Management Organization, DMK

Manage Mana gement ment Or ga gani niza zatt ion

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M an agem en t Or gan i zat i on Deut Deutssches Mil chkont hkon t or

4/7/2012 Student M arco Engler Engler

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Executive Summary The report gives gives an an overview about Deutsches Deutsches M ilchkont ilchkont or; th e com pany`s pany`s sshort hort cut history, the possibilities, possibilities, the or ganizational ganizational circum stances, tances, the organizational stru stru cture, the en vironm ent; in general and in Germ any; and th e possible possible op tion s. To be m ore p recise, recise, in some cases cases ther e is a closer closer view on Sanobub Sanobub , one of DM Ks brand s. DM K is a com com pany w hich is w ell- known in its current current operating m arkets, arkets, financia financiall health and has a good im age. age. DM K is established established in th e Euro Euro pean m arket and has the poten tial to expand in a broader w ay. The The Deutsches Deutsches M ilchkantor ilchkantor is very financially financially healthy healthy and profitably operating in m ore t han 100 countries. countries. Furtherm ore, DM K is m arket leader leader w ithin the dairy sector sector in Germ Germ any. The aim aim s are to get a stable m ilk prices, increase increase the m arket share and expand the p rod uct ranges The m arket in Germ Germ any is the m ajor source source of the com pany`s pany`s profit and DM K get an import ant leading player player in the Euro Euro pean diary mark et. W herefore it seems seems import ant to keep the researc researchh volum e running on the same same level. How ever, introducing a new strategy and acces accesssing a new m arket are recomm endable. The recomm endation is to expand expand in t he Asian Asian markets by building up a joint venture w ith a com pany w hich gained gained already experiences in this m arket.

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DMK– DeutschesMilchkontor Pr efac eface e The as assignm signm ent is, based based on int ernet research research and descripts published by th e firm itself, about the busines businesss environm environm ent of DM K, Deutsches Deutsches M ilchkontor ilchkontor . The The group received the task to w rite a report about an o w n chosen chosen com pany from the food- and agriculture agriculture sector. sector. Furtherm ore, a grade grade sheet sheet w as handed out to w rite an ass assignment w hich includes includes several several as aspects w hich have to m ention w ithin this document. To m eet the guidelines guidelines and and accom accom plish plish the aim of t he repor t; th e researc researchh w as based based to find out inform ation about th e stor stor y of DM K, its its management situation, partnerships partnerships and organization organization al stru stru cturing of DM K, issues issues and and t he m arket in general respectively. In this report , the Deutsches M ilchkonto r is also also nam ed as DM K. The foundlings are listed listed in t he Executive Executive Sum Sum m ary on Page Page thr ee. The The repo rt is stru stru ctured by th e guidelines guidelines of this grading grading form w hich is also also included at the end of t he report .

M arco Engler, Engler, Leeuw Leeuw arden, 23.10.2011

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Table of Cont Cont ents Executive Summary ............................................................................................................................................................ 2 Preface............................................................................................................................................................................... 3 Table of Contents ............................................................................................................................................................... 4 1

Int rod uct ion ............................. ................................ ................................ ................................. ................................ 5

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An alysis of cur ren t situ atio n ................................ ................................ ................................ ................................. ..... 8 2 . 1 M i ssi ss i o n ... . .………………………… ………………………………… ………………… …………………… ……………… ……………… ………………… ………………… ………………… ……………… ………………… ………………… ………………… ……………… ……………… ………………… ……….. 8 2.2 Visio n…… n……… .............................. ................................ ................................. ................................ ........................... 8 2.3 Goals…… Goals……………. ............................... ................................ ................................ ................................. ..................... 8 2.4 Strategic .............................................................................................................................................................. 8

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Int ern al envi ro nm ent ............................... ................................ ................................. ................................ .............. 10 3.1 Core competence .............................................................................................................................................. 10 3.2 Synergy ............................................................................................................................................................. 10 3.3 Value creation ................................................................................................................................................... 10 3.4 Functional analysis............................................................................................................................................. 10 3.5 Corporate culture .............................................................................................................................................. 11 3.6 Organizing ......................................................................................................................................................... 11 3.7 Tot al Quality M anagement ............... ....................... ............... .............. ............... ............... .............. ............... ............... .............. ............... ............... ............... ............... .............. ............... .......... .. 11

