Introduction:
Darbo AG is a leading food company in Austria,which was formed in 1879.It deals in fruit processing and bottling honey and is the market leader in Austria. It has a turnover of 123.5 million in 2014 and also has famous brand names in the trade of Austrian food. 50% of Darbo’s revenue is generated by the exports of its products.
It has the market share of 59.7% in Preserves, 34.4% in Honeys and 14.8% in syrup in Austrian market in 2014 and the Brand awareness of Preserves 89%, Honeys 63% Syrups 67% in Austria. (AG, n.d)
The main focus and the vision of company is making natural and innovative products, special focus on the premium quality of the products, and producing high quality products with the profit that is corresponding.
Darbo AG is looking to expand its business globally and exploit the opportunities present, and to increase the level of sales and profit. In addition, it is considering providing the world with its high quality products which will enhance the brand image of the company.
The main issues discussed under are related to what is global expansion, Austrian firms and market in respect to expansion and exports, selection criteria and implementation of the strategy.
Global Expansion:
Most companies expand globally because expanding the market and increase in sales means more profit.In most countries the success of business is measured with how much profit it makes, though in some counties it differs. Like in Japan the existence of companies is to serve the society and give employment to its people, while in U.S the shareholders are the reason for the existence of the company, which is contrary with the German market where the main reason is productivity and employment. However even in different countries, every firm has it separate goals for which they conduct the business.
In different countries, different factors create the value for firms which is often a problem when expanding the business globally, like in Darbo that has the uniqueness in what it makes in Austria, but would the consumers treat it the same way in other countries and if the same value can be created in the country it is expanding.
Darbo has been developed in Austria through a family business that is owned by the Darbo family.The case will not be the same for the employees in the country where it is expanded because for them it will be only a employment opportunity and the same culture won’t be developed which can affect the operations and the uniqueness and quality the brand which is the core value of the company.
Expanding the support for business by Government is very important because different regulations can affect the business in a negative and positive way, such as the increase in import and export duties would raise the concerns for Darbo who would like to import the raw material and other things from Austria to the country in which it will decide to expand the operations. Regulations about the employment to local people, and difficulties in Visas to the management of the company can also pose a real threat in expansion.
Expanding the operations globally has several disadvantages and problems. Lack of local knowledge can be a disaster for company; a thorough research program is conducted by the most companies before they expand globally to reduce any possible risks it will face.
Another disadvantage is when a large organization is formed, it gets affected by different amount of problems, even if one segment in a country is not working properly and not providing enough profits, then it also ends up ruining the profitability and shareholders’ value in the other countries.
Late entry in market also brings disadvantages to the company, the best locations and employees are already taken and the company has to make up quickly to survive in the market.
Even though there are disadvantages, however companies have reasons behind the expansion, and those reasons often arise in the competitive advantage.Strategic Plan Case Solution
Expansion means the scale of the company has extended, which provides access to more capital, negotiations with the suppliers, knowledge of the market and experience. Costs are also shared across the markers and a potential global image of the brand can be enhanced which in future can help in expanding to more countries.
Other advantages can be through the cost factors like the labor rate in the expanding country which is a developing country might be low and this reduces the overall cost of the production and enhances the profitability of the company...........................
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