Good About The Company: Danone Report Example

Headquartered in Paris, DANONE is a food and beverage manufacturing company and also world’s largest biggest maker of Yogurt. The origin of the company date back to 1966 when it was born out of merger decision of two French glass manufacturers and the company was named as Boussois Souchon Neuvesel, or BSN. Although the company planned its European expansion during 1970-1974, but the major international expansion was headed during 1990-1996 when it decided to consolidate its position as a multinational food and beverage company. It was only during 1994, the company decided to change its name to Groupe DANONE, and then to DANONE in 2009.

At present, the company operates four divisions, namely Fresh Dairy Products, Waters, Early Life Nutrition and Water Nutrition.

The company has established global management unit for each division to which local entities report. Such organizational structure contributes towards the success of the company where each division stands amongst ace position in the world. Below presented is the contribution by each division to the total sales of the company:

Strategy, Objectives and the outcome

DANONE, as a corporation itself has always been committed to expanding its global network but in alignment with social responsibilities. The company was been known for its integral commitment to the society, and even today the corporate objectives of the company includes global expansion but in alignment to health driven food supply and sustainable supply chain. Below is a brief layout of how the company has achieved each of its outcome:
Global Expansion- The objective of transforming into a global entity was the company’s objective since 1990, and today, the company has its presence in 130 countries where 53% of the total revenue is sourced from emerging markets, while it continue to dominate its market share in growth and matured markets of France, United States, Russia, Brazil, Indonesia and China.
Health driven product manufacturing: ‘Health and Growth’’ has been the central mission of the company since the very earlier years of its establishment. The company has a clear objective of growth but not at the cost of health. Hence, abiding to its mission and to achieve the objective, DANONE sold most of its division which it deemed as not being in alignment with ‘’health and Growth Strategy’’. This includes, sale of beer division in 2000, meet and cheese in 2002, and sauces in 2005-2006, and now each division focus only of producing health assistive and nutritional products. In addition, the company has also launched, NutriPlanet, a programme that analyzes the health issues of the target population so that each product developed should be relevant in improving health of the local community. By the end of 2014, Nutriplanet program was applied to 50 countries.
Develop Sustainable Supply Chain: The objective of the company also extends to maintaining a sustainable supply chain, and it has been making considerable efforts to achieve them. In the milk supply chain, suppliers are being educated to improve animal husbandry practices, feed herds and get veterinary treatments. In addition, the water division of the company is aggressively committed to protect water resources and use it in harmony with local ecosystem.

Competitive Environment

The food processing industry is highly competitive, and despite of being the market leader, DANONE faces tough competition from companies like:

Kraft Foods

Nestle
Coca-Cola
PepsiCo
Groupe Sodiaal
General Mills Inc.
Market Structure-Monopolistic
The company operates in monopolistic market structure where it survives the intense competition from the rival companies through product differentiation in the form of packing, branding, offers, et cetera. Important to note, the company employs different strategies to outperform the competitive threat in each geographic segment. For instance, in Europe, which is a matured market, high advertising expense is made to aware their customers about new innovative products. Similarly, in African markets, the differentiation is achieved on price differentials.

Porter Five Forces

i) Bargaining power of suppliers: High
The company has a policy of optimizing its purchase where it selects its suppliers through Supplier Relationship Management Solution Unit, on the basis of quality assurance and timely delivery of quantity ordered. However, if any supplier or a group of supplier fails to deliver the quantity or quality of the raw material desired, the production cycle will be badly disrupted.
ii) Bargaining power of customers: High
With each product of the company being supposed to be consumed by a retail individual, the bargaining power of each of them is very high. Consumers in the retail food processing industry get disillusioned very easily on the basis of price and quality, hence, DANONE faces huge quantity of bargaining power by the consumers that may neglect the product if the price is high and quality is inferior to that of substitute offering.
iii) Competitive Rivalry: High
iv) Threat of new entry: Low
Food processing industry is a capital intensive industry, hence it will be difficult for any new company to establish in the market which is already intense competitive.
v) Threat of substitutes: Low
Offering dairy products, mineral water and body nutrients, leaves the company exposed to low risk of substitution as customers understand the importance of a healthy lifestyle and associated products.

