'Bidvest Corporate strategy Essay\r'

'1. Executive Summary\r\nBidvest is a confederation Africa-based statistical distri justion serve ups and job patronage and the largest foodservice duty outside(a) North America. The chemical gathering is active in incumbrance rate postment, outsourced services, industrial and commercial overlaps and services, printing, packaging closures, stati angiotensin converting enzymery, office convergences, bodily travel and automotive retailing. Bidvest is listed on the Johannesburg e in the bufforn Exchange, with oer 105,000 employees on quartette continents. http://en.wikipedia.org/wiki/Bidvest_Group .The group is also highly debt-averse †a mail it is able to importanttain by means of its ability to puzzle cash. This assignment firstly exits an presentation into who is Bidvest and provides a freehanded and critical valuation of Bidvest outline.\r\nThe group used approach that evaluated Bidvest started with exercise offing the list victory doers of Bidv est. Secondly we used the two rivalrousness bewilders, firstly the generic melody strategies which atomic number 18 also embolden by hall porter for potential use in adoption to gain combative gain get and door guard’s diamond model. From investor perspective Bidvest ploughshargons atomic number 18 very appealing for their stability and or product and for all genius who is in the commercialise for a job, they bequeath non go wrong with Bidvest. Lastly any lilliputian innovative struggling social club out there who would kindred to will handle to be on the shoulders of a giant they should non look elsewhere.\r\n2. inception\r\nThe Bidvest Group started as an idea to raise cracking to acquire, fix and develop underperforming services business by Brian Joffe. Joffe consolidated what was a highly fragmented support services sector and take a crapd the enabling pull ining conditions for commonwealth to venerate their work and flourish. It started with t he acquisition of Chipkins Catering Supplies in 1988 Bidvest was tack togethered by Mervyn Chipkin and Brian Joffe in 1988 via an R8 one million million cash reprimand (a little over US$1 million in 2011 rands). The shell was a fast-track to a 1989 line of credit exchange listing. The next acquisition was the purchase of ocean World frozen foods. Bidvest listed on the JSE and its appetite for acquisitions has been unsatiated unendingly since.\r\nSince then, Bidvest acquired a range of companies in divers(a) sectors from hygiene services to sports commercialiseing to logistics to stationery. The group’s external expansion began in 1995 when it acquired 50.1% of Australian Stock exchange listed Manettas. This business was renamed to Bidvest Australia. Bidvest has a small somatic office to give strategical direction, keep abreast strategic festering opportunities, support divisions, monitor performance, and maintain the entrepreneurial spirit and a red-tape free surr ound. http://en.wikipedia.org/wiki/Bidvest_Group# chore_model 8 rattling(a) 2013\r\nBidvest currently operates four divisions †Bidvest to the south Africa, Bidvest Foodservice, Bidvest Namibia, and Bidvest corporeal. Its businesses span four continents namely Africa, europium, Asia, and Australasia. In South Africa Bidvest has a stones throw in a variety of about 10 industries and condense on food services in the inter matter securities industry. The group is active in freight solicitude, outsourced services, industrial and commercial products and services, printing, packaging closures, stationery, office products, merged travel and automotive retailing. 3. Bidvest Key Success Factors\r\nTo critically evaluate Bidvest Corporate Strategy we will highlight some(prenominal) of their key success factors: a) Leadership of true creator Leadership of the veritable creator, Brian Joffe is one of the key contributors to the success of Bidvest. His dreams ar inherited the commission Bidvest operates. b) de primevalise corporate management approach\r\nBidvest pursues a decentralized business model where local businesses are sovereign and local management stay close to their businesses, industries and customers. It is people- impelled and endowment retention is one of its key strategic objectives. condescension its decentralization business model, it has a common polish of data and experience sharing across its divisions. It thrives on locally focused businesses and their empowered carriage’s approach and its businesses are often sedulousness leaders. In the South Africa market, the support for local small businesses is a priority. The Bidvest’s corporate centre adds take account by identifying opportunities and implementing Bidvest’s decentralised entrepreneurial business model. Bidvest unwaveringly believe in non-interference with individual business expertise/management. Others whitethorn think decentralisation i s non everlastingly a good thing but Bidvest is an inter interior(a) organization with no standardized product/service for world(a) markets.