This case study raises a number of difficulties
Givaudan Flavors must devise strategies for competing with new flavor suppliers. Throughout the last three years, the firm has not faced competition when delivering its products to Tastyco. Yet, some companies, according to Susan, are eager to deliver high-quality goods and services at lower prices. This is why she is seeking Geoff's company to demonstrate its worthiness of inclusion in the Strategic Supplier Agreements (SSA). As a result, the second issue is determining how to maintain market leadership in non-carbonated and nutritional beverages. The third fact includes that of Tastyco where it seeks to improve efficiencies via cutting the supplier's costs. It means that Givaudan Flavors has to cut the prices to meet Tastyco's strategic plan of reducing the supplier costs. Furthermore, Michael Alpharo raises another concern on how to earn enough profits as a mean to pay for the increased development and innovation capabilities and henceforth become capable of paying for the investments. Additionally, there is a challenge of demonstrating that Givaudan has been creating value to Tastyco and the supplier is worth the SSA status. Geoff has to come up with other strategic alternatives that can help the company to continue making money with their customer without necessarily lowering prices like Nan Ya, Oligomer and NonObtainium as explained by Michael Alpharo. Additionally, Geoff has a significant responsibility of convincing their client's executives that they need to maintain the long term customer-supplier relationships.
Possible solutions
Solution A will include Givaudan Flavors taking an option to lower the prices of the supplies to win the SSA status and ensure that their flavors meet the conditions provided by the customer. It will involve making quality changes to some of the existing flavors and developing new ones in line with the project plans. However, there is a disagreement between Geoff and Michael Alpharo on whether to lower or seek other options. It is paramount for Geoff to convince the leader the benefits the company will gain from taking such step as opposed to the second suggestion that may be quite challenging to the organization in the long run. Solution B will necessitate the management of the company to ignore the challenge of winning the strategic supplier agreements status and discuss with Tastyco on alternative ways so that they can continue performing business together without necessarily meeting the requirements provided by Susan through the telephone call. The company can opt to focus on the provision of the technical services that will be of significance to the customer to make sure that they achieve the organization goals of profit maximization. This step will enable them to diversify the products and services portfolio.
Advantages and disadvantages of the solutions
The advantage of A is that it will allow Givaudan Flavors to gain the SSA status as opposed to the other competitors as it has been the supplier for a long time. If it provides the products and services at lower prices while at the same time they ensure there are new flavors accompanied with the refreshment of existing non-carbonated beverages, they will be sure of maintaining a long term relationship with the customers. According to Susan, if Givaudan becomes listed in the SSA status it will have the opportunity of becoming the exclusive provider of some of the flavor projects. The disadvantage of A will include depriving the company an opportunity to gain enough profits like in the past when they were offering supplies with premium prices that facilitated continuous innovation, research, and development.
The advantage of B is that Givaudan Flavors will be capable of providing other services to Tastyco which they cannot face stiff competition such as the provision of the technical services and other operations that can help the customer to provide quality as well as new product innovations at premium prices. The disadvantage of B is that they will no longer be the leading suppliers of their long-term customer and the competitors may take the chance to gain enormous market share in the long run. As a result, the company's competitiveness will start diminishing as other suppliers will overtake the services they have been providing to their customers over three years.
Choice and rationale
Solution A is the best alternative for Givaudan Flavors as it will give it an opportunity to remain the market leader in supplying the non-carbonated and nutritional beverages in the flavors industry. They will be the exclusive providers of innovative brands after being listed in the main strategic suppliers' document. It will help in creating a long lasting loyalty through value creation and satisfying the customer's needs when they raise them. As many vendors enter the market, their bargaining power will be minimal, and companies will have no other option apart from cutting down prices of their supplies. Furthermore, the vendor can shift their focus from providing products and services that may necessitate premium prices to those that their costs are relatively but still innovative and of high quality. Adjusting the prices will also save Tastyco from the possibilities of facing problems regarding quality and efficient delivery experienced by Nan Ya flavors. Givaudan Flavors should also adopt the differentiation and the cost leadership strategies in their strategic plans to ensure that they are the first choice when the customers are evaluating the bids by vendors.
Implementation of solution A
Firstly, Geoff will have to discuss the advantages of lowering the prices of the supplies with Michael Alpharo and ensure that they agree that the alternative is the best. Secondly, all the stakeholders involved should be engaged to make them aware that there are possibilities of reduction on the annual profits earned by the company. Afterward, the executives from Givaudan Flavors and Tastyco should meet and make an agreeable conclusion that Givaudan will be the exclusive provider of some project flavors as they have been partnering when it comes to research and innovation of new products. If both parties agree, Geoff and Michael should implement strategies of acquiring raw materials at lower prices. They should also make sure that they adopt new technologies in their systems that can aid in achieving low operational costs and at the same time provide high-quality products that target the global market rather than aiming at only Tastyco. Moreover, it is crucial to seek other alternative ways to build long term relations with the customer to enhance the chances of remaining the priority while selecting the vendors of the flavors. However, the prices should not be cut by more than twenty percent as opposed to the competitors.