Growth Strategy- Acquisition

For a company that sells its products in 5 continents, and is a leading food processing entity in the world, it is hard to believe that the growth strategy has been the acquisitions. Soon after the company sold its beer, cheese, biscuits and sauce divisions, it entered into the baby food business through acquisition of Numico in 2007. Later, in 2010, the company acquired Medical Nutrition USA, followed by acquisition of Applied Nutrition Corporation in 2012 for expanding its offering in Body Nutrients. Most recently, during November, 2014, company bought 49% interests in frozen dairy company, Fan Milk in West Africa, and 25% stake in Yashili International, a powdered milk producer in China.

The company has detailed its plan for been aggressively expanding its presence in China through multiple future acquisition.

Economic Environment
Business activities of the company are largely influenced by economic activities. For Instance, sluggish demand and high taxes in Europe has been consistently reducing the revenue figures of the company in their home country. Similarly, emerging markets with increasing demand pattern and high consumer spending such as China and Brazil are supportive for company’s operation. Moreover, countries like China and Russia, which have proposed expansionary healthcare expenditure, will be a boon for medical nutrition division of the company.

Internationalism

Danone has been focusing on international expansion since 1990’s, and today, 60% of its sales are sourced from markets outside Europe. Below are some pull/push factors that lead motivated the company for expanding footprints in alien markets:
i) Pull Factors:
-Increasing revenue figures
Increasing demand for healthy and nutrition products around the world is a primary pull factor for DANONE to expand internationally. Moreover, emerging markets such as China and Africa which are highly populous nations and where consumer spending is high; provides opportunities for increasing revenue figures significantly.
ii) Push Factors
-Economies of Scale
Food processing industry is highly competitive, and in order to survive, companies need to gain economies of scale, which is possible through mass production at various layouts in different countries.
-Sluggish demand in Europe
The consumer demand in Europe has been sluggish since many years. Moreover, high taxes on businesses and consumers also pushed the company to look for new markets.

Yips Model of Internationalism

Market Driver- Growing need and demand for healthy and nutritious products.
Cost Driver- Overseas expansion provides economies of scale associated with mass scale production.
Government Driver- Unfavorable tax environment in Europe for businesses and consumers.
Competitor Driver- Being ahead of competitor’s global strategies and achieve country interdependence.
Annotated Bibliography
Danone. (2013). Economic and Social Report. Danone.
Danone. (2014). 2014 Registration Document. Paris: Danone.
Danone: Competitors. (n.d.). Retrieved April 5, 2015, from Hoovers: http://www.hoovers.com/company-information/cs/competition.DANONE.d0e36c2b36a32275.html
Danone: Mission Strategies. (n.d.). Retrieved April 5, 2015, from Danone: http://www.danone.com/en/for-all/mission-strategy/our-mission/'
Groupe Danone. (n.d.). Retrieved April 5, 2015, from Atlas Advisors: http://www.atlasadvisors.com/casestudy/groupe-danone/
Kruglianskas, M. (2013, January 7). Sustainability as Innovation Strategy: How Sustainability and Innovation Drive Each Other and Company Competitiveness at Danone. Retrieved April 5, 2015, from http://www.managementexchange.com/story/sustainability-innovation-strategy-how-sustainability-and-innovation-drive-each-other-and-comp
TAKEUCHI, Y. (2014, December 28). French food maker Danone hankering for acquisitions in Africa, China. Retrieved April 5, 2015, from http://asia.nikkei.com/Business/Companies/French-food-maker-Danone-hankering-for-acquisitions-in-Africa-China
Tan, S. (n.d.). Controlling cost escalation of healthcare: making universal health coverage sustainable in China. Retrieved April 5, 2015, from http://www.biomedcentral.com/1471-2458/12/S1/S8