Carvajal S A as A Family Business - Case Study Example

Introduction

Carvajal S. A is a multinational private company that was established in established in 1904 by Manuel Carvajal in Colombia. Since then, the company has grown to become a major company in offering paper products in Columbia and other regions across the globe. It has seven subsidiaries of family owned holding, making it one of the Latin America most largest and distinguished business (Ivan, Mary & Sachin, 2014). Currently, the company is operating in more than five continents, offering education paper-products such as notebooks, textbooks and yellow books in addition to furniture. However, due to technological changes, and decreasing demands for paper products, the company has experienced a number of financial problems. Organizational challenges are also evident in the management of the company, making it to experience more and internal conflicts a situation that hinders profitability and the general growth of the company’s businesses. This paper makes a critical examination on the challenges facing the company and the proposed resolutions in addition to specific ways to position the company for future growth.

Challenges faced by Carvajal, S. A

Like any other multinational company, Carvajal faces a number of specific challenges that needs to be addressed for proper growth of the company. Both external and internal challenges are facing the company’s day-to-day running of the company, making it difficult for the management of the company to perform efficiently. The company experiences challenges related to socio-economic conditions in the country, in addition to the legal (governance) issues that keep affecting many regions where the company operates. Discussed below are specific challenges that face the company.

Stiff competition

The company operates in an era of digital technology. This means that many of the products and services offered must be digitalized for the company to effectively compete with its new competitors, a situation that poses challenges. Creation of a competitive environment has greatly affected the company in terms of sales and profits it makes.

The company’s yellow pages have been competing with Google. However, most people find Google much less to use (Ivan, Mary & Sachin, 2014). A condition that has limited and made the company to drive down the profits it can make. This means that, competition is greatly promoting the financial problems faced by companies (Needham & Dransfield, Edexcel Foundation, 2000). Stiff completion also makes the company to have a limited number of consumers or to simply experience a diminishing demand of its products. Both Google and Carvajal are competing for the same group of consumers; this means that the company should spend more revenue in the implementation of a proper competitive strategy. Through this, the company ends up spending and diverting more resources to cater for the completion a situation that worsens the financial capability of the company.

Stiff competition from foreign companies such as Google has made the company to extend and grow more international. Latin America is a land of much political and economic extremes, this means that Carvajal Company operates business in a challenging region. The company has been forced to adjust its objectives to the region’s real opportunity. This has also made the company to grow more multinational in order to make more capital from foreign markets. The company has now promoted aggressive strategies of entering into acquisition of companies and even entering joint ventures. This is a way that the company uses to consolidate its position across the Latin America region.

Competition in Latin America is like a war. Carvajal Company wants to dominate and secure the market, other competing companies like Google also aims the same. This means that all these competing companies wants the same, thus, Carvajal Company needs to develop strategies that will assist in having a competitive advantage. In addition, this means that the company needs to brand its products in such a way that its customers see a difference in them, an objective that needs resources and finance to achieve (Needham & Dransfield, Edexcel Foundation, 2000).

There are various legal factors that promote competition which affect the company’s activities in the Latin America region. Government involvement in business in terms of entry regulation greatly affects the business, as it makes competition stiff and stiffer. Barriers to entry into Carvajal’s business are much lower; this has been promoted by technological advancement in the region (Ivan, Mary & Sachin, 2014). The countries’ governments in the region promote business activities a condition that has made foreign investors to be attracted to the region.

Organizational challenges

The company experiences quite a number of organizational challenges. Being a family business, there are challenges associated with communication and alignment with governance networks across the family and business. The company’s communication poses challenges since it is difficult for its CEO to determine whether he should communicate some issues directly to the family or through the board (Ivan, Mary & Sachin, 2014). It is also difficult to determine when and how the family should communicate with the management. Family members have different opinions and views on how the company should be structured. This poses challenges in the company’s decision-making process, which may be slower due to being based on consensus, and this facilitates a situation where company business is mixed up with family business.

Family related challenges have affected the decisions made by the company CEO and the management at large. The CEO is caught in the middle between doing what is best for business and maintaining the family’s values and respect (Ivan, Mary & Sachin, 2014). The ideas and decisions made by the family representatives represent the family’s values to a greater extent compared to business values. This family influence poses a strong challenge to the organization, motivation of employees and the communication patterns in the company a condition that can lead to role conflicts between family members and the CEO of the organization.