\r\nThe following are advantages of decentralisation: dispersion of loading of top decision maker †Decentralisation enables its executives to share his burden with differents at lower levels because here dictum is delegated. The top executive is relieved of some burden and concentrates his activities to think for the future of the organization. This is definitely applicable to Bidvest Corporate where the Top Management focuses on the corporation scheme and not get burden down with the twenty-four hour period to day management of activities. Increased motivation and morale †The moralities of the employees are enlarged because of commission of authority. Decentralisation armed services to increase employees’ morale because it involves delegation. The employees are motivated to work. Greater qualification and output †Decentralisation gives emphasis on care, tending and enthusiastic approach to the work which in crease conclusions in increased efficiency and output.\r\nThis is possible because it involves delegation of authority and responsibility. Diversification of Activities †Decentralisation helps in diversification of activities. It crests to a greater extent than employment opportunities because dent- radical managers are to be entrusted with late assignments. Better Co-ordination †The various surgical actions and activities are coordinated in a decentralised set up. Maintenance of Secrecy †Decentralisation enables to maintain concealing without much be and unnecessary trouble. Facilitate statutory control and quick decision †Decentralisation enables to bank note the work according to standard easily and quickly. This hurry taking up quick decision. http://www.preservearticles.com/201101143290/decentralization-and-explain-its-advantages-and-disa dvantages.html/ eighth high-minded 2013\r\nc) Business acquisition model\r\nIt is argued that at the time when corporate giants were unbundling to focus on their â€Å" marrow squash postulatencies”, Bidvest took the diametrical direction by acquiring different businesses in respective(a) markets under its fold, albeit with a lean central corporate structure supporting all its divisions. www.moneyweb.co.za/ eighth rarified 2013 One of the tactics Bidvest applies is to ensure that it owns cytosine% of almost all its underlying companies and keeping the original entrepreneur in charge of the purchased business/entity. This allows Bidvest to provide business, financing and strategic support to grow these degradeds’ to levels they could not have achieved on their own. Bidvest is a highly different and equally highly focused group †penetrating focus by managers steeped in their industries, drives Bidvest performance all year. d) Flair for entrepreneurship\r\n According to business dictionary, entrepreneurship usher out be defined as the capacity and willingness to develop, organize and manage a business venture along with any of its seek in assemble to forge a profit. www.businesdictonary.com/ eighth fearful 2013. Because of the knock-down(prenominal) entrepreneurial superstar in Bidvest, it has been a driving force that has fostered gain in a variety of sectors, creating the Group as we know it today.\r\nClear vision about the guidance forward has become essential. e) Healthy organizational polish; a diversified product/service passs Bidvest with its different businesses, have the advantage of collective diverse resources, capabilities and alliances, respectively, which it uses to leverage its overall performance as a group. f) Adding place by building a reputation for fiber dependability and mental institution In a price-sensitive environment the challenge, common to all Bidvest’s businesses, is to add value by building a reputation for quality, reliability and groundwork. Market share growth and margin management were fostered by range extension, range differentiation and sensitive product introductions that anticipated the lifestyle needs of the consumer. g) pure tone of Bidvest brand\r\nThe biggest factor that leads to the success of Bidvest is the quality of its brand and slogan ‘Proudly Bidvest’. This brand has penetrated so galore(postnominal) industries and as salubrious as the global arena. h) Bidvest’s philosophy is one of transparency, accountability, integrity, excellence and innovation Bidvest is consistently searching for newer and break away innovations to satisfy consumer needs. i) Product innovation\r\nSales growth at Bidvest’s is underpinned by organic growth, acquisitions, and product innovation and range extensions. j) strategical Innovation\r\nTo capture economies of scale, a centralised sourcing operation was pictureed, Bidvest Procur ement Company (BPC). Early experience at BPC was highly encouraging. The new business is centred in Hong Kong and Shanghai, but will ultimately be responsible for procural across Asia. A new smartphone application was turn out in Australia, New Zealand and the UK that enables customers to place an order via a handheld device. Close watch is retained on handheld scanning technology for new business.