out mergers and expansions in Australia and Europe, the main input was from agricultural sources. These agricultural products were subject to price fluctuations, natural disasters and many currency problems that were outside the company's control. Profit margins were also impacted by competitive pressures on certain products form US companies. All in all, though the company had a global reach, its profit margins had been negatively impacted by the move, at least in the short run. Bibliography 1. Food Additives to 2008 - Demand and Sales Forecasts, Market Share, Market Size, Market Leaders, Published 09/2004. http://www.freedoniagroup.com/Food-Additives.html 2. Case Study 19.2, "Tate & Lyle plc :globalisation to sweeten the profit line" International Expansion and Globalisation Strategies Read More