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About strategic management

Chapter 1 Cargill’s Background Statement Cargills Ceylon a 70% wholly owned group of listed corporation C T holdings, is one of Srilanka’s potentially leading retailing as well as food drink companies. The organization operates essentially in three sections- Retail, FMCG and Banking acquaintance via a 40 percent participant. Cargill’s is Srilanka’s leading modernized merchant with more than 40% contemporary trade market share. (CT CLSA 2018). Cargill’s trade undertakings have grown up to 351 shops spread around 25 districts as Cargill’s food City, Cargill’s Express, Cargill’s Big City hypermarket in its short span of management of 35 years. As per the (Fitchratings2017) CFC was consistently rated as one of Srilanka’s the most highly valued brands in 2017. Vision To be a global commercial model for community-friendly development. Mission Mainly serves customers in rural communities and all other key stakeholders on the grounds of the three primary industry values food with love– and further related companies. Culture Cargill’s ‘ distinct culture is firmly created in its food with love mission statement and will keep building on fundamental ideologies. it was a volatile and confronted decade ago in Srilanka with the physical aspect of shopping threatened by online retailers in many selections from food to fashion. (Lynch 2009). The requirement of retailing in big hypermarkets and department stores is appealed to increase substantially in the future in comparison with the past. At the same time, it denotes that the competitive market is also powerful in adding up to that prices have a susceptibility to decrease associated with traditional venders. Cargill’s company’s retail sector strategy is to concentration principally on major trademarks while extending the regional subsistence in order to procure the retail sector ‘s long- term growth prospects. Cargill’s food city is considering to achieve for long term sustainability by transmuting its skills and competencies vital to meet challenges. Source ( http://www.ft.lk/marketing/The-race-to-be-the-king-of-retail/54-659429 Friday, 20 July 2018) 1.2 Environmental Analysis 1.2.1Pestle Analysis The retail sector ‘s growth is now on the rise in Srilanka with a very number of fully featured news outlets transferring into a modern commercial standard format. Srilanka is at a comparatively fledgling point in the history of contemporary trade especially compared to its neighbors in South- East Asia and current modern trade is predicted to be about 15-20%, due to the fluctuating patterns of lifestyle changes in the country. Srilanka ‘s FMCG per capita spending is greater than the standard in most businesses. In the retail sector exploit this untapped potential. Unstable political conditions and government policy on consumer taxation pose a major threat to the processes of CFC. Variance in tax rates vat 11- 15 percent certainly appears to be the biggest concern to increase establishment costs and reduce the profitability Srilanka. (Vat and Nation Building 2018) government regulations on the price mechanisms have led CFC to sell at lower prices compared to standard rates. (Carter et al. 2011) along with high inflation rates has a negative effect on consumer purchasing patterns. Even though the overall economic circumstances and government policy seem to be unfavorable at times this can provide future potentials to find particular skills at regional levels and contribute to the economy in terms of job opportunities. CFC always be an innovative establishment to meet customer expectation through research and development. this create customer awareness and brand loyal to stick to their brands at the same time ensure they preserve the ecosystem by their activities (Cargills Ceylon Plc 2018 p.62) (Refer Appendix). 1.2.2 Porter’s Five Forces Analysis The paradigm of five forces provides useful insights into the influences of CFC. The retail industry it operates seems to be profitable enough and it has manufacture own -label commodities for large purchasers in the retail industry at lower margins than branded products that have proved a successful strategy. (Lynch 2009) rather than considering as rivals but closely working with suppliers of all categories of FMCG sector help them to maintain a strategic relationship result to cut the expenditure of manufacturing. Expanding the business by launching a greater number of different outlets in target areas encourages Cargill’s to benefit from the first- mover advantage and to build a solid local market standpoint even before the rivals enter the area. (Sunday times 2013) (Refer Appendix) Chapter 2 Strategic Position 2.1 Swot analysis Being the market leader in the retail industry is the biggest strength (Economy next 2018) for CFC which provide a competitive advantage over its competitors. Applying VRIO framework to CFC it has been identified with having state art logistic center, wide geographic presence and procurement of raw materials