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Exter nal envi ro nm ent ............................... ................................ ................................. ................................ .............. 12 4.1 Porters five forces.............................................................................................................................................. 12 4.2 PESTE PESTELL Analysis .................................................. ................................ ................................. .............................. 13 4.3 SWOT Analysis ................................................................................................................................................... 14 4.4 Confrontation matrix ......................................................................................................................................... 14 4.5 Concl Concl usion SW SW OT ............................... ................................ ................................. ................................ .............. 15

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St rat egic gap ............................ ................................ ................................ ................................. .............................. 16 5.1 Current situation ............................................................................................................................................... 16 5.2 Desired situation ............................................................................................................................................... 16 5.3 Gap ................................................................................................................................................................... 17 5.4 Limiting conditions ............................................................................................................................................ 17 5.5 New goals o f th e desired situatio n: .............. ...................... ............... .............. ............... ............... .............. ............... ............... ............... ............... .............. ............... ............... ............. ...... 17

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St rat egic cho ice ............................. ................................ ................................. ................................ ......................... 18

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Im plem ent atio n ............................ ................................ ................................. ................................ ......................... 20

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Conclusio n and Recom m end atio n ............................. ................................ ................................. .............................. 21

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Refere nces ............................... ................................ ................................ ................................. .............................. 22

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Exhibit s ............................. ................................. ................................ ................................ ................................. ... 23

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Introduction

The introdu ction gives a clear clear overview about t he com pany, the siz size, e, the im age and the m ost im portant facts facts like the current situations evalua evaluate te t horoughly t he external and internal environm ent. Afterw ards, ards, the Strategic Strategic gap gap shows the d ifference betw betw een the current and t he desired desired situation; measured measured by t he founding of part t w o. The The results of t he strategic strategic gap gap lead lead to the strategic choice choice to show the p ossibilities ossibilities and ways to r each each th e desired situat situat ion. The im plement ation gives gives an overview overview about the im portant steps how to im plem ent and achieve achieve the desired desired situation. situation. At th e end, there can can be find a conclusion conclusion and recomm endation of th e report . DM K is a Germ Germ an diary w hich was founded in April 2011; the b oth cooperative cooperative organized organized companies from the northern o f Germ Germ any, Hum ania M ilchindustrie ilchindustrie GmbH and Nordm ilch ilch Gm Gm bH merged to DM K, to becom e the m arket leader leader in th e Germ Germ an diary industry. industry. The DM DM K em em ploys 5,5 5,500 00 em ployees in 25 sites sites wit h th e head off ice in Everswin Everswin kel, Germ Germ any. (DM (DM K, 2011) Now adays adays, through the m erger; the DM K constitutes constitutes of three cooperatives and and a lot of subcontractors. ubcontractors. In 2010, the net pr ofit exceeded exceeded I € 4 billion billion w hat leads DM K a market leader in Germ any and a leading leading player in Europ Europ e either . (DM (DM K, 2011), DM Ks legal for m is a Gm Gm bH and registered registered in Brem en, Germ any. The concern concern is centralized but t here are several sites sites and cooperatives. The The organizational str str ucture o f Deut sches sches M ilchkonto r can be seen in the picture below .

Exhibit 1.1 Organizatio Organizatio nal str str uctur e, Deut Deut sches M ilchont or

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The Deutsches Deutsches M ilchkonto r is the head of several subsidiaries subsidiaries to serve a wid e range of prod ucts and and atten d po tent ial clients. clients. The The subsidiaries subsidiaries can be seen seen in th e picture b elow . (DM (DM K, 2011)

Exhibit1.2 firm structure, DM K Deutsches Deutsches M ilchkontor GmbH

How to seen above, above, the por tfo lio includes all kinds of dairy prod ucts like yoghurt , cream pr odu cts, cts, but ter, and several kinds of m ilk or d essert essert s. Furt Furt herm ore, ther e are cheeses, cheeses, dietetics, ice crème, health pr oducts like function al food, novel foods, health supplem supplem ents; dextrose or baby foods, teas, teas, tub e feedings, feedings, drinks and concent concent rates. So, there are prod ucts for m en, w om en, childr childr en and babies. babies. (Produ (Produ cts - DM K Deutsches M ilchkonto r Gmb H, 2011) These These pro ducts are divided in to t en brand s. These These bran ds are: are: M ilram , Ravensberger, Ravensberger, Oster Oster land, Sanobub , Oldenb urger, Hu m ana, Cas Casarelli, arelli, Intact and Leben’s Biolabor.

