External Assessment: Opportunities and Threats
One exhibition and Two pages of writing are included in this case analysis project. Please carefully read the directions before making a decision. If you are unable to guarantee quality work that at
- Executive Summary
- External Assessment: Opportunities and Threats
The company that we will be discussing throughout this paper is a part of the agribusiness industry. This industry has a few major business segments such as crop harvest, food and beverage production, oil production, and many more. After this fact it comes to no surprise that this industry is geographically all around the world with some exceptions being in areas of the world that are too cold.
Knowing it is such a big and diverse industry there are many different opportunities and threats that come with it. The first opportunity that companies in this industry can face is generating more profits by being sustainable. The reason for this is due to the fact that many people are willing to pay a higher price if they know that this means the environment was not harmed. Consumers are growing more and more environmentally conscious and many are now trying to protect the environment in different ways and the easiest for them is to buy sustainable products.
A threat that we have found during our research is coming from the environment itself. The agribusiness industry is dependent on factors such as the weather and diseases as well as the demand of consumers. These specific factors are often not possible to be changed. If a crop is not able to grow properly due to the weather, the crop is lost and not usable anymore.
While the threat mentioned earlier is always present, there is another opportunity in this industry which consists of the production of soybeans. These specific beans are necessary for many different products and food productions. Therefore, it is a desirable market to be in and a market that will consistently be necessary. It gives companies in this industry to have a big market reach and high amount of sales if they decide to enter this segment.
- Internal Assessment: Resources and Capabilities
For our research purposes, we are focusing on Bunge, which is a company in the agribusiness area. The company’s main production segment in the agribusiness is the processing of soybeans. With this product, they are abl;e to produce and sell various kinds of oilseed, grains, fertilizers, sugar, and bioenergy. To get a better understanding of where the company is standing in this industry compared to its competitors, we will be taking a look at its value chain activities.
When taking a look at the company’s management, we can see that it consists of highly experienced individuals. The CEO of Bunge has been in the agribusiness for over 24 years and the rest of the management team has also been working in this industry for a long time. This surely gives the company a temporary competitive advantage due to the fact, that it is quite rare to have this opportunity. However, while it is rare as well as valuable, this advantage is not inimitable because there are many professionals with experience in this industry and any company could hire them.
Next we will be talking about their manufacturing segment. This company has a very good manufacturing area which is for a good reason. Bunge is focused on developing a good relationship with its farmers which helps them to ensure their manufacturing is as good as possible. Having a good relationship with its farmers is quite rare since not every company cares about that and it is also very valuable since it can ensure long run production. However, this is not inimitable either since other companies would only have to work on their relationships with their manufacturing teams and then they would have the same advantages as Bunge. Therefore, this is also a temporary competitive advantage.
The next activity that we will discuss is the company’s research and development. Bunge is always trying to find new and improved ways to use their products and their research and development team did great with that. The company has found four new growth platforms that can ensure an income for the long run. Those platforms consist of oilseeds, plant-based oils and fats, plant-based proteins, and renewable fuels. These are all valuable and rare and while it may be hard for companies to imitate it at the moment it will not be in the long run, which makes this activity a temporary competitive advantage as well. These new platforms can ensure the company will reach new clients that are more concerned with a healthy as well as sustainable lifestyle. A look into exhibit two can give a better understanding of Bunges value chain.
- Internal Assessment: Financial Performance and Future Financial Capacity
After we have researched the financials of Bunge, we are now able to take a closer look at them in exhibit 3 and understand how successful this company is. The first thing that is sticking out, is the return on assets that the company has over the past three years. In 2019, Bunge had a negative return on assets which shows us that they had no profit and when looking at the other numbers of this year, we can see that the company was not doing well overall. The return on equity had also been very low with a -22.10% which again tells us that the company has not been profitable in this year.
However, what is incredibly important to see, is that the company was quickly able to turn its financials and the profitability of the company around in the year 2020. Within just one year, Bunge was able to improve its return on assets as well as equity tremendously. They were no longer in the negative with these two ratios, however their free cash flow per share in this year was in the negative. This negative shareholder-return ratio shows us that in 2020 Bunge had a low ability to pay its debts which was a decrease compared to the previous year. Seeing this problem, in the 2021, Bunge was now in the green with all of its financials. The company was finally able to make a profit while still being able to pay back its debts.
- Current Strategies and their Implementation
The current business strategy of Bunge is based on differentiation. They have many different products that they are offering to their customers and they are also very future oriented because they are constantly working on finding ways to grow. The company is using the standardization strategy to reach as many customers as they can and since they are in a market that is always needed, they succeeded with it so far. To further enhance the quality of the way that Bunge is doing business, they are using horizontal integration and related diversification. This specific decision helped them to work together with the farmers producing the necessary seeds and grains they need for their products while also helping them to have the ability of creating and manufacturing their own products. The strategies and functions that Bunge is using in their business helps them to be future oriented and be successful in the long run, however, the competition in this industry is quite big and therefore, they need to find more areas in which they can differentiate themselves from their competitors. Our goal is it to discover an alternative based on the information that we have gathered in this case, to help Bunge stay successful in the long-run and not get lost in the cluster.
