CASE WRITE-UP
Name: S Jayashree Roll#: 1610038
Section: - Date: 02-02-2017
Case title: Birds Eye and the UK frozen food industry
Answer 1. Various reasons for vertical integration are as below-
• Develop market potential: During 1950’s and early1960’s, the frozen food industry was in its nascent stage. There was not much infrastructural development nor was there adequate availability of raw material suppliers, distributors or retailers. The company had to create new market for itself by leveraging the available resources at hand. The farmers required help with better farming practices and investments in harvesting equipment. While the retailers, required refrigerator cabinets for storing purposes. Thus, to establish foothold …show more content…
The techniques of production required quick freezing at the appropriate time. Also, time variation between storage and distribution had to be least. These process requirements forced producers to gain control over all aspects of production.
Answer 2. Various choices made by Birds Eye at different stages of value chain is as below:
• Raw material Procurement:
Vegetables: The company signed contracts per ton by quality with farmers to source its green vegetables requirements. The company worked closely with farmers providing them with both capital and expertise. As there was no asset specificity, long term contracts worked well.
Fish: Initially fish was procured fresh from dockside auctions or it was imported. Later, contracts replaced the old auctions at fish markets. In 1965, the company bought major shares of a fishing company. This integration failed as many sellers emerged and the market became efficient
Broiler: In 1958, the company entered the broiler chicken industry. However, within few years it sold off the chicken farms. This integration failed as well.
• Refrigerator …show more content…
Its profit margins halved. In 1976, the company barely broke-even. It registered a post-tax loss in 1977.
With growth and maturity, competitions came up at each stage of value chain and hence, Bird Eye’s vertical integration and widened product mix lost its competitive advantage and it could not sustain its profitable operation.
Answer 5: Birds Eye should adopt the following:
• Reduce product mix: It should focus on its profitable product lines and stop working on unprofitable products as its putting burden on its cost structure and disrupting advertisement efforts.
• Focus on private labels: It should tie-up with supermall chains and provide goods for their private label. The market share of private labels has increased from 6% in 1970 to 21% in 1978.
• Leverage brand recognition: The company should use its brand recognition and popularity to regain its market share and improve its sales in the region.
• Decreases integration: With market becoming efficient, there is not much asset specificity and the transactions are standardized, hence Birds Eye should sell-off its procurement and distribution
Name: S Jayashree Roll#: 1610038
Section: - Date: 02-02-2017
Case title: Birds Eye and the UK frozen food industry
Answer 1. Various reasons for vertical integration are as below-
• Develop market potential: During 1950’s and early1960’s, the frozen food industry was in its nascent stage. There was not much infrastructural development nor was there adequate availability of raw material suppliers, distributors or retailers. The company had to create new market for itself by leveraging the available resources at hand. The farmers required help with better farming practices and investments in harvesting equipment. While the retailers, required refrigerator cabinets for storing purposes. Thus, to establish foothold …show more content…
The techniques of production required quick freezing at the appropriate time. Also, time variation between storage and distribution had to be least. These process requirements forced producers to gain control over all aspects of production.
Answer 2. Various choices made by Birds Eye at different stages of value chain is as below:
• Raw material Procurement:
Vegetables: The company signed contracts per ton by quality with farmers to source its green vegetables requirements. The company worked closely with farmers providing them with both capital and expertise. As there was no asset specificity, long term contracts worked well.
Fish: Initially fish was procured fresh from dockside auctions or it was imported. Later, contracts replaced the old auctions at fish markets. In 1965, the company bought major shares of a fishing company. This integration failed as many sellers emerged and the market became efficient
Broiler: In 1958, the company entered the broiler chicken industry. However, within few years it sold off the chicken farms. This integration failed as well.
• Refrigerator …show more content…
Its profit margins halved. In 1976, the company barely broke-even. It registered a post-tax loss in 1977.
With growth and maturity, competitions came up at each stage of value chain and hence, Bird Eye’s vertical integration and widened product mix lost its competitive advantage and it could not sustain its profitable operation.
Answer 5: Birds Eye should adopt the following:
• Reduce product mix: It should focus on its profitable product lines and stop working on unprofitable products as its putting burden on its cost structure and disrupting advertisement efforts.
• Focus on private labels: It should tie-up with supermall chains and provide goods for their private label. The market share of private labels has increased from 6% in 1970 to 21% in 1978.
• Leverage brand recognition: The company should use its brand recognition and popularity to regain its market share and improve its sales in the region.
• Decreases integration: With market becoming efficient, there is not much asset specificity and the transactions are standardized, hence Birds Eye should sell-off its procurement and distribution