Bidvest Corporate strategy Essay

1. Executive SummaryBidvest is a southwesterly Africa-based distri bution services and handicraft air and the largest foodservice argumentation outside North America. The mathematical group is active in freight oversight, outsourced services, industrial and mercenary convergences and services, printing, packaging closures, stationery, office carrefours, corporate travel and automotive retailing. Bidvest is listed on the Johannesburg Stock Exchange, with all over 105,000 employees on quaternion continents. http//en.wikipedia.org/wiki/Bidvest_Group .The group is also highly debt-averse a position it is qualified to maintain through with(predicate) its ability to find cash. This assignment firstly pop the questions an introduction into who is Bidvest and provides a broad and critical evaluation of Bidvest outline.The group pulmonary tuberculosisd address that evaluated Bidvest started with highlighting the key success actors of Bidvest. Secondly we exercised the b oth agonisticalness shapes, firstly the generic transmission line strategies which argon also goed by doorman for possible use in adoption to piddle hawkish usefulness model and Porters diamond model. From investor perspective Bidvest sh atomic number 18s ar very likable for their stability and or growth and for anyone who is in the market for a job, they leave not go malign with Bidvest. Lastly any depressed innovative struggling family out in that location who would like to will like to be on the shoulders of a giant they should not look elsewhere.2. IntroductionThe Bidvest Group started as an idea to raise capital to acquire, fix and develop on a lower floorperforming services stemma by Brian Joffe. Joffe consolidated what was a highly fragmented support services heavens and created the enabling transactioning conditions for people to enjoy their work and flourish. It started with the acquisition of Chipkins Catering Supplies in 1988 Bidvest was founded by Mervy n Chipkin and Brian Joffe in 1988 via an R8 million cash shell (a little over US$1 million in 2011 rands). The shell was a fast-track to a 1989 stock exchange listing. The adjoining acquisition was the purchase of Sea World frozen foods. Bidvest listed on the JSE and its appetite for acquisitions has been insatiable ever since.Since then, Bidvest acquired a freewheel of companies in diverse sectors from hygiene services to sports marketing to logistics to stationery. The groups world-wideisticist enlargement 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 corporate office to picture strategic direction, pursue strategic growth opportunities, support divisions, monitor action, and maintain the entrepreneurial spirit and a red-tape free environment. http//en.wikipedia.org/wiki/Bidvest_GroupBusiness_model 8 August 2013Bidvest currently operates four divisions Bidvest to the south Africa, Bidvest Foodservice, Bidvest Namibia, and Bidvest somatic. Its businesses span four continents namely Africa, europium, Asia, and Australasia. In South Africa Bidvest has a footprint in a variety of about ten industries and cerebrate on food services in the international market. The group is active in freight oversight, outsourced services, industrial and mer provoketile products and services, printing, packaging closures, stationery, office products, corporate travel and automotive retailing. 3. Bidvest Key Success FactorsTo critically evaluate Bidvest Corporate Strategy we will highlight some of their key success factors a) attracters of original creator Leadership of the original creator, Brian Joffe is one of the key contributors to the success of Bidvest. His dreams atomic number 18 inherited the way Bidvest operates. b) Decentralised corporate concern turn upBidvest pursues a decentralized business model where topical anaesthetic businesses are autonom ous and local management stay close to their businesses, industries and customers. It is people-driven and talent retention is one of its key strategic objectives. Despite its decentralization business model, it has a common burnish of information and experience sharing across its divisions. It thrives on locally appreciate businesses and their empowered managers approach and its businesses are practically attention leaders. In the South Africa market, the support for local small businesses is a priority. The Bidvests corporate centre adds appreciate by identifying opportunities and implementing Bidvests decentralized entrepreneurial business model. Bidvest firmly believe in non-interference with individual business expertise/management. Others may think decentralisation is not always a good thing but Bidvest is an international organization with no standardized product/service for global markets.The following are advantages of decentralisation Distribution of burden of di adem executive Decentralisation enables its executives to consider his burden with wise(prenominal)s at lower levels because here authority 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 prudence revolve aboutes on the go with strategy and not get burden down with the day to day management of activities. Increased motivation and morale The moralities of the employees are increased because of delegation of authority. Decentralisation helps to increase employees morale because it involves delegation. The employees are motivated to work. Greater competency and output Decentralisation gives emphasis on care, caution and enthusiastic approach to the work which in turn turn ups in increased efficiency and output.This is possible because it involves delegation of authority and responsibility. diversification of Activities Dec entralisation helps in diversification of activities. It crests to a greater extent employment opportunities because new managers