Bunge Ltd

BUNGE LIMITED - Case Analysis Analysis Submitted by: Group B1  Abhishek Singh  Anshuman Tigga Bollibisai Giridhar Madhumita Patanaik Sudhanshu Shukla

(PGP/16/003) (PGP/16/005) (PGP/16/014) (PGP/16/027) (PGP/16/052)

The value chain Farmers

Elevators

Terminal Elevators

Processors

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Elevators: Facilities that were served as consolidation and storage points

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The above chain could involve a single integrated grain company or multiple companies with several changes in ownership and with prices established many times at different locations

Strategy • Goal was to become the best integrated agribusiness and food company in the  world • In addition to its strong market positions, it could differentiate itself by its  business model and its organization and culture • Superior logistics –> Cost advantage • Three dimensions to logistics: ▫ Transport ▫ Having the right industrial footprint and locationally advantaged production assets ▫ Extremely good management in the capture and analysis of information

• Logistics – Getting the right product to the right customer, in the right quantity, at the right time and the right place

Organization and Culture - A decentralized management structure •  According to Weisser, the source of competitive advantage for the company is its “Decentralized management structure” • Easy for decision making across different regional offices • Easy for the local management to act according to the local requirement • It reduced bureaucracy and allowed local managers to act fast and seize  business opportunities •  Want to be seen as a local player, not as an ugly multi national •  Was able to hire very good local talent, people who are bright and intelligent and take initiative, and who find the space to move • Only 35 people in Burge’s headquarters in White Plains, NY 

Challenges of decentralization • To run an integrated company in a decentralized manner • To obtain synergies across P&L lines • To correctly identify the functions that need to be centralized and the functions that truly need to be decentralized • Difficult to convince and to give instructions or directions to all regional

Competitors  ADM • Large and diversified than Bunge • Operated in oilseed processing, wet corn processing, wheat milling etc. • Highly centralized, US-focused and 70% revenues from North America • Low cost provider, and more market share & production oriented than customer driven •  Visualized itself as a large food input and fuel factory: “raw  materials entered at one end and exited as value-added products” • Has majority ownership stake in AC Toepfer International, a grain trading company  • Toepfer had more than 40 sales offices world wide and traded 40million tons of grains annually 

Cargill • Large and diversified than Bunge • Largest private company in the  world with sales of $50 billion in 2002 •  Active member throughout the agribusiness chain, from supplying inputs to farmers to selling processed foods to consumers • Its strength was in commodity  processing • Had leveraged its capabilities in commodity trading, logistics and processing into non-food businesses including steel mini-mills and metal trading

Bunge Global Markets (BGM) “The value of BGM is in taking our origin capacity, linking with customers, and managing the risks in between: commodity, credit, interest rate, foreign exchange, freight and political ”, a BGM manager explained. • Goal : To build an international marketing capability  • It had four main activities. Which were: 1. 2. 3. 4.

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Marketing physical products Freight Risk management Trade finance

BGM was organized along two axes 1.

Product lines : It covered global functions such as trade-structured finance, ocean freight, and certain risk management activities 2. Distribution businesses: Organized regionally at the main destinations, were focused on serving customers in their local markets

Challenges at BGM •

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To ensure that BGM is focused on building the business rather than just a segment of the chain, since everybody was optimized for their local  business To make sure that the people in charge of production at origin and the person in charge of marketing have the same goals To co-ordinate with origins regarding operational decisions

Acquisition of Cerol • It was the number four soy processor in the US and the leading oilseed processor in Canada • Its US assets were very complementary to Bunge’s and would make Bunge a strong number two to ADM • Cerol has established a leading position in the oilseed processing industry   with the privatizations in eastern Europe • It had a strong soy ingredients business and was a global leader in soy concentrates and lecithins • It was wisely respected by food industry customers for its innovation and long tradition

Challenges in integration Cerol •

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Increase the complexity in the organization  Affect of it to the Bunge’s business and organization model  Weisser wanted Bunge to be the world’s best integrated agribusiness company. So he was confused, whether the acquisition on Cerol require a change in Bunge’s organization model or not