Yeo Valley is a family-owned and dairy farming company that is popular for its production of organic yoghurts. The company was founded in 1961, and it is based in the village of Blagdon, Bristol, United Kingdom. The founders of the firm are Roger Mead and Mary Mead. However, the company did not start with producing organic products. Around 1996, it decided to expand its range after being approached by several dairy farmers who were willing to supply organic milk, which is one of the main ingredients in the production of organic yoghurt, to the firm. One of the reasons for the production of organic yoghurt was the high demand for it. However, the growth of the company was not as fast as expected. The supply for organic milk was low, and the company was forced to try and convince more farmers to convert from producing regular milk to organic milk. The company provides its farmers with long-term contracts to enable them to make enough money to expand their growth in the organic sector (Baglee et al. 2013, p. 291). Yeo Valley usually sets an annual fair price for the raw material (organic milk) to enable the farmers to make profits which in turn encourages more farmers to convert to organic. Due to the coming of Brexit, the company is no longer certain about the UK market, and it is considering expanding into the international arena. The paper will evaluate internationalisation strategy management for Yeo Valley.
The justification for the choice of product
The Yeo Valley organic yoghurts are probiotic and “bio life” which means that they contain good bacteria that keep the digestive system in good condition (Granato et al. 2010, p.462). The livestock kept for the production of organic milk are usually given access to the outdoors, and they only eat organic feeds. Organic feeds are crops that are grown without the incorporation of sewage sludge-based fertilisers, petroleum-based fertilisers, bioengineered genes, and synthetic pesticides. All this is to ensure that the product is safe for a whole family’s consumption (Lairon 2011, p.19). Also, the animals are not given growth hormones, antibiotics, or animal by-products. The animals are kept safe from the attack of diseases through healthy diet, rotational grazing, and clean housing.
Another reason for choosing organic yoghurt is that it is a healthy snack that can be consumed by children, adults, and even pregnant women since it has minimal contamination from chemicals. Strictly organic ingredients are utilised in the manufacture of organic yoghurt. It means that only natural ingredients that have been produced according to the organic standards are used (Hjelmar 2011, p.342). For this reason, the organic yoghurt produced by Yeo Valley Company should be sold to a broader audience so that they can enjoy its health benefits. With a lot of chemically processed food in the market, people need to have access to healthier food to reduce the cases of lifestyle diseases like cancer that are on the rise. Many people have cancer, and the spread of this disease can be reduced by eating healthy.
The SWOT analysis of Yeo Valley Dairy Farming Company
Strengths
Yeo Valley Company is a family-owned firm, and it specialises in farming and dairy processing business. It is popular in the United Kingdom, and its products are mainly in the organic dairy sector. Tim Mead took over the privately-owned business in 1990 alongside his mother. Together, the two have been able to develop a strong brand in the organic range provided by Yeo Valley. The company began its production of organic yoghurt in 1993, and by 1995, it managed to introduce fruit flavoured organic yoghurt. It is clear that the firm has been making good progress over the years. It is producing more products, and it has managed to expand its organic range. For instance, in the summer of 2002, the company’s organic range had approximately 4.5 % share of all the yoghurt that had been sold in the supermarket chains. It earned it the title of being one of the largest organic brands in the United Kingdom. Also, the firm makes retailer own-brand organic yoghurts. Tim is known to possess an entrepreneurial spirit that reflects in his central philosophy that Yeo Valley is more significant than just a yoghurt producer. He implements a balanced approach to farming. A company that has excellent leadership is bound to be successful. Also, the company gets its raw materials from big farms like OMSCo.
Weaknesses
Previously, Yeo Valley produced yoghurt that was not organic. It had a few supermarket stocking the Yeo Valley products, and it was not a good sign for the business. Moreover, the CEO of the company, Tim Mead, still views the firm as more of a farm instead of a manufacturer.
Opportunity
Organic farming continues to grow in the United Kingdom. The growth is mainly driven by the government’s, farmers’, and consumers’ concern about the safety and quality of the food that is being consumed. Also, there are concerns about the possible environmental damage that results from conventional agriculture. As a result, organic farming has been preferred by a considerable population of British people and the government (Tamime et al. 2018, p.73). It is because of its low environmental pollution and health benefits. For this reason, the firm has a vast opportunity of expanding and growing both nationally and internationally.
Threats
The company receives threats from other organic companies in UK like Muller Dairy Limited and Dairy Crest Group PLC. Also, the supply of raw materials like organic milk is not at the expected level, and the company is trying to convince farmers to convert from producing regular milk to organic milk.