are to be entrusted with new assignments. stop Co-ordination The various operations and activities are coordinated in a decentralised set up. Maintenance of quiet Decentralisation enables to maintain secrecy without much cost and unnecessary trouble. Facilitate effective control and readily decision Decentralisation enables to measure the work tally to standard easily and quickly. This facilitate taking up quick decision. http//www.preservearticles.com/201101143290/decentralization-and-explain-its-advantages-and-disadvantages.html/ eighth August 2013c) Business acquisition modelIt is argued that at the time when corporate giants were unbundling to guidance on their impression competencies, Bidvest took the opposite direction by acquiring distinct businesses in diverse markets under its fold, albeit with a lean central corporate structure support ing all its divisions. www.moneyweb.co.za/ 8th August 2013 genius of the tactics Bidvest applies is to ensure that it owns 100% 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 firms to levels they could not have achieved on their own. Bidvest is a highly diverse and equally highly focused group intense focus by managers steeped in their industries, drives Bidvest performance every year. d) Flair for entrepreneurship gibe to business dictionary, entrepreneurship can be defined as the capacity and willingness to develop, organize and manage a business venture along with any of its risk in order to defend a profit. www.businesdictonary.com/ 8th August 2013. Because of the strong entrepreneurial flair in Bidvest, it has been a driving force that has fostered growth in a variety of sectors, creating the Group as we know it toda y. agnize vision about the way forward has become essential. e) Healthy organizational culture a diversify product/service offerings Bidvest with its diverse 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 value by grammatical construction a reputation for quality reliability and excogitation In a price-sensitive environment the challenge, common to all Bidvests businesses, is to add value by building a reputation for quality, reliability and innovation. Market share growth and margin management were fostered by range extension, range differentiation and new product introductions that anticipated the lifestyle learns of the consumer. g) Quality of Bidvest brandThe biggest factor that leads to the success of Bidvest is the quality of its brand and slogan Proudly Bidvest. This brand has penetrated so some industries and as sound as the global arena. h ) Bidvests philosophy is one of transparency, accountability, integrity, excellence and innovation Bidvest is consistently searching for newer and violate innovations to satisfy consumer call for. i) Product innovationSales growth at Bidvests is underpinned by organic growth, acquisitions, and product innovation and range extensions. j) Strategic InnovationTo capture economies of scale, a centralised sourcing operation was established, Bidvest Procurement society (BPC). Early experience at BPC was highly encouraging. The new business is centred in Hong Kong and Shanghai, but will lastly be responsible for procurement across Asia. A new smartphone application was rolled out in Australia, New Zealand and the UK that enables customers to place an order via a take hold device. Close watch is maintained on handheld scanning technology for new business.4. Corporate and Business strategyGrant (Grant 201119) see strategy in two dimensions by making a distinction betwixt corporate strat egy and business strategy. He defines corporate strategy as the scope of the firm in telling to the markets and industries in which it competes (where to compete). In this subject sphere of influence the firm can make five fundamental strategic choices diversification, vertical integration, acquisitions, new ventures, and allocation of resources between the different businesses of the follow.He further defines business strategy as the function of how the firm competes within a particular industry and market (how to compete) this is where the firms competitive advantage over rivals comes in. The above two strategy dimensions, are usually reflected in most presidential terms organizational structure where the executive level focus on the scope, where to compete and divisional managers focus on the how to compete within particular industries. (Grant 201119).5. Porters Diamond of National Competitive advantage Further to the key success factors above we will also incorporate Por ters 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 effect of one point depends on the others and it is a self-reinforcing system.http//www.smartstudentsok.com/porters-diamond-model 8th August 2013According to Michael Porter on his work on firm-level factors (1986) and clusters of firms (1990) competitive advantage is created and not inherited. His have differs from the traditional economical thinking which focuses comparative advantage. Comparative advantage refers to things like availability of underlying factors of production, like cheap labor or energy, or natural resources. On the other hand competitive advantage is created. Sustained industrial growth has hardly ever been built on inherited factors. Sustained industrial growth has been the issuance of interlinked factors and activit ies. The following are Porters four interlinked factorsi. Business / Company strategies, structures and rivalryAccording to Porter despite all differences and national peculiarities one characteristic shared by competitive economies is that there is lemony competition among national firms. In a electrostatic perspective, national champions may enjoy advantages of scale but the real number world is dominated by dynamic conditions, and here it is direct competition