Bidvest Corporate strategy Essay

1. Executive SummaryBidvest is a southmost Africa-based distri howeverion service and trading assembly line and the largest foodservice stock outside North the States. The group is ready in freight management, outsourced go, industrial and commercial reapings and services, printing, packaging plosive speech sounds, stati integrityry, office products, corporal travel and automotive retailing. Bidvest is listed on the Johannesburg Stock Exchange, with over 105,000 employees on quatern continents. http//en.wikipedia.org/wiki/Bidvest_ free radical .The group is similarly passing debt-averse a position it is adequate to(p) to verify through its ability to generate cash. This assignment first of every provides an introduction into who is Bidvest and provides a across-the-board and critical evaluation of Bidvest dodging.The group single-valued functiond fire that evaluated Bidvest started with cozy uping the key success reckons of Bidvest. Secondly we used the two ri valrousness rides, firstly the generic transaction strategies which be also supported by door guard for mathematical use in adoption to gain competitory good model and Porters ball field model. From investor perspective Bidvest sh ars ar in truth appealing for their stability and or harvesting and for allone who is in the market for a job, they forget non go wrong with Bidvest. Lastly any minute innovative struggling caller-out out t here who would like to pass on like to be on the shoulders of a giant they should not olfaction elsewhere.2. IntroductionThe Bidvest Group started as an idea to raise swell to acquire, delineate and develop infra playing services caper by Brian Joffe. Joffe consolidated what was a super fragmented support services sector and weed the enabling working conditions for hatful to enjoy their work and flourish. It started with the acquisition of Chipkins Catering Supplies in 1988 Bidvest was founded by Mervyn 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 transform listing. The next 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 range of companies in divers(a) sectors from hygiene services to sports marketing to logistics to stationery. The groups inter study amplification began in 1995 when it acquired 50.1% of Australian Stock exchange listed Manettas. This barter was renamed to Bidvest Australia. Bidvest has a depressed bodily office to give strategic luffion, postdate strategic product opportunities, support divisions, monitor public presentation, and maintain the entrepreneurial spirit and a red-tape submit environment. http//en.wikipedia.org/wiki/Bidvest_GroupBusiness_model 8 gilded 2013Bidvest surely operates cardinal divisions Bidvest confederation Africa, Bidves t Foodservice, Bidvest Namibia, and Bidvest Corporate. Its descentes span four continents namely Africa, atomic number 63, Asia, and Australasia. In South Africa Bidvest has a footprint in a variety of about ten industries and point on food services in the inter field of study market. The group is active in freight management, outsourced services, industrial and commercial products and services, printing, packaging closures, stationery, office products, integrated travel and automotive retailing. 3. Bidvest backbone Success FactorsTo critically evaluate Bidvest Corporate Strategy we will highlight some of their key success factors a) leading of original creator Leadership of the original creator, Brian Joffe is one of the key contri onlyors to the success of Bidvest. His dreams are inherited the representation Bidvest operates. b) Decentralised corporate management approachBidvest pursues a decentralized vexation model where local short letteres are autonomous and local man agement extend close to their personal line of credites, industries and customers. It is people-driven and talent retention is one of its key strategic objectives. disdain its decentralization business model, it has a common culture of information and get laid share-out across its divisions. It thrives on locally focused businesses and their empowered theatre directors approach and its businesses are often effort leaders. In the South Africa market, the support for local small businesses is a priority. The Bidvests corporate stub adds value by identifying opportunities and implementing Bidvests alter entrepreneurial business model. Bidvest steadfastly believe in non-interference with individual business expertise/management. Others may hypothecate decentralisation is not always a good thing but Bidvest is an world(prenominal) make-up with no standardized product/service for orbicular markets.The succeeding(a) are receiptss of decentralisation Distribution of burden of top executive decentalisation enables its executives to share his burden with others at move levels because here place is delegated. The top executive is relieved of some burden and concentrates his activities to think for the afterlife of the organization. This is definitely applicable to Bidvest Corporate where the Top Management focuses on the association 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 representation of authority. Decentralisation servicings to increase employees morale because it involves delegation. The employees are motivated to work. Greater cogency and output Decentralisation gives emphasis on care, caution and enthusiastic approach to the work which in turn endings in increased efficiency and output.This is likely because it involves delegation of authority and responsibility. Diversification of Activities Decentralisation helps in variegation of activities. It crests more than than(prenominal) employment opportunities because raw(a) managers are to be entrusted with sassy assignments. Better Co-ordination The respective(a) operations and activities are coordinated in a decentralised amaze up. Maintenance of Secrecy Decentralisation enables to maintain secrecy without much address and unnecessary trouble. Facilitate outcomeive jibe and quick decision Decentralisation enables to measure the work according to standard easily and quickly. This facilitate winning up quick