Strategic Management Dell Company Case Study

Assignment Task

Introduction

Dell Company Case Study

Market Definition & Size

• Main product segment: Pc, large industry, small medium business
• Dairy Market size varies per country with New Zealand US$57.3, China US$38.1 as largest markets (Appendix 2)
• Market profitability : Avg Industry ROE and ROS is very low compared to global industries (see ROE, ROS and ROA Appendix 1 and 2)
• Production in 3 stages: dairy farming, milk processing and retail distribution
• Usually medium-long term contracts between processers, suppliers, buyers

Industry Challenges

• Dairy processor is a capital-intensive and low- margin market high raw material costs i.e. Australian dairy processer median OPS margin of 2.3% only and 45% PPE/assets
• Difference exists between A1 & A1-free variants , new segment being developed addressing customer needs (digestion)/healthier preferences.
• Consumption patterns: dairy 5% of daily nutrition for adults. Ireland, Finland, NZ and Australia as top consumers
• A2 market more attractive as BTE decrease (incl. patent expiry), likely to result in new entries

Company Intro

• Big 6’ Dairy processors being challenged by industry disruptors with new value proposition/innovation and development of new premium segment in existing commodity market
• Distribution challenges – i.e. Daigou buying in China might be regulated
• Financial growth: Market cap increased by 1300% from 2013-2017.
• Agile and growing from 2 person launch (farmer +scientist) to 161 employees in 2017
• Geo: Initially launched in NZ and AUS, both countries with high milk consumption (120l per capita each, well above global mean of xxx). Strategic geo expansion in later phase to China, US, UK
• Product: Launched basic product milk , later broadened portfolio to formula, cheese, etc.
• Partnering: In 2017, Accelerate growth by partnering with Forresta, incumbent with deeper pockets, resulting in 10% market cap increase.
• Challenge: New entry by Nestle: What to do?

Industry Analysis PC Industry

Porter’s Five Forces Framework: really competitive industry where citing Michael Dell ‘it was too late to challenge the technical standard and the dealer network.

Strategic Analysis| Dell disrupts PCs market

COST ADVANTAGE

• Logistics : Entry in new markets via JV with local processors (diversifying risk), allowing for high margins and low PPE/Asset rato vs competitors
• Market entry strategy based on speed/agility/leverage initially prevents incumbents from responding (JUDO strategy)

Benefit Advantage

• Market disruption via strategic innovation: new biochemistry technology at source of competitive advantage
• Leader in R&D : co-founded by a farmer & scientist, publications a2 Systems® know-how milk supply through customer sales
• First mover position protected by Patents/IP: introduced A2 milk earlier than competitors; Has patents on licensing, and more importantly on A2 Trademark (expiring in 2015 and 2036); initially low/no competition on trademark

Business Model Who-What-How Framework

Question

1. Explain a2MC 2017 performance, comp. advantage & sustainability

Segment

Initially adults who can, and are willing to pay for the value they get. Appealing especially to:

Health condition: Consumers with underlying digestion problems.

By choice: Health-conscious consumers and new/expecting mothers whom want to drink/p rovide their babies with ‘healthier’ milk alternative, yet not want to compromise taste of regular milk for taste of lactose-free, goat-milk In 2015 – present, appeal to wider demographic : infants to seniors

Geography

• Initially narrow geographic scope. To date Australia & New Zealandcontinues to be a2MC’s biggest market with Sales Revenue at NZ$440 million, 80% of total sales in 2017.
• During period 2014-2017, the firm has successfully expanded to China and Asia, revenues in 2017 are 30x those of 2014 (NZ$3mil in 2014 to NZ$89 in 2017), and CAGR 2014-2017 is an impressive 221%
• For the same period, a2MC expanded to UK&USA with sales of NZ$21mil in 2017, yet consistently negative EBITDA margins (-100% and worse)

Business Model| Who-What-How framework

• Explain a2MC 2017 performance, comp. advantage & sustainability

How

Internal consistency

HR hiring policy, asset-light infrastructure and long-term procurement strategy along with strong R&D focus ‘fit together’ as one system. Consistency in market strategies with similar partnerships on local levels in each operating country.

External consistency

A2mc strategy is no longer consistent with changing competitor landscape/industry challenges. Initially a2MC created the market. Although first mover advantage, larger copy cats and global brands are likely to enter the space. i.e. in 2018 10% stock price at entry of Nestle. a2MC needs to address new industry challenges and rethink components of its strategy (incl distribution via Daigou), patent pipeline and next expansions, for it to continue to be seen as INNOVATOR.

Core activities increase the intended competitive advantage

Cost & benefit advantage underpinned by capital light smart operating model and premium priced product portfolio. Fine tuning necessary to ensure continued competitive advantage in years to come.

Expand product line

Introduce new product offerings in existing markets, attracting new customers and offering cross-selling opportunities to existing consumers. Focus on nutritional choices, in line with the strat.

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