Company analysis of NUMICO

Company analysis of NUMICONUMICO came into existence in the year 1896 when Mr Martinus van der Hagen secured all(a) rights of a formula for baby milk from cows milk. His operation was based in The Hague in The Netherlands. In 20th century company changed the named to Nutricia withal in the year 1997 when company received the designation Royal then its name changed to NUMICO NV.Recent Past of NUMICOStrategic Corporate Development HistoryFor nearly 5 decades NUMICO worked with corporate strategy of trying to build themselves on only one baby increase with expressage exports. In 1946 company introduced an early(a) merchandise solely in the local food securities industry only. NUMICO for a long quantify move to disclose the new strategy after their first initial success in 19th century. Launching new product was non a brilliant idea though it was a sustainable decision. Usually companies spend millions of dollar instruction the product and this would take some years to recove r.As product development was not enough to grow in multiple folds so company make many learnednesss in different geographies. The result at the end of year 2006 was NUMICOs presence in more than 100 countries with plethora of products to snitch. Products were bifurcated among different divisions ilk clinical nutritional products went under brands such as Nutrison, peptisorb etc. Revenue and profit moulding both increased because of acquisition.Acquisitions smoke get a limited and desired level of success and to keep growing even NUMICO invested heavily in research development. Strategic alliance with industry giants, universities and governing body helped NUMICOs cause. Research development wing of NUMICO attracted the outdo and on a regular basis filed for the patents.NUMICO Acquisition strategy in 1998, 1999 2000To exploit linkages between the organisation and its environment NUMICO adopted medical checkup Platform Marketing. NUMICO moved from super merchandise shelves to practitioners clinics. Now, products for vulnerable people were prescribed by doctors. Expenses on research and development were forcing NUMICO to reach new places to recover the cost. In 1998 one-year field of study NUMICO was a multinational company focusing on the development, production and trades of nutritional medical concepts with a great value assenting.Strategy of NUMICO as per annual report of 1998 mentioned in the case study* by Eppink was as followsThe strategy of NUMICO is foc utilise on specialisation, continuing internationalisation and profitable maturement, partly by acquisitions as wll as by strategic alliances, and safeguarding the postgraduateest quality in all stages of production and services.As per the liftover in 1998, NUMICOs major revenue generating business still was infant food which was sold maximum in Western Europe which was experiencing the major falling alliance rates and an ageing population. After analysing the market NUMICO bought few European companies to expand in profitable areas.In 1999, NUMICO acquired a company bigger than them in terms of production revenue. When NUMICO bought General Nutrition Companies (GNC) of Pittsburgh (USA) it was the largest manufacturer of nutritional product in the world with a stronghold in sports-nutrition market. It was a win-win situation for both the organisations where GNC was gaining from NUMICOs research to conjure their product range NUMICO could gain from the distribution cyberspace of GNC. Press release explained the reason of this acquisition which was to pass the global market dominance.1Acquisition was on the cards for the third year as well when NUMICO snapped go against International Rexall Sundown in 2000. Un wish GNC Enrich was in the business of nutritional supplements personal care products with an in house RD department for product development. again un exchangeable GMC, Enrich was in 10 more countries with a global distribution system.Rexall Sundo wn another US based organisation was acquired by NUMICo. Rexall wish Enrich was a producer of nutritional supplements as well as consumer health products. NUMICO acquired another business which has got nothing to do with their main business engross like GMC.A press release describes the reason of acquisition which was again to get the pole position in the market.2Acquisition of new businesses far from NUMICOs main business made NUMICO its own rival because NUMICO already had the presence in the market. However, Rexall could exploit the European market because of NUMICOs distribution network present in Europe.At this point in time, NUMICO was confused in their apostrophize because two competitors (Enrich Rexall) were working under one roof and serving the same market. Strategist might dupe analysed the more competition less co-operation among the two brands. To make operation smoother and to serve their customers better NUMICO merged the Enrich Rexall in one new dissociate e ntity by the name Unicity.Strategy evaluationFrom day one and for a long period of time NUMICO operated with one product because of which they never realised their authorization as a standalone entity to grow.After not getting desired success till the end of 20th century NUMICO realised alone they sack upnot get the global position in market. At this position, they might take on done PEST analysis to judge the environment affecting them. Even SWOT could be used as a tool to know the strong areas where they can build the future empire.PEST might have shown them that they are not functional in future markets where they can grow faster than their current strong hold markets like Western Europe. PEST can cover issues from demography to social technical changes like declining birth rates to e-commerce. By applying SWOT, one can know that NUMICO eer regarded the RD as an important activity which they wont give up at any cost. Thus, they identified RD was their intensiveness where th ey can build their future.Michael Porters 5 forces theory could have also applied in this case study to know why NUMICO only adopted the acquisition route. As the case study explains NUMICO was operating in such an environment where the small players could have changed the entire game. The threat from subsisting players and new comers was massive moreover small players were taking the competition to all geographies. Hence to enhance the global position in the market NUMICO adopted the acquisition route.Acquiring GMC was a sensible move it was reducing the competition and on the other hand it was enhancing the performance but acquiring Rexall Enrich was not at all a brilliant move. Reason being, it stretches the operational efficiency because NUMICO was not in the same domain with them.