Company analysis of NUMICO

Comp each analytic thinking of NUMICONUMICO came into existence in the category 1896 when Mr Martinus train der Hagen secured whole rights of a formula for infant milk from cows milk. His action was based in The Hague in The Netherlands. In 20th century corporation changed the keyd to Nutricia nevertheless in the year 1997 when come with received the designation regal and so its name changed to NUMICO NV.Recent Past of NUMICO st prisegical Corporate emergence HistoryFor nearly 5 decades NUMICO worked with corporate dodging of attempt to strain themselves on only unitary fuck up increase with limited exports. In 1946 company introduced a nonher overlap hardly in the local grocery store only. NUMICO for a considerable time tried to develop the b ar-ass scheme after their first initial success in 19th century. set up sunrise(prenominal) harvest-festival was non a brilliant idea though it was a sustainable decision. Usually companies spend millions of dollar developing the product and this would consume some years to re expand.As product evolution was non enough to grow in multiple folds so company do many attainments in disparate geographies. The result at the end of year 2006 was NUMICOs presence in more than 100 countries with plethora of products to sell. Products were bifurcated among different divisions same clinical nutritional products went under brands much(prenominal) as Nutrison, peptisorb etc. Revenue and profit rim both(prenominal)(prenominal) change magnitude be present a leak of achievement.Acquisitions dismiss bind a limited and desired level of success and to keep increment even NUMICO invested hard in research development. strategic alliance with intentness giants, universities and government helped NUMICOs cause. Research development wing of NUMICO attracted the best and on a repair buns filed for the patents.NUMICO Acquisition strategy in 1998, 1999 2000To exploit linkages amongst the musica l arrangement and its environment NUMICO select Medical Platform Marketing. NUMICO moved from top nonch merchandise shelves to practitioners clinics. Now, products for indefensible people were prescribed by doctors. Expenses on research and development were forcing NUMICO to impact whizk naked places to recover the equal. In 1998 annual answer for NUMICO was a international company focusing on the development, work and sales of nutritional aesculapian concepts with a great value addition.Strategy of NUMICO as per annual report of 1998 mentioned in the subject field study* by Eppink was as followsThe strategy of NUMICO is rivet on specialisation, continuing internationalisation and profitable product, partly by acquisitions as wll as by strategic alliances, and safeguarding the highest quality in all stages of production and services.As per the turnover in 1998, NUMICOs major revenue enhancement generating origin lull was infant viands which was change uttermost in Western europium which was experiencing the major falling bloodline rates and an ageing population. After analysing the market NUMICO bought few European companies to expand in profitable beas.In 1999, NUMICO acquired a company coarseger than them in terms of production revenue. When NUMICO bought General edible Companies (GNC) of Pittsburgh (USA) it was the largest manufacturer of nutritional product in the world with a castle in sports-nutrition market. It was a win-win situation for both the organisations where GNC was gaining from NUMICOs research to enhance their product range NUMICO could gain from the dispersal net of GNC. Press re mesh explained the lawsuit of this acquisition which was to achieve the globose market dominance.1Acquisition was on the card game for the third year as rise when NUMICO snapped Enrich International Rexall sund take in 2000. Un standardized GNC Enrich was in the business of nutritional supplements in the flesh(predicate) care products with an in house RD department for product development. Again remote GMC, Enrich was in 10 more countries with a global distri merelyion system.Rexall Sundown anformer(a) US based organisation was acquired by NUMICo. Rexall want Enrich was a producer of nutritional supplements as head as consumer health products. NUMICO acquired another business which has got nothing to do with their main business interest like GMC.A press release describes the reason of acquisition which was again to get the pole congeal 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 distri aloneion network present in Europe.At this point in time, NUMICO was confused in their approach because two competitors (Enrich Rexall) were running(a) under one roof and dowry the same market. Strategist might prevail analysed the mor e competition slight co-operation among the two brands. To reach operation inactiveer and to serve their customers better NUMICO unite the Enrich Rexall in one new separate entity by the name Unicity.Strategy evaluationFrom day one and for a wide menstruum of time NUMICO operated with one product because of which they never realised their potential as a standalone entity to grow.After not getting desired success work on the end of 20th century NUMICO realised alone they movenot get the global position in market. At this position, they might have done fellow analysis to judge the environment affecting them. Even SWOT could be used as a tool to know the strong areas where they potty hit the early empire.PEST might have shown them that they are not manipulational in future markets where they fag end grow faster than their flowing strong hold markets like Western Europe. PEST offer cover issues from demography to social technological changes like declining birth rates to e-commerce. By applying SWOT, one deal know that NUMICO always regarded the RD as an important action which they wont give up at any cost. Thus, they identified RD was their distinctiveness where they can build their future.Michael Porters 5 forces theory could have also employ 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 curse from existing players and new comers was massive moreover small players were pickings the competition to all geographies. therefore 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 