- Key Issue(s) of the Case
- Implementable Strategic Alternatives
- Criteria and Evaluation of Alternative by Criteria
- Recommendation and its Implementation
- Limitations and Critique of Recommendation
- Exhibits
Exhibit 1: External Analysis
- Opportunity by creating profit through sustainability
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- People are becoming more environmentally aware and many are willing to pay more if they know that means the environment is protected
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- New options of product creation through new research such as biofuels which means the company can always research new options
- Threat through factors that cannot be influenced or changed
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- Agribusiness is often dependent on weather, diseases and other environmental factors that cannot be changed
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- Bad weather means low product values and in turn income goes down
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- Wildfires could completely destroy crops which would create a loss
- Opportunity in soybean production
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- Soybeans are used in a lot of different products that are used by everyone
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- Cooking supplies and other oils as well as food products
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- Can reach a very high amount of customers
This industry has a lot of segments and a high amount of competitors, therefore a company that wants to be successful needs to excel at, at least one, segment.
Exhibit 2: VRIO Analysis of the Company
| Value Chain Activities | Specific Attributes Along the Value Chain | V | R | In | W/S/DC/SDC | O | Competitive Implication: Likely to have |
| Management | Experienced CEO and management team | yes | yes | no | Distinctive Competency | yes | Temporary Competitive Advantage |
| Distribution | Own distribution system not outsourced | yes | yes | no | Distinctive Competency | yes | Temporary Competitive Advantage |
| Manufacturing | Good relationship with farmers | yes | yes | no | Distinctive Competency | yes | Temporary Competitive Advantange |
| Service | Various help services for farmers | yes | yes | no | Distinctive Competency | yes | Temporary Competitive Advantage |
| Research and Development | New growth platforms have been discovered | yes | yes | no | Distinctive Competency | Yes | Temporary Competitive Advantage |
| Marketing | Not very advanced | no | no | no | Weakness | no | Competitive Disadvantage |
The VRIO framework shows us that the company has a lot of competitive advantage but none of them are sustainable and they may want to consider doing some research and improvements to reach sustainable advantages.
Exhibit 3: Financial Analysis
| Name | 2021 | 2020 | 2019 |
| Return on Assets | 8.38% | 5.50% | -6.79% |
| Return on Equity | 27.65% | 20.53% | -22.10% |
| Current Ratio | 1.77 | 1.47 | 1.55 |
| Quick Ratio | 0.86 | 0.82 | 0.79 |
| Asset Turnover Ratio | 2.4834 | 1.7503 | 2.246 |
| Inventory Turnover Ratio | 6.6171 | 5.3847 | 8.0584 |
| Debt to Equity Ratio | 0.61 | 0.72 | 0.62 |
| Long-term Debt to Capital Ratio | 0.3796 | 0.4178 | 0.3813 |
| Price-Earnings Ratio | 6.69 | 8.12 | |
| Free Cash Flow Per Share | 4.4482 | -16.6465 | 2.9851 |
From the financial analysis we are able to see that it seems like the company has been improving their financials over the last 3 years and has further increased their assets.
Exhibit 4: Current Strategies and their Implementation
Name(s) of the Business Strategy(ies): Differentiation
Customer Needs: Food and Drinks, Oils of various kinds, Bioenergy
Customer Groups: Globally suppliers of oil, retailers, and the direct consumer
Basis for Competition: Superior Quality and innovation in various areas such as sustainability
Corporate Strategies: Horizontal Integration, related diversification,
Placement in the Value System: Manufacturer
Global Strategies: Standardization
Major Functional Strategies: Operation Strategy
Implementation: Structure, Process, Controls, and Culture
Centralization, flat hierarchies, functional structure, informal integrating mechanisms, output controls,
Exhibit 5: Strategic Alternative Descriptions
Name of the Alternative or Strategic Goal Identifier:
Customer Needs:
Customer Groups:
Basis for Competition:
Corporate Strategies:
Placement in the Value System:
Other:
Key Issue(s) Addressed by this Alternative:
FEASIBILITY JUSTIFICATION FOR THIS STRATEGIC ALTERNATIVE
Environmental Opportunity(ies):
Environmental Threats, Risks:
Present Corporate Attributes relevant and sufficient to this alternative (Strengths, Distinctive Competencies, or Sustainable Distinctive Competencies):
Missing and/or insufficient Corporate Attributes (Weaknesses):
Exhibit 6: Strategic Alternative Descriptions
Name of the Alternative or Strategic Goal Identifier:
Customer Needs:
Customer Groups:
Basis for Competition:
Corporate Strategies:
Placement in the Value System:
Other:
Key Issue(s) Addressed by this Alternative:
FEASIBILITY JUSTIFICATION FOR THIS STRATEGIC ALTERNATIVE
Environmental Opportunity(ies):
Environmental Threats, Risks:
Present Corporate Attributes relevant and sufficient to this alternative (Strengths, Distinctive Competencies, or Sustainable Distinctive Competencies):
Missing and/or insufficient Corporate Attributes (Weaknesses):
- Exhibit 7: Assumptions and Justifications
- Exhibit 8: Strategic Alternative Net Present Values
- Exhibit 9: Strategic Alternative Net Present Value
- Exhibit 10: Evaluation of Alternatives by Criteria
| Criteria | Name of Alternative 1 | Name of Alternative 2 | |||
| Shareholders | Net Present Value | ||||
| Stakeholder | Customers | ||||
| Employees | |||||
| Environment (Sustainability) | |||||
| Other Stakeholder(s) (Optional):
Specify |
|||||
| Other (required) | Please specify | ||||
| Other (optional) | Please specify | ||||
- Exhibit 11: Implementation Schedule/ Action Plan
Bibliography:
Bunge Current Ratio 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/current-ratio
Bunge Debt to Equity Ratio 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/debt-equity-ratio
Bunge Financial Ratios for Analysis 2009-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/financial-ratios
Bunge PE Ratio 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/pe-ratio
Bunge Quick Ratio 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/quick-ratio
Bunge Return on Investment 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/roi
Bunge ROA 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/roa
Bunge ROE 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/roe