Strategic Business Plan: Enerji Foods and Beverages

Introduction

A joint venture is one of the ways companies expand their operations abroad. It constitutes two companies entering into a contract to create a separate entity on a 50/50 basis. While such business arrangements are complex, they are critical to multinational corporations. It allows them to expand their operations into areas in which they may lack competitive advantage. Energie Foods and Beverages is a joint venture between one of the global soft drinks beverages, Coca-Cola, and Middle East dairy conglomerates. The paper describes the joint venture’s strategic plan, including its competitive advantage, PESTLE, and SWOT analysis, and provides recommendations to inform future decision-making.

Company Profile

Enerji Foods & Beverages (EFB) is a joint venture between US Coca-Cola and Saudi Arabia’s Almarai, focusing on the exclusive organic foods and energy drinks market. The Coca-Cola Company has expertise in the manufacture and distribution of soft drinks. On its part, Almarai specializes in dairy and baked products. The two companies hold a significant portion of their respective market. Therefore, their joint venture will benefit from their long experience in different regions to penetrate the market. Also, joint ventures help businesses to expand in areas where they lack a competitive advantage (Veiga & Franco, 2015). The Joint Venture will operate in the soft drinks and food industry. It will specialize in organic products and energy drinks, a market the two mother companies have yet to exploit fully. EFB will be headquartered in Saudi Arabia, from where it will expand to the other countries in the region. Therefore, its primary market will be Saudi Arabia.

Strategic Plan

Analysis of Competitive Advantage

For a company to thrive amidst stiff competitive pressures, it must possess some uniqueness. The unique qualities that enable a company to succeed and gain market share constitute its competitive advantage (Kotler & Armstrong, 2014). They make the firm superior to its competitors, attracting and retaining customers. Firms can exhibit a competitive advantage in three areas (Lee, Wu, & Jong, 2022). They include cost, differentiation, and specialization. Some firms can produce and deliver their goods and services to their customers at low prices. Low-cost leadership can be a highly effective move and naturally attracts many customers to purchase products at a discount. However, it is rarely sustainable, as slashing prices reduces the company’s overall income. The second source of competitive advantage is differentiation. It involves creating unique products from competitors. The third strategy to gain competitive advantage is specialization, which consists of providing products to a narrow but highly valued customer segment in the market. EFB will be a highly competitive firm on differentiation and specialization.

EFB is focused on producing unique products using only organic products. The company will deliver organically sourced products to customers in Saudi Arabia and the neighboring countries. Research indicates many people are willing to pay above-market rates for organically sourced foods (Cote, 2020). In other words, organically sourced foods increase consumers’ willingness to pay (WTP) for a company’s products. Also, there is a general trend toward organically produced products. The second EFB advantage is specialization. The company aims to produce an organically sourced energy drink. The drink will be specialized and premium-priced for a small market segment. Saudi Arabia, the Gulf, and the MENA regions have cultures characterized by high power distance (Hofstede, Hofstede, & Minkov, 2010). Leaders have the desire to differentiate themselves from their subordinates. The company’s product will be tailored to appeal to only the leaders and the upper social echelons. Incidentally, the leaders can pay premium prices for the organically produced energy products developed by the company.

PESTLE Analysis

PESTLE analysis is a tool that enables the owner to understand the factors in the business’s external environment and their impact on its operations and profitability. The situational factors shape a business and determine its success in the marketplace.

Political

Political factors are a critical facet of a business environment. The politics of a country can either facilitate or hinder business operations. The political system in Saudi Arabia is monarchical, which is stable. The stability provides businesses with a conducive environment for operations. Stability enables the business management to make long-term plans and commitments.

Economic Factors

Saudi Arabia is one of the countries with the fastest rate of economic development globally. The economic development is buoyed by the high crude oil and gas prices, which are the primary export products in the country. The rapid economic development increases people’s disposable income, enhancing their purchasing power. Saudis will be able to support the business through their purchases.

Social Factors

Social factors impacting a business include change of taste and trends. There is a global shift toward whole foods and organically sourced products. In Saudi Arabia, more people are realizing organically produced products’ health benefits. People who can afford the premium prices charged for organically sourced foods would never hesitate to purchase EFB products. The social changes are creating a ready market for the company’s products.

Technology

Saudi Arabia is one of the most technologically advanced countries globally. The use of internet-enabled communication devices such as smartphones in the country is high, and online businesses are booming. The high level of information technology use will benefit the company by facilitating easy communication with the customers and enhancing brand equity. Also, it will allow EFB to sell its products online, eliminating the intermediaries and lowering the production cost. It can share the savings with the customers through lower prices.

Legal Factors

The legal environment in Saudi Arabia might challenge the company, especially regarding the energy drink. The government has passed strict regulations for the energy drink sector. However, the joint venture will have the resources to comply with all the country’s legal requirements.

Environment

The business surroundings have a significant influence on its operations and profitability. The business environment in a country includes the weather conditions, geographical locations, terrain, and global climate issues. The Saudi Arabian environment is conducive to business operations.

6-Month Outline

• The first month will be full of activities, especially on the human resources front. The two organizations will agree on the EFB-neutral CEO who will manage the new outfit. They will also agree on the managers to be seconded to the JV from both companies to start its operations and align its goals to those of the parent firms. The managers will have the choice to return to their parent companies or remain as permanent employees of the JV after one year. The new leadership will hire the requisite staff and start operations.
• The joint venture will launch on 15 October. It will be a grand affair broadcasted on local, international, and social media.
• The third month will deal with the commencement of full company operations after entering into a contract with suppliers and other stakeholders.
• The Fourth month will be taken up by processes for establishing the new product’s supply chain and distribution channels.
• The distribution process will roll out in the fifth month, aiming at reaching customers in all the supermarkets in the larger cities.
• In the sixth month, the JV will have stabilized, with an accelerated pace in production and distribution. The online platform will also be operational, and customers can process orders online and receive their purchases promptly within the major towns in Saudi Arabia.