Financial challenges

Finance and capital play a very important role in the development of companies and large organizations. When companies face financial problems, strategies need to be formulated to resolve them, since financial problems can promote the downfall of a company. Financial problems are associated with competition problems since companies make limited profits due to a limited number of consumers. As noted on this paper, the family influence largely contributes to a large number of challenges that the company faces. By asking for capital returns, the company can likely suffer from financial problems, which will affect the day-to-day processes and activities. The family is growing in a relatively high rate compared with the company and the generation getting poorer; this needs members to determine the level of growth needed to sustain future generations to establish a good financial environment (Ivan, Mary & Sachin, 2014).

Resolutions to the problems

There are various ways the company can resolve the competition issue and develop a competitive advantage over its competitors. This involves making customers aware of the differences in the services and products of the company. There are several ways to do this. First, the company needs to defend with a home and field advantage. Since the company has local area knowledge about traditions and interests of buyers, it should use the home market knowledge as an advantage to outdo foreign companies in the competitive market (Jäger & Sathe, 2014).  This should include strategies to fine tune the company’s products and services to suit the customers fully. The customer in this case should be treated as the king, and any effort made should strategize on meeting customer demands, values and interests. Through this, the company will also be able to focus on those customers and consumers who consider the local brands and ignore those who champion and favour global brands. The company should consider upgrading service and quality of its products; this can serve as an important way to attract that segment of the market

Secondly, the company should engage in advertising. This should include both the use of social media and traditional advertising media such as newspapers and TV. Through advertising, the company can be able to keep the potential customers aware of changes on their brand and even their current promotions. Advertising will also serve an important role of communicating the differences in the company’s brand products, which will give customers important information on why Carvajal’s products are preferable. Advertising serves an important way of retaining the existing customers and to consumers, it gives them information necessary to compare products and develop product loyalty. For the company to maintain its image and the general brand image, it needs to advertise continually across all areas it operates. These not only higher sales but also it can assist the company to know its competitors and plan effectively according to the level of competition.

On financial problems, the company should encourage strategies of raising sales to promote profits made through its services and selling of products. This will be an important way of raising finance that will promote effective implementation of the company policies. Through advertising as stated in this paper, Carvajal Company can easily increase sales through advertising activities as they assist the consumers to create goodwill and loyalty to the company’s products.

The company should also promote the use of geographical structure. This will promote regional cooperation from the locals of Latin America and will serve as an important way of strategic planning and positioning the company for future development. Dividing its subsidiaries into regions managed by different managers will be an important way to promote effective utilization of resources and reduce family influence on the dairy activities of the company.

Additionally, Carvajal Company needs to promote effective communication and motivation of employees. The family representatives should not consider family values and interests dominant; instead, they should also promote the needs and values of the company. Communication channels should also be clear so that to promote the relationship between the company’s non-family CEO and family members.

The company should consider carrying research activities especially those that fall under market analysis and marketing communications. (Gunasekaran et al., 2012).This will facilitate understanding of the local and global market in addition to proper analysis of its competitors. By analysing the market, the management team will be able to understand consumer preferences needs and interests, which they should take into account when developing and advancing the company’s products. This will also assist the company to match up with their competitors’ strategies effectively.

Understanding the social-political structure of the region will also promote profitable results for the company. Most parts of Latin American region experience economic problems, a situation that needs to be considered. However, most countries like Colombia are receiving a great development and improvement of its economy, an issue that has attracted investors and other global companies to do business in the region. It is therefore necessary that that company brands and prices its products in the right way, which takes into consideration the social and economic background of the people. This will involve a fare pricing strategy that will assist in raising the sales and promote profit realization.

For continued growth in the future, the firm needs to take into consideration a number of issues, proper branding strategy is one of them. As noted in this paper, proper branding will take into account the needs and interests of consumers. Brand positioning strategy will involve dynamic changes made on the brand of the products to fit the customers’ preferences and promote the identification and selection of the target market (Gunasekaran et al., 2012).

Good product positioning strategies will also assist the company to understand both external and internal factors that may affect the image of its products. This will also include effective differentiation of each of the company’s products from its competition. The positioning should involve emotional experience of its products; this will promote the company’s value relative to its completion.

Lastly, for the company to promote continued growth in the future, it needs to adopt an efficient competitive planning and positioning strategy. This involves making sure that the customers’ problems are solved true an establishment of a different and unique aspects in the company’s products. More efforts should not be on comparing the company with its competitors but considering how its products meet the needs and interests of the customers.