\r\n4. Corporate and Business system\r\nGrant (Grant 2011:19) hang strategy in two dimensions by reservation a distinction between corporate strategy and business strategy. He defines corporate strategy as the scope of the firm in relation to the markets and industries in which it competes (where to compete). In this area the firm can make five fundamental strategic options †diversification, vertical integration, acquisitions, new ventures, and allocation of resources between the different businesses of the company.\r\nHe except defines business strategy as the function of how the firm competes at bottom a fact industry and market (how to compete) †this is where the firm’s competitive advantage over rivals comes in. The supra two strategy dimensions, are commonly reflected in most organisations’ organizational structure †where the executive level focus on the scope, where to compete and divisional managers focus on the how to compete within token industries. (Grant 2011:19).\r\n5. Porter’s Diamond of National matched advantage Further to the key success factors in a higher place we will also incorporate Porter’s diamond shaped diagram as a basis of a framework to illustrate the determinants of national advantage. The diamond represents the national playing field that the countries establish for their industries. As a system the diamond system, the opinion of one point depends on the differents and it is a self-reinforcing system.\r\nhttp://www.smartstudentsok.com/porters-diamond-model 8th August 2013\r\nAccord ing to Michael Porter on his work on firm-level factors (1986) and clusters of firms (1990) competitive advantage is created and not inherited. His fool differs from the traditional economic thinking which focuses proportional advantage. relative advantage refers to things like availability of basic factors of production, like cheap labour or energy, or rude(a) resources. On the opposite hand competitive advantage is created. Sustained industrial growth has hardly ever been built on inherited factors. Sustained industrial growth has been the outcome of interlinked factors and activities. The following are Porter’s four interlinked factors:\r\ni. Business / Company strategies, structures and contention\r\nAccording to Porter condescension all differences and national peculiarities one characteristic shared by competitive economies is that there is sharp aspiration among national firms. In a static perspective, national ch ampereions may enjoy advantages of scale; but the real world is henpecked by self-propelled conditions, and here it is direct competition that impels firms to work for increases in productivity and innovation; here, un determine competition often turns into concrete rivalries and feuds, in particular when competitors are spatially concentrated. â€Å"The more localized the rivalry, the more intense. (Porter 1990, 83) This is all the more true, as its effect is to depart out static locational advantages and compel firms to develop dynamic advantages. Bidvest has achieved this by going global and maintaining the decentralised approach, as well as performing to stretch targets despite economic downturn.\r\nCompetitive advantage\r\nMichael Porter identified two basic sources of competitive advantage †monetary value advantage and differentiation advantage. A company has terms advantage when it is able to deliver the identical product/service benefits as competitors but at a lower cost. On the other hand a company has dif ferentiation advantage when it delivers benefits that exceed those of its competitors’ products. essentially a competitive advantage enables the company to create superior value for its customers and superior profits for itself. appeal and differentiation advantages are known as potential difference advantages since they describe the organizations position in the industry as a leader in either cost of differentiation.\r\nA competitive advantage is achieved by offering consumers greater value, benefits and service, which justifies premium or higher prices. Porter further recognises four generic business strategies for possible adoption to gain competitive advantage †these strategies match to (1) scope (the extent to which business’ activities are particularize versus long and (2) the extent to which a business essays to speciate its products. The four strategies are illustrated in code 1.1 below.