Exhibit 1.3 brands, DM K Deutsches M ilchkont or GmbH

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DM K is is the market leader in Germany and operating in 100 countries worldw ide; to keep the position against against th e com petit ors Langnes Langnese/ e/ Ola, M ovenpick, Nestle/ Scholler, Haagen Haagen d azs, azs, Ben & Jerry’s, Landliebe, DM K intr oduced som e joint ven tur es. Successful uccessful collaborat collaborat ions are are the join t vent ure w heyco heyco GmbH, and Nord-Contor Nord-Contor M ilch ilch GmbH. The brands respectively respectively divisions are are im por tant . The The brand s are are small t o sustain sustain flexibilit y and react on t em porary changes changes. DM K says says on it s website: “ The sales sales mix makes DM DM K a reliable partner – nat ionally and internationally  W e will p rot ect our long -term leadership leadership positions by means of a strat egically designed designed sales mix:  balancedd wit h 30% of sales t hrough t he export business  70% of sales t o t he domestic mar ket  w ill be balance business , w ith deliverie deliveriess to mo re than 100 countries all over the w orld – a very healthy healthy constellation  constellation  economically. Turnover by produ ct group is split split int o  50% fr esh esh dair y product s , 40% cheese a nd  10% milk powder . This split split enables stab le medium -term costing costing ’s and investment investment s. And it p rovides adequate flexibility  if individual mar kets fluctuat fluctuat e. “  The profit allocation allocation is show show n in the picture below .

Exhibit 1.4 Profit- DM K Deutsches Deutsches M ilchkontor GmbH.

Another key aspect aspect is the research research and developm ent departm ent. DM K is is producing products on a high- quality level and focused focused on th e prod uct inno vations like organic food . Thro Thro ugh the fo cus of research research DM K is able to keep t he value of 6,7 billion lit re m ilk, every year. (Res (Research earch & Develop m ent - DM K Deutsc Deutsches hes M ilchkontor ilchkontor GmbH, 2011) As a result result of it, DM K is a company w hich is w ell- known in its current operating m arkets, arkets, financial financial health and got a good im age. DM K is established established in th e Europ Europ ean m arket and has the pot ential to expand in a broader w ay. Thanks Thanks its healthin ess base base th ere are a lot of p ossibilities ossibilities to find n ew w ays and opt ions. ions.

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Ana nalysis lysis of cur cur r ent sit uati uation on

This analysis analysis show s the curren t situation; divided in t he external and internal enviro nm ent in det ail. The com m on t oo ls like SW SW OT, PES PESTEL TEL, Por Por ter `s 5 fo rces are used to exp lain t he ben efit s and issues thoroughly. 2.1.1 2.1 Mission The selfself- chosen m ission ission i s qui te clear . “ W e will m ake good use use of our capacities capacities and m arket shares  for stabl e milk prices and excellent excellent m arket p ositi ositi oning.”  (Strat (Strat egy - DM K Deutsches Deutsches M ilchkonto r Gmb H, 2011) 2.1.2 2.2 Vision “ A sys system tem at ic busines businesss str at egy makes DM DM K even stro stro nger in t he market . The The merger o f Hum ana  M ilchindustrie GmbH and N ORDM ORDM ILC ILCH GmbH a rose from a hi ghly succes successsful, long -stan -stan ding  collaboration. collaboration. Our primary goal is to earn at tractive milk prices w ith long-term stabilit y for t he  cooperat ive ow ners of bot h companies.”  (Strat (Strat egy - DM K Deutsches M ilchkonto r Gm bH, 2011) 2.1.3 2.3 Goals The prim ary goal goal is to earn attractive m ilk prices prices w ith long-term stability for th e cooperative cooperative ow ners of bo th com panies. (Str (Str ategic expansion expansion of th e cheese cheese business, business, Profitable grow th o f the b randed goods business, business, Securing our m arket share in fresh dairy prod ucts, Furt her d evelopm ent o f the ingredient s business, business, Expansion of t he ice cream , baby f ood and h ealth p rod ucts business business areas). areas). Another central focus w ill be th e expansion expansion of the int ernational busines business with in th e EU EU and increasing increasing participatio n in intern ational grow ing market s such as Asia 2.1.4 2.4 St St r ategic DM K prof its from its clear clear and consequent strat egies. egies. The The m ain goal, accordin accordin g to t he m ission, ission, is to earn a stable and at tr active active m ilk price. This goal shall shall be accom accom plished by d eveloping a logical pr ogression in existin g business areas. The main poin ts are: are: -