directly from the farmer sand growers are the valued sources it will gain through its competencies. . (Cargills (Ceylon) PLC, 2018 p.88). Economies of scale and positive cash flow results will allow them to make use of the prospect to reach the rural marketplace where the market is untapped and improve the current portfolio of products will permit them to compete with Keels and Airpico (Barney and Hesterly, 2015). but due to the poor customer service and limited and no parking facilities has created an unsatisfied status from the repeated customer base. since this would be a valuable resource but has become the great drawback that differentiates it from it directs rivals such as keels and airpico where they provide it to their customers. Having limited stores in rural areas will push the CFC to struggle with minor supermarket chains such as Sathosa and peer stores which will gradually represent a market share in the long run. Implementing a queue management system with a patent protection facilitate CFC overcome the weakness of poor customer service. By delivering training and development to the employees at service level will become a great opportunity to upgrade its services and make it as a unique resource. Focusing on customer behaviors, variations in macro environmental changes, purchasing patterns and supplier requirements and continues research on new market development allow CFC to face the pressures from the external environment and new competitive entrance in an effective manner. (Refer Appendix) 2.2 Capability Analysis The table Below compares the resource base with highly competitive success prerequisites.in order to create value and improve commercial viability CFC blends and uses monetary human social and natural assembled and analytical capital relationships. Strategic skills ca not be static. They need to change. (Teece 1997) argue that competitive success-based capacities can be parodied over time by competitors and become common practice in the retail sector. So, it is important that these competencies turn to be dynamic. (Kay 1993) also emphasizes that the company must be able to realize the benefits of the company’s legislative powers and skills. it is therefore essential to manage personnel and conducts for the advancement of capacity to protect against competitors. 1.systemic thinking -CFC could progress new abilities by forming acquisitions while allowing them to concentrate on competencies and skills, the main benefit will be information exchange that allows companies to react quickly to new openings and risks and to overcome relative weakness. (Goold et. al. 1994) 2.(Kotter and Heskett 1992) CFC culture can be adapted constantly as the demands of customers and workers significantly change. 3.(Raypat and Sviokla 1995) argue that the association clearly supports all activities. but it could be an added value source and thus a competitive advantage, implementing a new version of and queue management syst emetizes a visibly greater level of service. 4. it is better to concentration progress and development of skills through education and training adapting to a KM culture that supports better decision making and entrepreneurship all throughout the institution thru the proper management of human perception and understanding augmented by data that will encourage to counteract administrative flaws. Chapter 3 Strategic Objectives Objectives take the generalities of the mission and turn them into more specific commitments. 1. Expanding and focusing on Geographical coverage on rural areas and open up 25 CFC stores at North and East Province in Srilanka By 2022. 2. Introducing attractive and innovative FMCG product line by 15% by end of 2019 with Lowest possible cost. 3. Adopting a competitive pricing policy to create a new market segment by end of 2019. 4. Implement self Pos management system to improve quicker on time delivery than rivals by 2020. 5. Outsourcing Training and development team to strengthened the core competencies of the business unit to over come the HR related and other functional area issues. Chapter 4 Strategic Direction As far as concern CFC always seek assertively to increase market share and more defensively to hang on to the prevailing customers by concentrating investment in brands and brand uniqueness. And increasing consumption rate of existing users whenever possible by presenting loyalty cards and using advertising and promotion to gain dominant market share in a product. replacement of products and product extensions which are based on existing technologies and skills represent improved products for existing clients CFC has the opportunity of acquiring a new self-delivery system. Also entering into own online supply/ delivery system would bring more customer confidence and loyalty but it typically involves mastering new technologies that are unfamiliar to CFC and heavy investments. But referring to the CFCs three hold capacities and proficiencies (Chapter 3) and to avoid the threat of existing challengers and new entrants it has to focus on the