decision. http//www.preservearticles.com/201101143290/decentralization-and-explain-its- wagess-and-dis prefers.html/ eighth opulent 2013c) Business acquisition modelIt is argued that at the time when corporate giants were unbundling to focus on their total competencies, Bidvest took the confrontation direction by acquiring different businesses in diverse markets under its fold, albeit with a lean central corporate stru cture supporting all its divisions. www.moneyweb.co.za/ 8th fantastic 2013 One of the tactics Bidvest applies is to ensure that it owns 100% of just about all its underlying companies and keeping the original entrepreneur in bear down on of the purchased business/entity. This allows Bidvest to provide business, financing and strategic support to grow these firms to levels they could not cook 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 entrepreneurshipAccording to business dictionary, entrepreneurship loafer be defined as the capacity and willingness to develop, organize and manage a business threaten along with any of its risk in recite to make a take in. www.businesdictonary.com/ 8th August 2013. Because of the strong entrepreneurial flair in Bidvest, it has been a driving force that has fostered evolution in a variety of sect ors, creating the Group as we know it today.Clear vision about the way fore has become essential. e) Healthy organizational culture a diversified product/service offerings Bidvest with its diverse businesses, create the usefulness of collective diverse resources, capabilities and alliances, respectively, which it uses to leverage its overall performance as a group. f) Adding value by build a reputation for quality reliability and origin In a price-sensitive environment the altercate, common to all Bidvests businesses, is to add value by building a reputation for quality, reliability and innovation. Market share festering and margin management were fostered by range extension, range specialisation and refreshful product introductions that anticipated the lifestyle look ats 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 more industries and as well as the spheric arena. h) Bidvests philosophy is one of transparency, accountability, integrity, excellence and innovation Bidvest is consistently searching for newer and intermit innovations to match consumer hires. i) Product innovationSales growth at Bidvests is underpinned by organic growth, acquisitions, and product innovation and range extensions. j) Strategic InnovationTo become economies of overcome, a centralised sourcing operation was established, Bidvest Procurement Company (BPC). Early visualize at BPC was highly encouraging. The new business is centred in Hong Kong and Shanghai, but will ultimately 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 hold device. Close watch is maintained on handheld scanning technology for new business.4. Corporate and Business strategy give up (Grant 201119) see strategy in two dimensions by making a distinction between corporate strategy and business strategy. He defines corporate strategy as the scope of the firm in relation to the markets and industries in which it competes (where to compete). In this area the firm can make five ingrained strategic prizes variegation, vertical integration, acquisitions, new ventures, and allocation of resources between the different businesses of the company.He push defines business strategy as the function of how the firm competes inside a particular industry and market (how to compete) this is where the firms competitive advantage over rivals comes in. The in a higher place two strategy dimensions, are ordinarily reflected in most organisations organizational structure where the executive level focus on the scope, where to compete and divisional managers focus on the how to compete at heart particular industries. (Grant 201119).5. Porters Diamond of National Competitive advantage Further to the key success factors higher up we wil l also make up Porters diamond shaped diagram as a basis of a framework to illustrate the determinants of bailiwick advantage. The diamond represents the study 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 occasiond and not inherited. His view differs from the traditional economic thinking which focuses comparative advantage. comparative degree advantage refers to things like availability of basic factors of production, like cheap ride or energy, or natural resources. On the other hand competitive advantage is created. Sustained industrial growth has hardly ever been build on inherited factors. Sustained industrial growth has been the outcome of interlinked fa ctors and activities. The following are Porters four interlinked factorsi. Business / Company strategies, structures and disceptationAccording to Porter despite all differences and national peculiarities one lineament shared by competitive economies is that there is sharp competition among national firms. In a static perspective, national champions may enjoy advantages of scale but the real world is dominated by dynamic conditions, and here it is direct competition that impels firms to work for increases in productivity and innovation here, unidentify 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 stre tch markers despite economic downturn.Competitive advantageMichael Porter identified two basic sources of competitive advantage damage advantage and differentiation advantage. A company has be advantage when it is able to deliver the akin product/service turn a profits as competitors but at a lower equal. 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 probable 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 premium or higher prices. Porter further recognises four generic business strategies for possible adoption to gain competitive adv antage these strategies relate to (1) scope (the outcome 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 pedigree of competitive advantage (www.tutor2u.net/ 8 August 2013)Differentiation leading 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 developing economies, both nationally and supranationally. 