Paper Example on Nature of the Operation and Product Portfolio of the Chosen Beverage Company

Danone is a multinational beverage and food company base in France. The companys CEO is known as Frank Riboud. He is behind the transformation of this production industry into an international supplier of bottled water, health foods, baby foods and dairy products in his 16 years tenure. Previously the company was involved in selling glass containers in Spain, Italy, and France before diversifying into beverage and food. However, Danone seeks to expand its business into the US, Brazil, Russia, Indonesia and Mexico, as this country offer a large market for both beverages and food products. The demands for healthier eating and dairy products are on a rise in emerging economies where there is the need for nutrition. Therefore, Danone will achieve its desired earnings and revenue because of the ready market for its products in advanced nations.

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The family of Frank Ridoud and Andre has created a distinctive style of management that promotes decentralization, strong values and entrepreneurial methodologies that are geared towards the development of the business. Therefore, the expansion into the international market is both fragmented and opportunistic. The company has adopted organic growth and joint venture so that it can expand. Danone has ventured new markets in Russia due to its entrepreneurial approach. The company has adopted the freewheeling approach and unusual leadership styles through the distinctive styles of management.

GROUPE DANONE comes into existence by the merger of a French-Spanish company dealing with dairy products and BSN French glassmaker a firm which was created by Gervais and Antonie Danone. The company went further and diversified into production fields under the leadership of Frank, for instance, it ventures into cheese and biscuits, beer sauce and developed four major divisions which included medical nutrition, water, baby foods and dairy products. Through its international expansion, the company ended up acquiring 37 different companies and divested 34 of them during the years 2000 to 2010. Danone applied the use of joint venture extensively to develop different areas of the industry, enter new markets which made it enhance distribution capabilities and enhance local knowledge.

The Executive committee which is the top management of DANONE and the Board of Directors are the main governing bodies of the company. The company integrates all the acquired businesses through four major divisions which include communication, human resources, research, and development so as to undertake the management of the operations. Decentralization forms the management style for this company, through this approach, DANONE is able to align its products and brands with the characteristics of the local market. This style of management makes the company be quicker and effective in terms of delivery and launching of new products compared to its competitors. Teamwork, learning, and networking are the major approaches that this company puts more emphasis.

The company has adopted a management system that is informal, through this system, the company is able to support lateral communication, problem-solving and decentralization. DANONE has two research centers where it conducts research and development exercises. Humanism, Proximity, Enthusiasm, and openness are DANONE central values. The company has programs that focus on environmental sustainability, they include the support of eco-friendly biodiversity and agriculture, packaging, water resources protection and climate change. Nature, Health, for people and all are the strategic priorities for this company.

Internal and external environment of the company

PESTLE Analysis of DANONE

Political factors

The countries that Danone plans to venture into or the one it has already established its stores are stable politically. The UK laws offer protection of companies from the takeover, moreover, the government is concerned about the obesity levels which are on a rise hence it has developed protective measures. Food safety is one of the areas that both the emerging and developed nations have strict rules in relation how food is processed and handled. Varies central governments are applying different tools that ensure that industries cut down the emissions of Green House Gases (GHG) after Kyoto protocol through subsidies, voluntary agreements, imposing taxes and regulatory pressure (Stone and Ozimeck, 2011).

Economic Factors

The company will have to cater for 1% of GDP which is the cost reducing the greenhouse gasses otherwise DANONE will find itself in problems due to its growth (Stern, 2007). However, there exist carbon trading companies that will provide DANONE with consultancy services that are focused towards the reduction of the emission of greenhouse gasses either by the dwelling or buying carbon allowances (Stone and Ozimeck, 2011) which will be cut down over a period of time. Most of the economies of developed nations are emerging from the effects of inflation as its level goes down. The rates of unemployment are reducing and the Gross Domestic Product (GDP) of many countries is on a rise.

Socio-Cultural factors

A large number of people are well informed concerning living a healthy life, they have therefore they are currently consuming products that assist in the reduction of obesity. The levels of obesity in most of the countries around the globe are on a rise due to the sedentary lifestyle. The levels of confidence and consumer spending are on a rise. Most of the children are more interested in visiting sports clubs so as to ensure that they are fit and healthy. Most of the customers sometimes go against the wishes of companies which are friendly to the environment, for instance, clients sometimes consider the companies as gimmick marketing. For example, according to (Euromonitor, 2011), there was a substitution of EU bottled water by tap water because of the perception that they cause harm to the environment.

