Case Analysis Raisio Group And The Benecol Essay

1. ProblemOriginated from a grain-milling company in Finland, the 57-year-old Rasio Group genuine a substantial export telephone circuit which accounted for 39% of its sales by 1996. Its main products including margarine, pasta and other provender products were manufactured, sold loc all(prenominal)y and exported. In 1995, a blockbuster product Benecol, cholesterin-lowering margarine, attracted the interest of food processors and supermart groups throughout the demesne and fueled a surge of investor interest. Stanol ester is the active ingredient that provides the lower cholesterol benefit. There was huge marketing potential and profit opportunity for Raisio. However, its expressage production capacity, limited supply of stanol ester, few facilities, limited experience right(prenominal) Finland, different product formulation requirements, different marketing channel and involved economys in different countries challenged its further outline.2. Analysis and assessment of s chema to battle for mercenaryizing the introsA largely self-sufficient strategy/a strategy of upended integration Raisio had fabricated stanol ester itself in its profess plant using its make technology. Its stanol ester was used simply in its own sended margarine, Benecol, which was buzz offd in its own factories and marketed and distributed through its own sales and distribution system.This strategy enabled Raisio to have tick off over the technology, reduce transactions costs of market contracts and maintain captain coordination through the value chain, but it failed in meeting market get home and broad due to limited production capacity and limited supply of raw material. Besides the demand, it would take a long epoch for Benecol to fully market in other countries. That would be risky, as it provided had 18- to 24-month consider time over its competitors. Its impossible to open all markets by acquisition which entails high cost and various management issue. Theref ore, the strategy wont allow Raisio to realize the international launch of Benecol during the lead time, or help it meet the worldwide demand.3. Assessment of Raisios war-ridden position in January 1997Supplier power high. The raw material for producing stanol ester was limited, many another(prenominal) companies similar to its current supplier hadnt had the system in roll to collect the plan sterols.Buyer power low. Because of the new technologys significant effect on trim down cholesterol, Benecol margarine was priced about sextette times the price of regular margarine, even so the demand was alleviate very high.Threat of entry low within 18- to 24-month. The patent bought them that much lead time over its competitors.Substitutes high. A number of competing products were available for reducing cholesterol such as naturally available plant sterols. The surmise of using plant sterols as a food additive change magnitude the risk of being substituted. A growing array of chole sterol-reducing drugs was available on the market. There are also a number of natural food products that have the effect of reducing cholesterol within the blood, including fish oil, garlic, flax seed, dietary fiber, policosanol, and guggulipid.Industry rivalry temporarily low. It maintained leading position for Benecol because of the pattern. but the product was single, not change. The profit margin was very low, save 4.1%.In short, Raisio had a favorable competitive advantage over its competitors, but would only within the lead time if it couldnt figure out a suitable strategy and feasible plan. 4. The alternative strategies available to Raisio in 1997(1) To take a crap union with Johnson & Johnson (J&J) to utilize its extensive experience worldwide.According to the case, it would be grievous bodily harm partnership. Considering J&Js experience which was exactly Raisio needs, the partnership was feasible for its international launch of Benecol.(2) To focus on its call ing redient, stanol ester and exploit its innovation more widely so as to produce and supply to a number of suppliers and food processors.As the key competence of Benecol margarine was the key ingredient, the innovation would diversify the usage of stanol ester in more kinds of drinksand food so as to come on Raisios competence. However, I wont hint Raision to provide the ingredient to more suppliers and food processor, as it would weaken Benecol products uniqueness.(3) To keep up its production of stanol ester in-house or license this technology.As mentioned above, this technology was the key to its success. I wouldnt recommend license it out. 5.Summary/Proposed StrategyBased on the analysis and assessment, first offly I would recommend Benecol product be diversified and defined as functional food. The diversification and raw material paucity would require more R&D. This not only reflected Raisios technological ingenuity, but also was key to its success. In 1996, R&D only accoun ted for 2.2% of its revenue. Through R&D, Raisio would plausibly find more ways to produce stanol ester. It would also be beneficial if Raisio started nourish more suppliers of plant stenols to increase its bargaining power as well as get immutable supply of the raw material. Secondly, I would suggest Raisio establish exclusive partnership with J&J to produce, market and distribute diversified products with the new innovation in other markets other than Finland, the nearby markets and the markets which already had joint ventures. dickens important provision should include (1) all products should be under the dirt of Benecol to ensure the increase of the fault value.Once Raisio wants to buy it back, the established brand would be value-added for Raisio, like what many international companies have done to encipher a new market with complicated regulations and laws, different marketing channels and culture, etc. (2) J&J involves Rasio in the value chain of the brand to enable Rai sio gain experience/learning opportunity from J&J. The strategy would solve the problems of production capacity, lack of marketing and distribution experience in many countries, and would help avoid complicated regulatory issues. (3) Regarding different regulations and market conditions, the marketing plan should be promoted progressively. Marketing stage 1 The markets for the first stage should include the US and European Union which were the biggest potential markets for Benecol products and the regulation situation of the two markets were relatively clear and efficient. In US, it allowed the product to gain approval as a dietary supplement.It was thesimplest path which only took 60 days file notification with supporting evidence before commercial rollout. In European Union, it was possible to go through fast-track approval, as it had already been marketed in Finland. Marketing stage 2 J&J would probably start bring the products into the markets with huge potential simultaneously, as it would take a longer time to gain approval. Last but not least, base on the revenue breakdown in 1997, Raisio would allocate more recourses to the business unit of animal feeds, as the markets for animal feeds would be promising. For chemicals, though it represent 34% of its total sales, I would suggest Raisio take it as spin-off of its R&D. No detailed recommendation for those two units would be do due to limited information.