AGD Case Study Analysis

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AGD Case Study Analysis

 

Introduction

A strategy lies in the identification process of a business’ objectives and the laying down of a clear and feasible plan of accomplishing the set goals. As such, the strategies laid down by the management of a company are highly dependent on the achievements the stakeholders want. Aceitera General Deheza (AGD) is a company founded in 1948 by an Argentinian known as Adria´n Urquı´a. The goals of Adria´n Urquı´a were clear and he strived to keep them afloat through the application of various business strategies. At first, the company begun as a small oil factory specialising in the indigenous industry, but as time passed by, circumstance and opportunities forced various changes in the business. The aim of Adria´n was to set up shop in the countryside and specialise in oil production and supply. Thus, his goals were clear and he worked diligently to attain them through various strategies. The following brief will be an elaborate report detailing means that AGD used in its growth from its inception to its successful years in the 21st century. The scope of the details will range from the business models applied in AGD to the theories and concepts related to strategic management. To increase the depth of the information in the details, the brief will explore different literature sources to add on to the analysis (Twarowska & Kąkol, 2013). The brief will also contain a detailed proposal of an international expansion strategy and the focus will be on product-market combinations, which will include market entry strategies.

Key Business Models Used by AGD

During the inception of the company, Adria´n saw it fit to specialize in the production of oil and his model was the basic strategic management. Upon the creation of the company, Adria´n ventured into a strategy that encompassed identification of opportunities and explored them with a goal of maximizing the profits. He sought to have an increased volume of production with an aim of cutting costs. In turn, the reduced costs led to increased margins, which was among the initial goals of the company. A basic strategic management model of doing business entails coining of the objectives, formulating a feasible means of attaining the goals, projecting sales, increasing the production volume and monitoring the progress. Once everything is running, the management keeps close tabs on the areas to improve in order to achieve the set goals. In the case of AGD, the company’s goals included dominating the oil industry and with time, it resolved to increase its production volumes. To achieve an increased volume of production and balance the economies of scale, Adria´n indulged high-levelled technology. In turn, logistics was optimized and production was kept as high as possible. The increased use of technology led to high volume production in the company, which was essential in the increment of margins through reduced costs. All these endeavours occurred prior to the year 1968 when the company hit a hurdle that saw its closure, but was brought back to the market later. Several factors led to its downfall, but the main players were a global increase in oilseed prices and the company’s failure in establishing a business strategy that would stand several commercial tests (Hoeffler & Keller, 2003).

At first, AGD had to restructure and formulate a new strategy that would increase its chances of acquiring increased sales. The strategy was to coin a feasible strategy before the other companies in the same industry. The target was the retail market where AGD aimed at increasing supply by using brands. Bringing new brands in the market is a feasible strategy used by several companies, both new and old. It creates opportunities to penetrate the market in an influential way. Other benefits of introducing a new brand in the retail section of an industry include enhancing the product’s recognition in the market. Based on various logistics such as packaging and advertisement, companies target to increase the chances of selling as many products as possible. Brand loyalty is yet another target aimed at by several companies and it is achieved when the product meets the demands of many clients. The target is for clients to attain a product that they would like to be associated with in their homes and other places. At this point, marketing is the key to getting the products recognized by the targeted customers. Once the niche has been identified, the company should aim at looking for the best outlets for the products. For example, supermarkets and other huge companies on the retail level are quite a preferable point of dispensing the products (Aspara, Lamberg, Laukia & Tikkanen, 2010).

Prior to 1985, and after AGD had reopened and resumed operations, it had restructured the strategy. Firstly, it improved the technology in the production process and manufactured its products in a unique way. Sequentially, the company specialised in selling bulk products that were produced using state-of-the-art technology. The essence was to capture many customers from both local and international scopes. Consequently, by 1985, AGD was a 100% focusing on international clients through exports. By this period, the only business AGD was indulging in was bulk production, which targeted international clients only (Harnish, 2010).

Concepts in Strategic Management

The period ranging from 1985 and 1999 involved uncertain economic shifts in Argentina, which highly affected the companies’ operations. At that point, different companies had to adjust their functionalities. AGD was among the first companies to take a step in adjusting their ways of operating in Argentina. In turn, this gave the company an edge over others and was soon a leading exporter of edible oils in Argentina. To escape the uncertainty of the Argentinian economy, AGD beefed up its logistics chains. The aim was to achieve cost-effectiveness in its operations in the country and around the globe.

Being a company operating on an international level, AGD had to strengthen its logistics chains. Specialising in exporting edible oils by selling bulk products to various markets in the world requires strong and functional chains of supply. As such, AGD had to have an effective channel of supplying the bulk goods around the globe. There are several merits associated with strong logistics chains. Several factors are bound to affect the supply chains, especially for companies involved in exporting goods. In this case, AGD was highly involved in exporting edible oils, which means that it was highly affected by various factors. Risk and compliance are two great factors affecting exporting companies (Moen, Bolstad, Pedersen & Bakås, 2010). The risk of sending goods over several miles away is high because of the uncertainties that exist in the transit routes. For example, shipping can be delayed or the quality compromised during the transportation process (Wang, Walker & Redmond, 2007). Therefore, the companies have to formulate means to get their goods to the customers in good shape, which guarantees acceptance by the customers. The demand on an international level is high and quality has to be maintained for a company to achieve success in the market. As such, the companies involved in exporting goods need to mind their customers’ demands. Competition is high on the international platform and companies need to identify clients, comprehend their needs and satisfy them. As much as the global market is vast, it is required for companies to comply with the rules set to control the functionality of each international company. The cultural differences and varying market logistics can be the root of problems for companies striving to comply with the varying specifics. The bigger the market, the larger the variations and compliance requirements that companies need to follow. At the same time, they need to watch their moves to ensure that they do not compromise their quality and supply quantity.

As aforementioned, companies operating on a global scale do it with the help of different chains of supply. Therefore, the management has to establish a supply chain execution convergence strategy aimed at helping the company achieve its goals. Orchestrating and synchronizing the involved processes of delivering the goods from the production plants to the global clients. The basic processes involved include transportation and warehousing after production. All the processes are to be executed meticulously to maintain quality and quantity of all the goods produced. A company should also recognize the need to keep everything running as per the stakeholders’ expectations. Converging and operating all the supply chain logistics is essential in keeping the management in harmony with the market demands. Cost-effectiveness is essential in a company because several organisations aim at increasing revenues and margins. Controlling the entire organisation’s supply chain logistics offers the opportunity to avoid cases of unwanted costs and wastage (Cheng, 2011).

In 1995, AGD pointed out at an area of concern that aimed at revolutionising the management of the company. The company took the initiative to check into its governance structure with the aim of improving it. A company’s governance is the engine propelling it to success and it has to be adjusted accordingly to keep its plan afloat. The management is the main source of decisions made in a company. As such, the management has to be properly structured to handle the leadership role in the company in an essential way. The main functionality of the company’s management team is to delegate authority in the establishment. The management is formed with the aim of leading the company (Oh & Contractor, 2013. The leaders are expected to make crucial decisions aimed at steering the company to success. Therefore, the formation of the management team is crucial and is often composed of directors who are the pioneers of the company. On the contrary, the company have its founders as stakeholders and employee directors. Thus, the board of directors leads the company and makes every crucial decision pertaining to the functionality of all the sectors in the establishment.

Once a company has been formed and its objective established, it is the duty of the management to formulate feasible policies. Following the formulation of the policies, it is the management’s duty to work and control every individual in the company. Among the main agendas of management is to i.............


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