Technological factors

Advanced technology leads to the development of better and healthier products nutritive and products for the baby. Moreover, R&S which is advanced technology that helps in the production of flavored yogurts and drinking water.

Environmental factors

The rising greenhouse gasses affect the atmospheric temperature and hence leading to water shortages and other related problems (Stern, 2007). Keeping the environment both green and clean needs the use of eco-friendly products that prevent the emission of carbon.

Legislative Factors

New laws are being enacted focusing on food safety, health, and environmental protection. For instance, bottled water in Chicago was imposed 5% tax (Swedloff, 2008). The European Union has put in place waste packaging directives at 25-45% which is supposed to be recycled.

SWOT Analysis

Strengths

Danone is a leading provider of fresh dairy products and second in the supply and production of bottled water. It comes in the second position and third positions in the world in the production and supply of both baby and medical nutrition respectively. The companys product portfolios include both international and national market leaders Aqua, Wahaha, Danone and Evian, the group's image has been enhanced by its market leadership. The company has a diversified stream of revenues both on product portfolio and geographical reach hence reduction on the risks related to doing business. Danone has strong capabilities in product innovations which are grouped into four major divisions which include; bottled water, medicinal nutrition, baby nutrition and dairy products division, this makes the company gain a competitive edge and stay ahead of its competitors (Datamonitor, 2010).

Weaknesses

Danone water division has been performing poorly, for instance, the revenues generated have been on the decline since 2006 due to the adverse trends which are continuous in developed countries like Japan, UK, France among others. The reduction of the bargaining power and revenues of Danone group is reducing due to inadequacy in the scales of operation compared to companies like PepsiCo, Nestle and Coca-Cola.

Opportunities

The beverage and food markets are experiencing growth at a high rate due to the introduction of flavors both in water and dairy products and moreover rising health concerns. The citizens of developed countries are becoming more concerned on issues related to the changing life styles and health related matters such as obesity, moreover, the working hours and single business in household have increased hence leading to a rise for parked foods. Currently, customers prefer healthy products which are fat free and natural, therefore, this provides an excellent platform for Danone to sell its products.

Threats

Danone faces competition from both smaller and bigger competitors such as Kraft Foods and Nestle while Camina and Dean Food Group are the smaller competitors that are focusing on markets and product lines. The large competitors have massive resources which are devote promotion, selling and sourcing which in the long run might affect company profit margins and markets. The European market is flooded by private brands, they account 45% sales, moreover, some consumers in Europe opt for private labeled food which might threaten Danone market. There is the subjection of extensive regulations by both local and international authorities on beverages and food segments through quality control, hygiene and taxes among others. Therefore, the frequent regulation changes a cross the world may significantly affect the companys business. Some of the Danones products face seasonal demands, for instance, during summer the beverages are on its peak while packaged water is on a low demand in cold temperature areas.

Market Situation, segmentation and market share of Danone in the beverage industry

Danone is an international supplier of bottled water, health foods, baby foods and dairy products in his 16 years tenure. Previously the company was involved in selling glass containers in Spain, Italy, and France before diversifying into beverage and food. However, Danone seeks to expand its business into the US, Brazil, Russia, Indonesia and Mexico, as this country offer a large market for both beverages and food products. The demands for healthier eating and dairy products are on a rise in emerging economies where there is the need for nutrition.

By 2012, the company four divisions that it had specialized, 60% of its total sales come from the fresh dairy products which accounted for a 27% international market share. Its second division is focused on water and the company is considered as the second supplier of bottled water globally. The division of water was formed through the combination of Vovic and Evian which are among the international brands with local brands such as Aqua, Mizone, and Bonafont. The company has formed baby nutrition products through superior nutrition and infant formulas. DANONE acquired Numico in 2007 hence making this company a leading supplier of Medical Nutrition in the rest of Europe.

In 2010, the companys net sales had grown from 7933 million Euros in 2006 to 9732 million Euros from its dairy products. However, there was a decline in the sales of bottled water from 3942 million Euros in 2006 to 2868 million Euros in 2010. However, there is a tremendous growth in the sales of baby nutrition products as they increased from 809 million Euros in 2006 to 3355 million Euros in 2010. Moreover, the same case is experienced in the line of medical nutrition. France was displaced by Russia as one of the largest international markets for the company after merging Unimilik in the year 2011.

Using the Ansoffs matrix, determine which growth opportunities are more viable and appropriate for the company

The Ansoffs Growth m...