TATE & LYLE International Business Strategy - Essay Example

Q. 1. Tate & Lyle plc started in the UK towards the middle of the 19th century as two separate sugar refining industries which amalgamated in the 1920s. They import raw sugar cane from almost all parts of the world. Over the years the company has become a multinational with acquisitions and alliances with similar agri-businesses, for example, from the USA, Canada, Belgium and Australia. However, by the year 2000 Tate & Lyle began divesting itself of some of these acquisitions in a strategic move resulting from an unexpected reduction of profits. Tate & Lyle is increasingly diversifying into the manufacture of food additives and bio-materials like Sucralose and again beginning to reclaim its international expansion and globalization strategy (Case Study, Tate & Lyle.doc). More recent initiatives include ‘A joint venture with Du Pont to manufacture a renewable 1,3-Propanediol that can be used to make Sorona (a substitute for nylon)’ and the acquisition of ‘… a small Dutch company called Hycail … to manufacture PLA (polylactic acid)’ (http://en.wikipedia.org/wiki/Tate_&_Lyle). While profits from sugar refining would be affected by price fluctuations of raw sugar cane in world markets, natural disasters and currency exchange problems, the food additive side of the company is very much a value added business and lends itself to a more stable regime in terms of profits. It is also an expanding market and unlike sugar where the market is saturated, open to competition for greater market share. T & Ls expressed new strategic vision is to develop ‘… partnerships to create the world’s leading renewable ingredients business’ and to ‘... build a consistent portfolio of distinctive, profitable, high-value driven solutions in products and services for our customers’ (http://www.tateandlyle.com ). T & L’s former (not very successful) globalization strategy appears to have been designed following a top-down model of the classical business development type. This is formulated in the form of a pyramid with vision at the top followed by mission, goals, strategies, tactics and action plans below. In a changing and unstable environment such a rigid form of strategy formulation is unworkable. It is unlikely to be of help to the company in positioning itself to gain a sustainable competitive advantage. Today, the new opportunity driven model of business development is both top-down and bottom-up at the same time. Challenges and opportunities from the environment must inform the company’s strategic intent. It must constantly be aware of the match between its internal capabilities (resources) and its external environment (of customers, competitors and the market). (http://www.1000ventures.com/business_guide/mgmt_inex_strategy.html ) The contrast between the old strategy approach and the new opportunity approach is seen in the table below. OLD NEW Known environment Unknown environment Stable environment Unstable environment Building on existing Building on new competencies Competencies, products capabilities, products and and markets markets Need stability and certainty Open to change, uncertainty Lack capacity for flexibility corporate Capacity for flexibility, venturing and speed of change corporate venturing/speed http://www.1000ventures.com/business_guide/crosscuttings/vision _mission_strategy…. Tate & Lyle has articulated its Strategy & Objectives as follows: (http://www.tateandlyle.com/TateAndLyle/our_business/strategy_objectives/default/htm) The five key steps are headed: 1) Serve our customers, 2) Operate efficiently and safely, 3) Invest in acquisitions and partnerships, 4) Invest in technology and people, and, 5) Grow the contribution from value added products. The resources needed to realise these objectives are, according to T & L, threefold. First, we have people development in the form of recognition of leadership, talent, customer focus, and fostering these through graduate recruitment and ongoing training. Second, patents are also identified as a significant area of gaining competitive advantage. This requires vigilance to protect intellectual property rights. ‘During the 2007 financial year, the Group’s US subsidiary, Tate & Lyle Sucralose, Inc., twice filed actions at the’ United States International Trade Commission in Washington, alleging patent infringement …’ (op. cit.). Research and Development is the third key resource. The ‘target is to spend 4% to 5% of value added turnover on research and development. They have launched (2006) a venture capital fund to ‘invest in start-ups and expansion stage companies …closely aligned with Tate & Lyle’s strategic objectives’. (op. cit.). T & L have established a Research Advisory Group and made a $4.5 million grant to fund a Health Research Centre at King’s College, University of London. It has also established a partnership with a subsidiary of a US-based pharmaceutical company Microbia Precision Engineering, to ‘work exclusively together within defined renewable ingredient markets and … share the profits’ (op. cit.). One of the most ambitious projects that the T & L strategic planners have developed recently is the new European Wellness and Nutrition Centre, Lille, France, with an initial investment of £3 million to include ‘laboratories and pilot plant facilities for customers. It will focus on developing new ingredients in the field of wellness and nutrition, catering for beverage, dairy, bakery and convenience food. ...The centre will also specialise in application and development work for SPLENDA® Sucralose, hydrocolloids, carbohydrates, proteins and … range of ingredient solutions’. (op. cit.). It is clear from the above brief discussion that Tate & Lyle have learnt from their early mistakes and are now taking on a new and aggressive, but enlightened approach to the market place. Increasingly it must work closely with the US Food and Drug Administration which is charged with evaluating products such as food additives that come under its jurisdiction. (http://www.hoptechno.com/book27htm ) However, whatever the challenges are, there is profit to be made in this business. ‘The food additive industry generates approximately $10 billion a year in business’ (op. cit.) and T & L with its improved strategy are well placed to profit from it. Q. 2. One of the most important lessons to be learnt from the Tate & Lyle case study above is the importance of moving away from the old, outdated models of strategy formulation (http://home.att.net/~nickols/strategy_definition.htm). Although new patents developed through research and development may not be applicable or valid in all types of businesses and industries, new ways of working, cost-cutting and developing staff through ongoing training should work in practically all business contexts. Globalization and acquisitions alone did not work to increase profit for T & L. Customer focus and feedback has been extremely important for T & L to identify the value-added products and services needed in its future expansion. So much so that, T & L have invested in laboratories, initiated a university research department and aligned themselves with a leading edge pharmaceutical company. It is clear that T & L has positioned itself 'against competition in the market over the long run to secure a sustainable competitive advantage' (http://www.1000ventures.com/business_guide/mgmt_inex_strategy_10schools.html ). Again, these measures may not be relevant to all businesses, but they indicate the value of innovation as a constant feature. For example Japanese car manufacturers are well-known for their innovativeness even at the level of assembly on the factory floor. There are also innovations in reducing cost of storage, by using 'Just In Time' delivery methods. ‘To meet and exceed customer satisfaction, the business team needs to follow an overall organizational strategy. A successful strategy adds value for the targeted customers over the long run by consistently meeting their expectations better than the competition does’ (op.cit.). How all this is to be achieved has never been more argued over. New science in the form of complexity theories and chaos theory has undermined over-rational planning. In recognition of ‘creative disorder in the universe …agility of thought based on the fostering of diversity is a prerequisite for the organisation’s longer-term success’ (http://www.human-nature.com/science-as-culture/rosenhead.html ). Even from what little we know of the transformation of Tate & Lyle after 2000, it is possible to draw some conclusions applicable to most corporate entities. For example, Stacey (1993) pointed out, ‘that organisations do not only adapt to their environments, but help to create them; that organisational success can come from contradiction as well as consistency; that success may stem from being part of a self-reinforcing cycle, rather than from an explicit vision; and that revolutionary as well as incremental changes my lie at the route of organisational success’ (op. cit.). It is clear that Tate & Lyle has been a successful learning organization. It learned from its mistakes in its earlier globalization phase. Its emphasis on customer satisfaction cannot be faulted, and so is its emphasis on value-added ingredients and its commitment to innovativeness in ongoing research. Most other businesses can learn from Tate & Lyle. References Stacey, R.D. Strategic Management and Organizational Dynamics. Pitman, London: 1993 < http://home.att.net/~nickols/strategy_definition.htm > 10/03/2008 < http://en.wikipedia.org/wiki/Tate_&_Lyle > 14/03/2008 < http://www.tateandlyle.com > 10/03/2008 < http://www.1000ventures.com/business_guide/mgmt_inex_strategy.html > 10/03/2008 < http://www.1000ventures.com/business_guide/crosscuttings/vision > 10/03/2008 < http://www.tateandlyle.com/TateAndLyle/ourbusiness/strategy_objectives/default.htm > 13/03/2008 < http://www.hoptechno.com/book27.htm >12/03/2008 < http://www.human-nature.com/science-as-culture/rosenhead.html > 19/03/2008 < http://www.1000ventures.com/business_guide/mgmt_inex_strategy_10schols.html > 10/03/2008 *** Read More