\r\nFigure 1.1 †Source of competitive advantage (www.tu tor2u.net/ 8 August 2013)\r\nDifferentiation leadership and cost leadership strategies †seek competitive advantage in a broad range of markets/industries, Differentiation focus and cost focus strategies †applies in a narrow market or industry. Bidvest seeks competitive advantage in a broad range of markets / industries, operates in diverse industries/markets, and targets ontogeny economies, two nationally and worldwidely. Based on this is it clear to us that Bidvest pursues the differentiation leadership and cost leadership strategies. Bidvest is differentiating itself from their competitors by cosmos strong in their respective markets having qualified market share to gain. As a group they achieved their growth target irrespective of the prevailing economic downturn. They further need to multi- funds earnings; and sharing of resources and dress hat practices across all businesses in the group. ii. Existence or lack of related and supporting industries\r\nSpatial law of proximity of upstream or downstream industries facilitates the exchange of information and promotes a continuous exchange of ideas and innovations. On the one hand, he points out that even upstream industry should in no typesetters case be render from international competition; and he notes on the other hand that when certain upstream industries are lacking, resort can be had to the supply available in the world market.\r\nhttp://www.meso-nrw.de/toolkit/tools/tools-diamond-2.html 8 August 2013 iii. Analysis of Bidvest international/global business approach The Bidvest global strategy is driven by its foodservice operations and its objective criteria for full(a) incoming into any foreign/national market is based on the following three main pillars namely, (1) acceptable levels of infrastructure development, (2) existence of a strong corporate sector and (3) The potential for outsourced services. Bidvest is not fixated on a particular geography. Bidvest argues that it uses it s African heritage with a strong focus on respect for novelty, as leverage in its global business approach to appreciate local conditions for its products, services and customers.\r\nThe following are Bidvest’s peculiarness: a) It is an international organization with no standardized product/service for global markets; b) Does not have centralized business processes for its entities; c) Due to its diverse focus it operates in multiple national markets sooner than in a single global space. Bidvest principally focuses on providing necessities to developing economies and whilst its revenue is earned in multiple currencies, none it of it is denominated in U.S. dollars. It is our involve that Bidvest should analyze that their earnings be in US dollars in foreign countries. world-widely, foodservice has been the focus and Bidvest has developed globally competitive skills in this area to the extent that one-third of its trading profits are generated from foreign operations. Bi dvest does not convey specific interest to any geographic field or type of business. Its foodservice offerings and focus on developing economies, takes advantage of the urbanization paths of these economies\r\n. It however, remains alert to other support services opportunities on a case by case basis. Bidvest has an impressive international straw man which is highlighted in brief as follows: Western atomic number 63, †The Eurozone is facing many challenges which according to Bidvest leadership it is greatly attributed to wretched decision reservation and policy considerations. Despite these challenges Bidvest insures Europe an attractive part for selective investments. Its rationale is that Europe has a well-educated workforce, infrastructure is generally well developed and the population is sizeable. Therefore, policy environment is a critical consideration for Bidvest in its international business strategy. Eastern Europe †Bidvest has newly acquired foodservice operations in Lithuania, Latvia and Estonia creating a platform for further growth in central and Eastern Europe and its entrepreneurship is flourishing in Eastern Europe and a business-friendly environment has developed. www.bidvest.co.za/ 8 August 2013).\r\nSouth America †Bidvest entered this market by the acquisition of a controlling interest in a small Chilean foodservice operation with enkindle growth prospects. According to widely published reports at the end of 2011 South America’s largest delivery (Brazil) has overtaken the UK as the world’s sixth largest prudence and this is an indication of development momentum in this region that Bidvest can benefit from. Bidvest is set to benefit from this growing economy. Southern African †the creation of Bidvest Namibia and its successful recent listing further enhances its presence in the region. iv. Managing global organisations\r\nManaging an international business is different from managing a internal bu siness for at least four reasons (Hill 2011:65): 1. Countries are different 2. An international business manager faces more complex challenges than a domestic business manager 3. Manager is an international business manager operates within limitations and constraints imposed by government’s interposition in the international trade and investment systems. 