Macro environment analysis
International markets that the firm can tap into include the United States and China. China is mentioned because it has the highest population on in the world at approximately 1.39 billion people. For this reason, the company will have a huge population to feed and thus make more sales. Also, China has been having a lot of environmental pollution and adopting organic farming would help in the reduction of pollution caused by chemicals, fertilisers, and pesticides. However, I prefer the United States to China regarding the best international market for our company’s product. It is because the United States recorded the highest appetite for organic products with sales at about $27 billion in 2013. The company needs to consider conducting business in the United States. The fact that the United States has the highest population of consumers of organic products makes it the best option for the firm since it is assured of a market for its products once it starts operating there. In this section, the political, economic, social, technological, environmental, and legal factors regarding the United States will be analysed.
Political factor
The United States is considered the second largest democracy globally regarding population. The country elects its president and he or she rules for four years before the next elections are held. The elections are usually considered transparent and fair. Despite the recent challenges in the nation’s leadership, the country has continued to experience a stable political climate. Also, the United States has a significant influence on the political dynamics of many nations around the globe. However, the nation has been criticised for some of its interventions in some countries. The United States has been an advocate for democracy globally. With its advanced technology, good infrastructure and political stability, the United States is the best place for foreign investment.
Economic factor
Regarding nominal GDP, the United States is the largest economy in the planet. It is the country where organisations like Google, Facebook, Apple, Microsoft, Subway, McDonald’s, and Coca-Cola are leading and shaping the socio-economic discussions concerning the entire world. However, the economy of the United States was much affected by the recession in 2009. During this period, unemployment rates rose as many firms collapsed. In the last few years, several changes took place. For instance, unemployment fell in 2015, and income levels became better in 2016. However, it should be noted that labour is not cheap in the United States.
Social factor
The United States is at the third position regarding population in the world with approximately 326 million people. According to the US Census Bureau in 2017, a baby is born in every 8 seconds, and a life is lost in every 11 seconds. Also, even though the United States is not among the leading nations in the list of the ageing population, it still has a huge ageing population which may affect its labour supply. Moreover, the country is very diverse. It is estimated that by 2020 about 1 in 3 Americans will either be Latino, Asian, African or from a Native American ancestry. The health care and education systems in the United States are of excellent quality. However, health care is quite costly for many citizens. Most of the Americans are health conscious, however, their fast food culture has led to many illnesses including obesity. Even though most of the people have a liberal mindset, the nation faced racial tensions lately. Some studies state that since 1980, the socio-economic mobility in this nation has been declining.
Technological factor
The United States has the best science and technological inventions. The country has firms like Facebook, Google, Microsoft, and Apple which take care of the technological needs of the Americans and the rest of the world (Issa et al. 2010, p.78). The United States has been receptive to the incorporation of new technologies in various fields. Even though technology has reduced production cost for many firms, it has upset many citizens. Americans adapt to technological changes and innovations rapidly.
Environmental factor
The United States has a lot of diversities in its climate, wildlife, and geography. The diversity has attracted many tourists to the nation. For instance, in 2014, the United States had approximately 75 million visitors. However, the country faces extreme weather conditions. Since 1980, the nation has dealt with around 218 weather and climate calamities. Furthermore, disasters disrupt the everyday lives of citizens.
Legal factor
Each state has its legal scheme and government structure. The businesses set up in this country will have to adhere to the laws of the state where they are located. The nation treats foreigners and nationals as equals legally (Stephens et al. 2010, p. 558). Any expatriate employees should not fear to work in the United States since they will receive a fair trial in their legal systems. Also, the nation offers a robust legal system in the protection of Intellectual Property Rights.
Strategy and mode of entry into the international market
I believe that the Yeo Valley should enter the international market via merger. Merger is a strategy where two companies join and form a new one (Shortt et al. 2016, p.67). Our company can establish a new organisation with a firm like American Organic Food Company which is a wholesale food store located in Florida. The new firm that will be formed will enable our company to gain economies of scale and make more profits. Also, this mode will minimise competition between the organic foods companies and may even increase prices for the products. Also, the company will have a considerable market for its organic yoghurt in this foreign country. With the formation of a larger company when the two firms merge, their output will be increased, and the firm can be able to reduce the average costs. Consumers will be able to buy the products at a more affordable price when the average costs are minimised.