*case study (Do the Harvard referencing because I am not aware of the source)1) Just the last line pack referencing from the case study.2) Press release in the case studyCurrent Strategic SituationA cquisitions in a field which was not related with their main business interest left them in a position between the pharmaceutical market and the food market. To avoid the stuck in the middle situation usually organisations adopts the Michael Porters (1998), generic strategies which is as followFigure Competitive advantageSource tutor2u.net(Accessed on 20/03/2011) woo Leadership In this strategy, organisation aims to be the lowest cost producer to gain the maximum share in the market. To achieve this position organisation military campaign the cost down through sourcing the cheapest raw material labour cost. NUMICO was not trying to achieve the cost leadership because case study shows that they were aiming for high margin business. Hence, cost leadership is not NUMICOs domain.Differentiation As the name suggests, in this strategy, organisations aim to be different from their competitors. Differentiation provides a competitive advantage to organisations which helped them to perpetr ation a premium price for their products services. If we look at NUMICO case study we will find that they started with one product due to patents they held the ground for long time. atomic number 53 product was sufficient with a patent to create the differentiation but later they acquired so many organisations which could provide them distribution network penetration in the foreign market.Acquisition which they made was not only in their own domain and at this point they started losing the gained differentiation. From super stores shelves to general practitioner prescription, move was certainly adopted to make a differentiation but due to diversified businesses it confused the distribution points. Differentiation did not pay off well because by 1998 their major revenue generator was still infant formula.Niche strategies Here the organisation function in one specific segment and try their best to become the best provider of products services. To work in this kind of strategy org anisations need to be either cost efficient or different from other players like Rolls Royce in the car market.NUMICOs acquisition exercise took them into various domains but still they tried to call themselves a Medical Platform Marketing. One chopine for medical assistance to those who are vulnerable didnt work well because of plethora of products. However, from NUMICOs perspective they focused on specialisation with profitable growth.STUCK IN THE MIDDLENUMICO got intricate in series of acquisition related unrelated to their main business interest because of which they are facing the stuck in the middle situation. To simplify the situation they tried to bring all the diversified business interests under one roof. Things are still confusing because they wanted to build on nutritional field but due to acquisitions they are working in nutritional supplements fields as well.Moreover, they acquired two competitors (Enrich Rexall) and left them in the field to compete with each other . It took some time to bring both of them under one brand name and by that time both of them did enough damage to each other.Now, NUMICO is stuck between the pharmaceutical market the food market because of their confused approach. Lot of unwise decision made which resulted in head on collusion with giants of pharmacy food business like Novartis Nestle. NUMICO always wanted to sell clinical diet foods but because of their acquisitions they are not focusing on their main stream business. NUMICO bought the US operations not to sell what they were doing before acquisition e.g. vitamins. Rather than turning them into NUMICOs regular business NUMICO started looking after their operations.First an industry expert noticed that NUMICO is facing challenges because they are not performing only in their traditionalistic markets. Company was stuck in the middle because it was facing challenges from giants minnows at the same time. New markets where they were operative due to acquisitions were spacious of small players. In addition to that threat from new entrants was massive. NUMICOs strategy needed a review before they lose the global position.Strategy reviewIn the year 2000, NUMICOs jump on of directors recognised the risks from existing strategy. NUMICO due to acquisition was not paying enough attention to their specie cow i.e. infant products and now strength of NUMICO is making them vulnerable. NUMICO is a European organisation they maintain balance sheet in euro and any PEST affect in USA operation can cause serious problem to their business figures.Operation overseas involves exchange risk as well. Last but not the least even NUMICOs board realised that they are confused in approach.NUMICO was not all stuck in the middle because organisations who face this kind of situation usually subject to a takeover or nuclear fusion reaction. Finally when NUMICOs board realised the drawback associated with the strategy they should take this opportunity to reduce or eliminate the risk.Strategy review due to certain eventsIn the year 2001, after 1 year of realisation, company saw themselves in hot waters due to economic slowdown in the USA. In addition to slowdown, demand for nutrition herbs were plummeting too with an increased competition from low price manufacturers. Its not only NUMICO which was facing the heat but the whole sector was losing the effectiveness.If NUMICO would have done the PESTEL analysis then they could have avoided this slowdown and competition because they never saw this slowdown coming into the picture. It is necessary to explore the competitive environment to develop sustainable competitive advantage.NUMICO response to eventsNUMICOs response to the situation was not at all proactive. NUMICO response was reactive that to after negative growth. CEO was asked to mind the traditional new business but not to take any other big projects. US operations gave back to back management problems to CEO which resulted in his resign ation in May 2002.New CEO bifurcated the operations in three divisions and for the first time they adopted a specific approach to tackle each brand. In other words, NUMICO changed the corporate strategy to unit level strategy to take care of each business. In the year 2002, NUMICO got speculative news from all the quarters of business and to make the situation worse exchange rate of US dollar was changing