SMART Goals

SMART goals are important as they allow the management to allocate time and resources appropriately. They must be specific, measurable, attainable, relevant, and time-specific (Bjerke & Renger, 2017). They must be clear and specific, as one will not provide accurate progress measures.

The EFB SMART Goals

1. EFB will distribute its products in five big cities in Saudi Arabia by 28 February 2023.
2. The company will endeavor to enhance its customer services by ensuring that we deliver 90% of our consumers’ orders within 24 hours in the five major cities.
3. The EFB will expand its regional reach by ensuring that its production and e-commerce platforms are aligned, functional, and able to deliver a product on time within the region by 31 June 2023.
4. The management team will have established operational procedures and guidelines for the joint venture within 30 days after its launch.

Summary of Startup Human Resources and Marketing Concepts

Human resources considerations will be critical in the food and beverage startup as it may mean the difference between failure and success. In a joint venture, the human resources issue will be complicated as the two parent companies will source their management (Veiga & Franco, 2015). Therefore, they must be careful about the people they place in charge or hire. Also, the new company will borrow organizational cultures from the two firms, which might complicate human resources management. The CEO must be careful as they blend the cultures to avoid creating a lot of friction, which could cause low morale, reduced productivity, and a high turnover rate.

Another challenge facing an international joint venture is the alignment of the two constituent companies’ human resources practices and policies. The problems emerge as the two countries have different cultural, legal, and operational norms. The management must be on the lookout for problems that might emerge and deal with them immediately and decisively. They must establish operational procedures and guidelines using best practices borrowed from the two organizations. The human resources department must clearly communicate the guidelines and procedures to the company’s current and future employees.

Marketing is a vital ingredient in a business’s success. Marketing involves the entire complex of satisfying a human need, from production to the final consumer. It ensures that products are available when needed and that customers know their existence (Kotler & Armstrong, 2014). For a joint venture like EFB, aggressive marketing will be essential. It must create a buzz in the industry, gaining attention from potential customers. The joint venture can access significant marketing and research & development resources from the two constituent companies. The marketing campaigns for the JV will commence with the mega launch, which will be broadcast on mass and social media. It will create a buzz within the country, leaving customers anticipating the product’s rollout.

SWOT Analysis

SWOT Analysis identifies the factors in the company’s internal and external environment that influence its operations. They can be positive or negative.

Recommendations to overcome the challenges and Threats

• Aggressive marketing- The new country will operate in a highly competitive market. The parent companies must invest significant resources to market their products. It should use mass and social media to disseminate information about the brand and its products. During the advertisement, it should distance itself from the parent companies, encouraging customers to view it as a different entity with unique products not tarnished by association with the parent firms.
• Proper alignment of the legal, cultural, and policy aspects of the two parties forming the joint venture. A joint venture faces potentially devastating risks of a conflict between the two companies as they try to influence decisions in the new firm. Also, most of the JV’s top echelon managers will be seconded from the two companies on a 50/50 basis. They have diverse backgrounds due to their affiliations with former companies and may desire to recreate their former operations in the current firm. It may result in conflicts that disrupt operations and even collapse the JVs. The first thing the CEO should do is to find a way of collapsing the two teams into one. One way to accomplish that task is by inviting all the managers from the two companies into a brainstorming session where they develop guidelines and procedures for operations in the new firm. He should also enforce the implementation of the guidelines and procedures, developing cohesion within the group.
• Lobbying the government: dealing with governments may pose a significant challenge. However, the company can invest in lobby groups dealing with the government on its behalf. They can lobby the government to lower the restrictions and regulations imposed on the energy drinks market.
• Diversification- EBF must always look for opportunities to diversify its product portfolio. Depending on a single or a few product lines is not ideal, as it exposes the company to risks if the product fails. It must find products and firms to partner with to deliver a wider product offering.

Conclusion

Joint ventures are critical vehicles in business expansion. They are complicated due to the merger of aspects of two entities with vast differences regarding their cultural, legal, and operational norms. When EFB solves the differences, it has a high potential of being a highly successful entity. It will bring significant revenue to the two parent enterprises.

References

Bjerke, M.B. & Renger, R. (2017). Being smart about writing SMART objectives. Evaluation and Program Planning, 61(1) 125-127

Cote, C. (2020). 5 sources of competitive advantage to drive growth. Harvard Business School Online. Retrieved from https://online.hbs.edu/blog/post/sources-of-competitive-advantage

Hofstede, G. H., Hofstede, G. J. and Minkov, M. (2010). Cultures and organizations. Third Edition. New York: McGraw-Hill.

Kotler, P. & Armstrong, G. (2014). Principles of marketing. Fifteenth Global Edition. Harlow: Pearson

Lee, C., Wu, C., & Jong, D. (2022). Understanding the Impact of Competitive Advantage and Core Competency on Regional Tourism Revitalization: Empirical Evidence in Taiwan. Front. Psychol., 13(1), 1-13. https://doi.org/10.3389/fpsyg.2022.922211

Veiga, P. M. & Franco, M. (2015). Alliance portfolios and firms’ business strategy: a content analysis approach. Manage. Res. Rev. 38(1), 1149–1171.