Merger will enable our firm to compete internationally. The larger firm will be able to handle threats from multinationals and even compete on an international platform. Also, it may lead to greater investment since the new company will be more profitable (Verbeke 2013, p.82). The profits made can be utilised in the financing of risky investment. It may result in the production of better quality of goods. Moreover, our company will be protected from closing. Surviving in a new market may be challenging and merging with a company that already exists in the market will help prevent our firm from possible losses.
Theoretical Framework
Michael Porter’s Diamond Model (Theory of National Competitive Advantage of Industries) explains why some companies in a particular country are internationally competitive while others are not. Such a model is vital to be discussed in this management report since our company wishes to enter an international market. Porter states that the competitive nature of any company in an international arena is based on Related and Supported Industries, Demand Conditions, Factor Conditions, Structure and Rivalry, and Firm Strategy (Smit 2010, p.21). A domestic company will continue to grow and develop if all these conditions are favourable. Other components included in this model include Chance and Government. All these components create a national environment where firms are formed and learn ways in which they can be competitive. A diagram of the model is in Appendix A.
Firm strategy, structure, and rivalry
The creation, organisation, and management of firms are dependent on the national context where the organisations operate. Its location influenced our company's strategy and structure. Also, the internal rivalry that we face from firms like Muller Dairy Limited and Dairy Crest Group PLC is essential in preparing our company to be competitive internationally since it encourages the development of unique and sustainable capabilities and strengths. An intense domestic rivalry pushes a firm to be better and maintain a competitive advantage.
Factor conditions
This component refers to the available human, capital, and natural resources. Porter states that the created factor conditions like good infrastructure, skilled labour, and scientific knowledge are of great importance to a company. A company will continue to upgrade if these skills are developed.
Demand conditions
The home demand for the product influences the success of a firm (Bakan et al. 2012, p.443). For Yeo Valley, the home demand for the organic yoghurt has been increasing over the years. Venturing into a broader market means that the company will face a lot of challenges, but it will be exposed to opportunities to improve and grow. When the local consumers have sophisticated demand conditions, a company is forced to develop and enhance the quality of goods provided. For instance, Yeo Valley was pushed to start production of organic yoghurt which it did not produce previously.
Related and Supporting Industries
The present related and supporting industries provide the foundation for the growth of a company. Companies create partnerships and alliances with other firms to help them become more competitive. Suppliers are vital in the innovation of a company, and that’s why Yeo Valley took part in the formation of an organisation that caters for the farmers’ needs and payment.
Government and Chance
The government can be a catalyst or a challenger. However, Porter does not believe that the government is a crucial supporter of firms. Governments can push and encourage firms to be more competitive. Chance reflects the possibility of external factors like natural disasters and war affecting the progress of a company.
Ansoff matrix is another model that enables businesses to develop strategic options. The diagram of the matrix is included in Appendix B. The market penetration strategy concentrates on improving the total sales of the existing products to the company’s existing market. The product development strategy focuses on providing new products to the already existing market. The market development strategy focuses on reaching a new market with the existing products (Hussain et al. 2013, p.200). The diversification strategy aims at providing new products to a new market. In our case, the type of diversification is unrelated since the company is planning to enter an international arena where it has no experience.
Challenges in an international market
One of the difficulties is physical distance. Even though the internet and technology have improved means of communication overseas, it is still not the same as being present physically. It would be hard to travel frequently from the UK to the United States to talk to prospects and distributing partners (Papadopoulos et al. 2011, p.142). Also, more costs in shipping, logistics, and freight. Another challenge is unfamiliar cultures. It is vital for the company to understand the common behaviours and culture of the Americans. The problem can be solved through merging with an existing American company which is familiar with the American culture. Also, mastering marketing is a challenge since the organisation needs to learn how to establish a customer base in the United States. Also, the company needs to be aware of tariffs and export fees for bringing in goods into the United States.
Conclusion
Yeo Valley is involved in the production of healthy food like organic yoghurt which ensures that consumers feed on food that is not contaminated with chemicals. The company is doing well in the UK, and the coming of Brexit may affect its operations in Europe. For that reason, the company should enter an international arena, preferably, the United States due to its high appetite for organic food and development. However, entering an international field comes with its challenges like physical distance, mastering marketing, unfamiliar culture, and tariff fees. All these challenges should be addressed to ensure that the company succeeds in this new market.
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Appendices
Appendix A
Porter’s Diamond Model
Appendix B
Ansoff Matrix