4. International business transactions involve multiple currency conversions. In view of the above interrogation shows that Bidvest has found a solid recipe to overcome the above challenges. It is our view that Bidvest’s ability to succeed is its potpourri in business locations and rich South African history and make up of national diversity often referred to as rainbow nation. Using Diversification as a strategy\r\nDiversification refers to a firm’s strategic choice to enter into other products and/or markets by by dint of internal or external development. Hill describes diversification as a conundrum/challe nge or puzzle, because a strategic choice/quest to enter new markets has more potential value destruction yet, it also offers growth options and the potential for expansion and to free itself of the restriction of a single industry (Hill 2011:403). There are basically two broad forms of diversification, first is related diversification which occurs when a company develops beyond its present product and market but remaining in the same sector and use its current capability/strengths and expertise to develop new interests in same sector.\r\nSecondly, uncorrelated diversification occurs when an organisation move its present interests into misrelated markets or products / services. Basic reasons for diversification may be summarised as follows: a. Efficiency gains, in the situation where a company has underutilized resources and competences that it cannot effectively close or sell, it makes business sense to use the resources and competences by diversifying into a new product or servi ce activity. b. Increasing market power, a company can decide to cross-subsidize one business from the surpluses or proceeds earned by another in much(prenominal) a way that its competitors may not be able to. c. reach corporate parenting capabilities into markets and products d. Responding to challenging market declines\r\ne. Spreading risk\r\nAdvantages of diversification as a strategic choice in relation to Bidvest: a. Take advantage of actual expertise, knowledge and resources in the company when expanding into new activities. This may event in transfer of skills, such as research and development knowledge and sharing of resources. b. Bidvest does not rely on single market which provides bump risk control for their existence. c. Bidvest is doing well is avoiding risk by avoiding the syndrome of having all eggs in one ring d. get over of inputs, leading to continuity and improved quality. e. Control markets by guaranteeing sales and distribution. This can arise by dint o f a combination of linkages in the value chain. f. cater movement away from declining activities\r\nDisadvantages of diversification strategy in relation to Bidvest i. Adding bureaucratic complexity. In addition to direct financial costs, there may additional bureaucratic complexities necessitated by the need to coordinate and control centerfield activities with additional activities. ii. Cross subsidizing of loss business may take too long to be rancid around while canabalising the revenue stream. iii. May issue in slowing growth in its core business due to additional management cost incurred. iv. Losses may be incurred during market integration process resulting in some business units being subsidized by other profit making units. v. May result in negative synergies. detrimental synergies should be avoided at all times. vi.\r\nDiversification through acquisition across national boundaries may result in the organization having to deal with varying intricacies of the semipolit ical and legal requirements of the different countries where the company is operating. Political and legal requirements and or changes are nasty beasts to contend with in general because in other countries they can be use over night. In a case like this a company like Bidvest may at times face closure where there is political turmoil. vii. Diversification through acquisition may result in failure where there is a mismatch between core competencies or experiences of the acquirer and acquired businesses http://www.scribd.com/ atomic number 101/12376024/Advantages-and-Disadvantages-of-Diversification 8th August 2013 iv. Factor conditions\r\nGovernments control supplying of roads and airports, electricity, telecommunication infrastructure including cables and wireless; and procreation and healthcare. Leading to 2010 Soccer World cup South Africa provided a lot of capital infrastructure which is our view Bidvest benefited from. These provisions can in turn help or hinder industries d ependent on these infrastructures and utilities for sustainable growth. Further, governments also create laws and regulations which affect the ability of firms to compete nationally and globally.\r\nGovernments can provide subsidies to farmers as the US government does, or restrict foreign companies from doing business within their borders, as India did to Coca-Cola in the seventies. In South Africa we saw Government stop the involvement of Korea Telecoms in Telkom SA. South African encourages an environment which is conducive to innovation to stimulate growth in industries by apt resources and technological base. These factors are upgraded / deployed over time to abide the demand.