frequently against euro.Finally, NUMICO announced the sale of Rexall Sundown GNC to focus on high-growth/high-margin businesses of baby food and clinical nutrition. Both the brands increased the performance of its new owner.Strategic Direction for the futureAfter divestment, NUMICO should conceive of about the future. Company can use BCG Matrix to determine what is to be done to remaining product portfolio. NUMICO already dumped the low-growth/low-margin products, so now they can sharpen on long term value creations through developing high-growth/high margin products.Stars of N UMICONUMICOs star was infant product but due to lot of motion picture in low birth rate countries their business was declining at an alarming rate. NUMICO can utilise the some money which they received from divestment to expand in those countries where birth rate is much better than Western countries like India China. For infant products, long ago NUMICO used to command premium price because of RD patents.Cash Cow of NUMICONUMICO should turn their infant product into cash cow by offering cost leadership. After gaining the cost leadership NUMICO can go back to their golden days. To achieve the cost leadership NUMICO doesnt have to invest heavily on supply chain because they have everything which it takes to get the advantage.Dogs of NUMICONUMICO already sold the Dogs from their product portfolio now they should not repeat this mistake by taking over another non-business interest investment.Question marks of NUMICONUMICO should avoid this block by focusing on cash cows star blocks . Imagine a scenario if they dont pay much attention now on finding new markets for infant products then they might end-up in this block because western market has declined in term of birth rate and they already sold the maximum distribution points of GMC Rexall in USA. Hence, they should take actions on pressing basis to avoid question mark.Figure BCG MatrixSource www.tellingthestory.typepad.comAccessed on 20/03/2011BCG matrix can help in understanding the mistakes done in past to fit an all approach strategy for future. BCG matrix is not free from flaws but it certainly explains what to do what not to do.To bring back the growth back into the books of NUMICO they should adopt Ansoff Growth Matrix. As per Lynch (2006), the market options matrix examines the options available to the organisation from a broader strategic perspective than the simple market/product matrix (called in some texts the Ansoff Matrix).Figure Ansoff matrixSource www.cipher-sys.comAccessed on 20/03/2011As pe r Ansoff matrix, NUMICO can go for market penetration. It will be like without disturbing the companys existing range of products or services and perhaps it can attract current customers as well. Things can backfire if market penetration is mean for new customers only. For example, mobile companies offer brilliant price plans to retain the existing customer.Market penetration is smooth when the market is growing. Existing organisations with low relative market share in a booming market have little to lose but NUMICO has high relative share and if they dont attract their current as well as new customers then they might lose whatever they are holding till now.Market development using existing products could be a strategic route but for this approach they should not disturb the existing customer focus. In NUMICOs case, they should take infant products to those countries where birth rate is better than Western Europe and USA. NUMICO can slightly repackage the product then can promote to a new market segment.Product development for the existing market can be possible for NUMICO because they have their own RD centres where they can develop new concepts. NUMICO should do optimum utilisation of their all resources to counter competitive entry. NUMICOs RD centres can help them to maintain the companys stance as innovator.Diversification is not needed according to case study because they have just finished the sale of GMC Rexall. early(a) Strategic OptionsOrganic growth NUMICO should start the change from with-in and build itself from scratch and this time they should stick to the core business.Acquisitions Mergers NUMICO can acquire the rival business or merge with one of its rival from core business market to gain the lost momentum.Strategic Alliances NUMICO can make some strategic alliances with few government bodies in developing countries.Licensing NUMICO can sell their patent license or lease to its competitors to build a business from their intellectual prope rties.RecommendationsNUMICO needs to pursue a growth strategy in a structured way the methods by which the market opportunities associated with strategy options might be achieved. NUMICO should treat their RD outputs as their assets which they can sell in market to claim a tag of future business. Investors like to associate themselves with future markets because they know their money can take them to new avenues with high returns.NUMICO was a leader in RD and infant products but all was lost because of acquisitions in foreign un-related markets products. This time they should build themselves related to their core-strength. For RD, they hired PHD passed-outs but they never presented themselves as a smart organisation which they should focus this time. Current generation would like to associate themselves with smart organisations like Google Apple. NUMICO should aim for future parents who will bribe their products services.Given the amount of analysis that can potentially be unde rtaken, merger with other competitors is highly recommended. Mergers are similar to acquisitions like combining two companies. However, merger can happen in one scenario where both the parties cannot take over each other. This can be a friendly hand but still a special care will be always required. Merger should be sone before identifying the strategic issues.Mergers are never meant to lose the total influence of the company but to gain new markets new customers. None of the evidence suggests till date that merger is a value addition but neither has it suggested any failure when both partners are same in size. Merger might not a big value to NUMICO but it can enhance the performance.Although NUMICO can still grow as a stand alone business but to take their research in right path they need a right partner. Partner especially with same business interest but with more distribution points in desired locations can do wonders for NUMICO.NUMICO always had RD centres but they never capita lised on that asset perhaps a partner can take that advantage or turn it into their competitive advantage.