increase of existing production capacity invest more in promotion and improve and concentrate on the untapped market in certain regions. (Chapter 5) forces CFC also recorded an operating profit of 2 502 million but 5.48% marginal decline from the previous year due to the increase of vat from 11% to 15% (Cargills (Ceylon) PLC, 2018 )financial year. But the previous years yield positive results compared to 2018 has considering the factors which impact on the sustainable growth of CFC the company has to select a strategic option which is based on known skills and capabilities and current resources. According to (Kilgore, 2017) the Ansoff matrix provides simple way of generating basic direction for corporate strategy. Since the company’s product line have real growth potential concentration of resources on those product lines makes sense as a strategy for growth. Business tries to find new shopper groups for its current products and services as potential customers. In other words market development is aimed at expanding into unexploited markets. These combined customer groups can already be served or not currently sold by competitors. This external growth strategy can be acquired through the horizontal integration by expanding the CFC s products into other geographic locations by acquiring by Cooperative Societies operates in Srilanka ( COOP CITY). The reason for a market development strategy is that existing loyalties may be less secure and new customers entering the market may still be searching for a most acceptable product. Moreover, greater market share implies increased power of buyers and suppliers in terms of porters 5 greater economies of scale and experience curve benefits if CFC pursuing this strategy is susceptible to changes in the growth rate or attractiveness of the retail industry in which it competes. And therefore, the strategy can become a high risk if the industry goes into recession. There is also a need to monitor competitors and ensure that any innovations do not constitute a major threat. References 1. CT CLSA Securities Pvt Ltd., (2018), Cargills (Ceylon) 3Q18 Results Update: Category Briefing, 10 Apr 2018. Available from: [http://www.ctclsa.lk/ctclsas/wp-content/uploads/2018/04/CT-CLSA-CARG-3Q18-Results-Update.pdf] Accessed: [16th December 2018.] 2. FitchRatings., (2017), Spotlight: Sri Lankan Modern Grocery Retail: Available from: [Spotlight-Sri-Lankas-modern-grocery-retail-Nov-2017]. Accessed: [ 17th December 2018]. 3. Lynch, R., (2009). Strategic management. 5th ed. Harlow: Prentice Hall. 4. Carter, C., Clegg, S., Schweitzer, J. and Kornberger, M.”,( 2011). Strategy. London: Sage Publications Ltd, pp.54-55. 5. Cargills (Ceylon) PLC, (2018). Cargills (Ceylon) PLC Annual Report 2017 | 2018. [online] p.62. [Availableat:http://www.cargillsceylon.com/InvestorRelations/downloads/annual_reports/annual_report_2017_18.pdf] [Accessed 20 Dec. 2018]. 6. Sunday times, (2013). Cargills has 45% share in food retail sector. [online] Available at: [http://www.sundaytimes.lk/131020/business-times/cargills-has-45-share-in-food-retail-sector-65957.html] [Accessed 19 Dec. 2018]. 7. Economynext, (2018). Sri Lanka’s Cargills says supermarket, bank synergies yielding results. [online]Availableat:[https://economynext.com/Sri_Lanka%E2%80%99s_Cargills_says_supermarket”,_bank_synergies_yielding_results-3-11772.html] [Accessed 20 Dec. 2018]. 8. Barney, J. and Hesterly, W.”,( 2015). Strategic Management and Competitive Advantage Concepts and Cases. London: Pearson Education. 9. Cargills (Ceylon) PLC, (2018). Cargills (Ceylon) PLC Annual Report 2017 | 2018. [online] p.88. [Availableat:[http://www.cargillsceylon.com/InvestorRelations/downloads/annual_reports/annual_report_2017_18.pdf] [Accessed 20 Dec. 2018]. 10. Kay, JA (1993). Foundations of Corporate Success, Oxford. University Press. 11. Goold”,M, Campbell, A and Alexander , M .( 1994). Corporate Level Strategy, John Wiley 12. Kotter, JP and Heskett, JL. (1992). Corporate Culture and Performance. Free Press. 13. Rayport, JF and Sviokla”,JJ (1995). Exploiting the Virtual value chain, Harvard Business Review, November- December . 14. Kilgore., D. 2017. Ansoff Matrix for Busies. Google books [Online]. Available at: https://books.google.lk/books?id=uypuswEACAAJ&dq=ansoff+matrix&hl=en&sa=X&ved=0ahUKEwiV8IXgmbzfAhXLuI8KHQVtBIYQ6AEILTAB. (Accessed: 24th December 2018). 15. Anon, 2018. Sri Lanka – VAT and NationBuilding. [online] KPMG. Available at: [https://home.kpmg.com/xx/en/home/insights/2017/02/sri-lanka-vat-and-nationbuilding-tax-proposals-enacted.html]. [Accessed 16 Dec. 2018]. 16. Anon, 2018. Cargills (Ceylon) PLC : Nutrition. [online] Cargillsceylon.com. Available at: [http://www.cargillsceylon.com/Sustainability/ResearchDevelopment.aspx] [Accessed 20 Dec. 2018]. 17. Anon, 2018. cargills ceylon plc . Our Business. [online] Cargillsceylon.com. Available at: [http://www.cargillsceylon.com/InvestorRelations/downloads/annual_reports/annual_report_2017_18.pdf] [Accessed 18 Dec. 2018]. 18.

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