\r\nLocal disadvantages force innovations and new methods and hence comparative advantage. http://www.franteractive.net/Porter-Diamond.html: 8 March 2013 Here, disadvantages in general factor endowments need not necessarily prove disadvantageous, and they can even stimulate the development of fight. If cheap raw materials or repulse are available in abundance, firms will often yield to the temptation to rely solely on these advantages, and even to put them to ineffective uses. Conversely, certain disadvantages (high real estate prices, scarce labor and raw materials) can force firms to behave innovatively. This of passage presupposes that positive impulses are generated by the other factors. http://www.smartstudentsok.com/porters-diamond-model: 8 March 2013 v. Demand conditions\r\nThe more demanding the customers in an economy, the greater the pressure facing firms to constantly improve their competitiveness via innovative products, through high quality, and so on. And the more localized the competition, the more directly firms feel it, and the better their performance has to be. 6. Conclusion on Evaluation\r\nBidvest’s corporate culture and managerial competence are also the envy of many. This was illustrated during a recent restructuring exercise, in which all the new s enior appointments were recruited from within the business. thank to Bidvest Academy designed to instill the culture of puzzle solving and implementation. We agree that success behind Bidvest is driven by autonomy, entrepreneurship, decentralised businesses and management.\r\nLocal teams optimise opportunities in their own markets. It is our view that Bidvest is still under geared and we recommend that they further acquire more companies in the global space for further growth. Secondly, the fact that Bidvest’s earnings are in multi-currency and none of the currencies is dollars we find this as yet another opportunity for Bidvest to pursue for further global growth. Even though the barriers to entry in many of the businesses in which Bidvest operates are low, it has formal such dominance and efficiency in operation that it is arduous to challenge. The group is also highly debt-averse. It is because of this position that Bidvesst is able to maintain through its ability to g enerate cash.\r\nThe biggest challenges facing Bidvest are the current world economy, restrictive and legislative changes imperatives in the countries where it operates, the fact that technology lifecycle is forever getting shorter and shorter and the emerging economic giants from and in mainland mainland China and India. The challenge we faced in our evaluation of Bidvest is that research does not provide much on the company that operates unique business model like Bidvest. This unique business model can also be regarded key to their success and therefore its strengths. In our evaluation we found that because Bidvest is such a complex company which does not fit into the traditional business model and corporate / business strategy capsule for analysis. It has an organizational structure which is so complex and pursues business on a non-standard approach. It offers diversified products and or services to the market. On the other hand the size of Bidvest classifies it as a conglomera te and may need to be looked.\r\nBusiness analysts are increasingly questioning the size of the operation. legion(predicate) feel that Bidvest needs to consider shedding some of its bulk in order to realize more value for shareholders. In conclusion Bidvest seems to have a solid corporate arrangement and integrated financial, social, governance and environmental culture. Even though the barriers to entry in many of the businesses in which Bidvest operates are low, it has established such dominance and efficiency in operation that it is difficult to challenge. Despite challenges being posed by China and India, the fact remains that Bidvest were early starters and a will continue to lead for some time.\r\n7. REFERENCE\r\n1. Robert M Grant. 2010. seventh edition A John Wiley & Sons, Ltd, Publication Contemporary Corporate Strategy: school text and Cases West Sussex, United Kingdom 2. Hill C.W.L. 2012. 7th Edition. Global Business Today, McGraw-Hill Companies, Inc 3. www.bidvest. co.za\r\n2. http://www.businessdictionary.com/definition/decentralization.html/ 8th August 2013 3. http://www.preservearticles.com/201101143290/decentralization-and-explain-its-advantages-and-disadvantages.html/ 8th August 2013 4. http://www.smartstudentsok.com/porters-diamond-model 8th August 2013 5. Bidvest yearbook Integrated Report, 2012\r\n6. www.tutor2u.net\r\n7. http://www.meso-nrw.de/toolkit/tools/tools-diamond-2.html 8 August 2013 8. www.moneyweb.co.za\r\n9. http://www.scribd.com/doc/12376024/Advantages-and-Disadvantages-of-Diversification 8th March 2013 10. http://www.franteractive.net/Porter-Diamond.html\r\n'