that impels firms to work for increases in productivity and innovation here, anonymous competition often turns into concrete rivalries and feuds, in particular when competitors are spatially concentrated. The more localized the rivalry, the more intense. (Porter 1990, 83) This is all the more true, as its effect is to cancel 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.Competitive advantageMichael Porter identified two basic sources of competitive advantage cost advantage and differentiation advantage. A company has cost advantage when it is able to deliver the same product/service benefits as competitors but at a lower cost. On the other hand a company has differentiation 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. Cost and differentiation advantages are known as potential advantages since they describe the organizations position in the industry as a leader in either cost of differentiation.A competitive advantage is achieved by offering consumers greater value, benefits and service, which justifies bounty or higher prices. Porter further recognises four generic business strategies for possible adoption to puddle competitive advantage these strategies relate to (1) scope (the uttermost to which business activities are narrow versus broad and (2) the extent to which a business seeks to differentiate its products. The four strategies are illustrated in Figure 1.1 below.Figure 1.1 Source of competitive advantage (www.tutor2u.net/ 8 August 2013)Differentiation 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 development economies, both nationally and internationally. 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 being strong in their respective markets having sufficient market share to gain. As a group they achieved their growth target irrespective of the prevailing economic downturn. They further need to multi-currency earnings and sharing of resources and best practices across all businesses in the group. ii. Existence or lack of think and supporting industriesSpatial proximity of upstream or downstream industries facilitates the exchange of information and promotes a unbroken exchange of ideas and innovations. On the one hand, he points out that even upstream industry should in no lineament be sheltered from international competition and he notes on the other hand that when sealed upstream industries are lacking, recourse can be had to the supply available in the world market.http//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 entry into any foreign/national market is based on the following three main p illars 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 its African heritage with a strong focus on respect for diversity, as leverage in its global business approach to appreciate local conditions for its products, services and customers.The following are Bidvests uniqueness 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 rather than in a single global aloofness. Bidvest mainly 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 attend that Bidvest should consider that their earnings be in US dollars in foreig n countries. Internationally, 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. Bidvest does not show specific cheer to any geographic piece or type of business. Its foodservice offerings and focus on developing economies, takes advantage of the urbanization paths of these economies. It however, cadaver alert to other support services opportunities on a case by case basis. Bidvest has an impressive international presence which is highlighted in brief as follows Western Europe, The Eurozone is approach many challenges which according to Bidvest leadership it is greatly attributed to poor decision making and policy considerations. Despite these challenges Bidvest finds Europe an attractive region for selective investments. Its rationale is that Europe has a well-educated workforce, infrastructure is generally well developed and the commonwea lth is sizeable. Therefore, policy environment is a critical consideration for Bidvest in its international business strategy. east Europe Bidvest has recently 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).South America Bidvest entered this market by the acquisition of a controlling interest in a small Chilean foodservice operation with exciting growth prospects. According to widely published reports at the end of 2011 South Americas largest economy (Brazil) has overtaken the UK as the worlds sixth largest economy and this is an indication of developing 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 en hances its presence in the region. iv. Managing global organisationsManaging an international business is different from managing a domestic business for at least four reasons (Hill 201165) 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 governments intervention in the international trade and investment systems. 4. International business transactions involve multiple currency conversions. In view of the above research shows that Bidvest has found a solid recipe to overcome the above challenges. It is our view that Bidvests ability to succeed is its diversity in business locations and rich South African history and make up of national diversity often referred to as rainbow nation. Using Diversification as a strategyDiversification refers to a firms strategic choice to enter into other products and/or mark ets by through internal or external development. Hill describes diversification as a conundrum/challenge or puzzle, because a strategic choice/quest to enter new markets has more potential value destruction tho, it also offers growth options and the potential for expansion and to free itself of the restriction of a single industry (Hill 2011403). 