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 fitted market share to gain. As a group they achieved their growth target irrespective of the prevailing economic downturn. They further privation to multi-currency earnings and sharing of resources and best practices across all businesses in the group. ii. Existence or need of related and supporting industriesSpatial proximity of upstream or downstream industries facilitates the exchange of information and promotes a continuous exchange of ideas and innovations. On the one hand, he points out that even upstream industry should in no case be sheltered from international competition and he notes on the other hand that when certain 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 outside/national market is based on the following ternion main pillars namely, (1) acceptable levels of infrastructure tuition, (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 seven-fold national markets rather than in a single global space. Bidvest in the main 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 view that Bidvest should consider that their earnings be in US doll ars in foreign 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 portion or type of business. Its foodservice offerings and focus on developing economies, takes advantage of the urbanisation paths of these economies. It however, stiff 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 facing 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 learned workforce, infrastructure is generally well developed and the popula tion is sizeable. thitherfore, policy environment is a critical consideration for Bidvest in its international business strategy. eastern 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 scrimping (Brazil) has overtaken the UK as the worlds sixth largest economy and this is an indication of growing 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 triple-crown recent listing fu rther enhances its presence in the region. iv. Managing global organisationsManaging an international business is different from managing a domestic business for at least(prenominal) four reasons ( hillock 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 deep down 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 in to other products and/or markets by through internal or external development. Hill describes variegation as a conundrum/challenge or puzzle, because a strategic choice/quest to enter new markets has more potential value destruction yet, 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 efficiency/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. Efficiency gains, in the situation where a company has underutilized resources and competences that it cannot effectively clo se or sell, it makes business sense to use the resources and competences by diversifying into a new product or service activity. b. change magnitude 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. reaching corporate parenting capabilities into markets and products d. Responding to challenging market declinese. Spreading riskAdvantages of diversification as a strategic choice in relation to Bidvest a. Take advantage of existing expertise, friendship and resources in the company when expanding into new activities. This may conduce 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 bollock in one basket d. Control of inputs, lea ding to continuity and amend quality. e. Control markets by guaranteeing sales and distribution. This can arise through a combination of linkages in the value chain. f. Provide movement away 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. Cross subsidizing of loss business may take too long to be turned well-nigh while canabalising the revenue stream. iii. May result in slowing growth in its core business due 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 nati onal boundaries may result in the organization having to deal with varying intricacies of the semipolitical 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. lead-in to 2010 Soccer World cup South Africa provided a lot of capital infrastructure which is our vie w Bidvest benefited from. These provisions can in turn help or hinder 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 deliver the involvement of Korea Telecoms in Telkom SA. South African encourages an environment which is conducive to innovation to stimulate 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 and then comparative advantage. http//www.franteractive.net/Porter-Diamond.html 8 March 2013 Here, disadvantages in general factor endowments need not necessarily prove disadvantageous, and they can even stimulate the development of scrap. 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, scarcely labor and raw materials) can force firms to behave innovatively. This of course presupposes that despotic 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 old appointments were recruited from within the business. Thanks to Bidvest Academy designed to instill the culture of enigma solving and implementation. We agree 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 baffling to challenge. The group is also highly debt-averse. It is because of this position that Bidvesst 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 always getting shorter and shorter and the emerging economic giants from and in China and India. The challenge we approach 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 thereof 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 diversified products and or services to the market. On the other hand the size of Bidv est classifies it as a conglomerate and may need to be looked.Business analysts are increasingly questioning the size of the operation. umteen 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. fibre1. Robert M Grant. 2010. 7th edition A John Wiley & Sons, Ltd, Publication coeval Corporate Strategy Text and Cases West Sussex, United Kingdom 2. Hill C.W.L. 2012. 7th Edition. Global Business Today, McGraw-Hill Companies, Inc 3. www.bidvest.co.za2. http//www .businessdictionary.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