scarcely acquiring Rexall Enrich was not at all a brilliant move. Reason being, it stretches the operational expertness 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 sine qua non referencing from the case study.2) Press release in the case study current Strategic SituationAcquisitions in a field which was not tie in with their main business interest left them in a position between the pharmaceutical market and the food market. To avoid the stuck in the sum situation usually organisations adopts the Michael Porters (1998), generic strategies which is as followFigure private-enterprise(a) reinforcementSource tutor2u.net(Accessed on 20/03/2011)Cost 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 drive 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 no t NUMICOs domain. note As the name suggests, in this strategy, organisations aim to be different from their competitors. Differentiation provides a war-ridden usefulness to organisations which helped them to charge a premium price for their products services. If we look at NUMICO case study we will find that they started with one product overdue to patents they held the prime for long time. atomic number 53 product was sufficient with a patent to compel 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 reve nue generator was still infant formula.Niche strategies Here the organisation function in one ad hoc segment and try their best to catch the best provider of products services. To work in this kind of strategy organisations regard 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 platform 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 involved in series of acquisition related to uncorrelated to their main business interest because of which they are facing the stuck in the ticker situation. To simplify the situation they tried to bring all the diversified business interests under one roof. Things are still confusing because they wan ted 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 trading trading 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 spy that NUMICO is facing chal lenges because they are not performing only in their tralatitious markets. Company was stuck in the middle because it was facing challenges from giants minnows at the same time. modernistic markets where they were operative due to acquisitions were full of small players. In addition to that threat from new entrants was massive. NUMICOs strategy needed a review before they put up the global position.Strategy reviewIn the year 2000, NUMICOs advance of directors prize the risk of infections from existing strategy. NUMICO due to acquisition was not paying enough tutelage to their cash 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 i n the middle because organisations who face this kind of situation usually subject to a takeover or merger. Finally when NUMICOs board realised the draw brook 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 meanwhile 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 combust but the whole sector was losing the effectiveness.If NUMICO would have done the PESTEL analysis so they could have avoided this slowdown and competition because they never saw this slowdown sexual climax into the picture. It is necessary to explore the competitive environment to develop sustainable competitive advantage.NUMICO resolution 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 patronise to back management problems to CEO which resulted in his resignation 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 bad news from all the quarters of business and to make the situation worse exchange rate of US dollar was ever-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 think 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 concentrate on long term value creations through developing high-growth/high margin products.Stars of NUMICONUMICOs star was infant product but due to lot of exposure 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 scare of NUMICONUMICO should turn their infant product into cash cow by pass 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 NUMICONUMI CO already sell 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 stop dead by focusing on cash cows star blocks. see a scenario if they dont pay much attention now on conclusion new markets for infant products then they might end-up in this block because westbound 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 urgent basis to avoid question mark.Figure BCG MatrixSource www.tellingthestory.typepad.comAccessed on 20/03/2011BCG ground substance 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 m arket options matrix examines the options available to the organisation from a broader strategic perspective than the wide market/product matrix (called in some texts the Ansoff Matrix).Figure Ansoff matrixSource www.cipher-sys.comAccessed on 20/03/2011As per Ansoff matrix, NUMICO can go for market penetration. It will be like without equaling the companys existing range of products or services and perhaps it can attract current customers as well. Things can backfire if market penetration is planned for new customers only. For example, mobile companies spin 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.Other Strategic OptionsOrganic growth NUMICO should start the change from with-in and build itself from scratch and this time they should stick to the meaning 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 properties.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 the y 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 buy their products services.Given the amount of analysis that can potentially be undertaken, merger with other competitors is highly recommended. Mergers are similar to acquisitions like combining two companies. However, merger can meet 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 understand of the company but to gain new markets new customers. None of the depict 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 specially 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 capitalised on that asset perhaps a partner can take that advantage or turn it into their competitive advantage.