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.Secondly, unrelated diversification occurs when an organisation move its present interests into unrelated markets or products / services. Basic reasons for diversification may be summarised as follows a. qualification gains, in the situation where a company has underutilized resources and competences that it cannot effectively close or sell, it makes b usiness sense to use the resources and competences by diversifying into a new product or service 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. Stretching corporate parenting capabilities into markets and products d. Responding to intriguing market declinese. Spreading riskAdvantages of diversification as a strategic choice in relation to Bidvest a. Take advantage of existing expertise, knowledge and resources in the company when expanding into new activities. This may result in transfer of skills, such as research and development knowledge and sharing of resources. b. Bidvest does not rely on single market which provides better risk control for their existence. c. Bidvest is doing well is avoiding risk by avoiding the syndrome of having all testicle in one basket d. Control of inputs, leading to continuity and improved quality. e. Control markets by guaranteeing gross sales and distribution. This can arise through a combination of linkages in the value chain. f. Provide movement out-of-door from declining activitiesDisadvantages 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 core activities with additional activities. ii. deflower subsidizing of loss business may take too long to be turned around term canabalising the revenue stream. iii. May result in slowing growth in its core business collectible to additional management cost incurred. iv. Losses may be incurred during market consolidation process resulting in some business units being subsidized by other profit making units. v. May result in negative synergies. Negative synergies should be avoided at all times. vi.Diversification through acquisition across national boundaries may result in the organization having to deal with varying intricacies of the political 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 mainly because in other countries they can be implemented 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/doc/12376024/Advantages-and-Disadvantages-of-Diversification 8th August 2013 iv. Factor conditionsGovernments control provision of roads and airports, electricity, telecommunication infrastructure including cables and wireless and education and healthcare. Leading to 2010 Soccer World cup South Africa provided a potful of capital infrastructure which is our view Bidv est benefited from. These provisions can in turn help or halter industries dependent 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.Governments 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 commove growth in industries by skilled resources and technological base. These factors are upgraded / deployed over time to meet the demand.Local disadvantages force innovations and new methods and hence comparative advantage. http//www.franteractive.net/Porter-Diamond.html 8 inch 2013 Here, disadvantages in general factor endowments need not necessarily prove disadvan tageous, and they can even stimulate the development of competitiveness. If cheap raw materials or labor are available in abundance, firms will often yield to the temptation to rely solely on these advantages, and even to put them to inefficient uses. Conversely, certain disadvantages (high real estate prices, scarce labor and raw materials) can force firms to behave innovatively. This of course presupposes that positive impulses are generated by the other factors. http//www.smartstudentsok.com/porters-diamond-model 8 March 2013 v. Demand conditionsThe 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 EvaluationBidvests corporate culture and managerial competence are also the envy of many. This was illustrated during a recent restructuring exercise, in which all the new senior appointments were recruited from within the business. Thanks to Bidvest Academy designed to instill the culture of problem solving and implementation. We chink that success behind Bidvest is driven by autonomy, entrepreneurship, decentralised businesses and management.Local 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 Bidvests 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 established such dominance and efficiency in operation that it is difficult to challenge. The group is also highly debt-averse. It is because of this position that Bidves st is able to maintain through its ability to generate cash.The biggest challenges facing Bidvest are the current world economy, regulatory 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 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 alter products and or services to the market. On the other hand the size of Bidvest classifies it as a conglomerate and may need to be looked.Business analysts are increasingly questioning the size of the operation. Many 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 governance 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.7. REFERENCE1. Robert M Grant. 2010. 7th var. A John Wiley & Sons, Ltd, Publication Contemporary Corporate Strategy Text and Cases West Sussex, United domain 2. Hill C.W.L. 2012. 7th Edition. Global Business Today, McGraw-Hill Companies, Inc 3. www.bidvest.co.za2. http//www.businessdi ctionary.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 Annual Integrated Report, 20126. www.tutor2u.net7. http//www.meso-nrw.de/toolkit/tools/tools-diamond-2.html 8 August 2013 8. www.moneyweb.co.za9. http//www.scribd.com/doc/12376024/Advantages-and-Disadvantages-of-Diversification 8th March 2013 10. http//www.franteractive.net/Porter-Diamond.html