A strat strat egic expansion expansion in t he cheese cheese business business and a prof itable grow th o f th e branded goo ds business sector sector . Securing of th e m arket share in the fr esh esh dairy b usiness usiness Logical progression in ingredient s business business Expansion xpansion in th e ice cream, baby food an d health fo od p rodu ct business business

2.5 Gl obal St r at ategy  egy  A central focus lies on t he expansion expansion w ithin the European U nion states and acces accesss the m arket in Asia. DM K is using its capacities, capacities, experiences and know ledge to increase the m arket share and achieve the goal of stable m ilk prices, in Germ any, Europ Europ e and in Asia as as well.

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2.6 Cor por at atee-Le Leve vell St r at ategy  egy  In order to ensure ensure its product qu ality, DM K has to be m ore focused focused on pr oduct innovations, the r etail sector ector m arketing, reputation and the pr iceice- perform ance ratio, ratio, the sm all brand awareness awareness and and th e sessional sessional pro ducts respectively respectively the dem and of th ese ese prod ucts and th e consum consum er needs. Furtherm ore, they have to be aware of changes changes w ithin t he m arkets and and progresses progresses of competit ors. Hence Hum Hum ana and and Nor dm ilch ilch have m erged to Deutsches Deutsches Milchkontor and have started som som e joint ventures to find new m arket niches niches,, expand expand the prod uct range and and im prove the m arket leading leading position position in Germ Germ any. One m ajorit y claim claim and a huge pot ential disadvantage can can be raises raises due to the sm all brand awareness. 2.7 Busi Busi nes nesss- Leve Levell St r at egy  The m iss ission of Deutsches Deutsches M ilchkontor ilchkontor DM K, to offer and deliver a w ide range of several several dairy prod ucts for a fair and stable price is a rather dif ficult m ission ission t hen as they are acting on such an inter nation al scale scale.. The The agricultur e business is every tim e depend ing on legal regulations and agricultural aids. aids. One aspec aspectt is that t hey have to set n ew tren ds and and reach a big target group like children, children, men and w om en in all markets. markets. So, So, DM DM K always needs to com e up w ith new produ ct innovations, innovations, and has to be able to adapt new trends, in particularly, particularly, in the health food and genetic food b usiness usiness and needs to be sure sure t hat t hey can maint ain the sam sam e quality and sam sam e price level. level. The same same pr ice level level is is formulated in t he m iss ission of DM K. However, the produ ct unit and the high quality standard standard of t he t echnology echnology is the big plus of th e company.

2.8 Funct Funct i onal – Le Leve vell St r at ate egy  DM K is is a m erger of tw o comp anies w hich have have already already cooperated before. The The aims of the m erger w ere to get a stable stable m ilk prices, prices, increase increase the m arket share and and expand th e prod uct ranges Therefore, it w as neces necessary to get t ogether and put the strengths of t he high quality standard standard and t he new technologies technologies together. together. DM K gets gets mor e aware and established established its prem ium ingredients ingredients in the m arket. Now adays adays, the m arket in Germany is the m ajor source source of the company`s profit and DM K get get an im portant leading player player in t he European European diary m arket. The The next step is to expand the m arket share share in Europe Europe and Asia. Asia. Therefore, Therefore, it seem seem s import ant to im prove th e m arketing and and distribution areas areas, durin g the financial as aspect and the w ell-developed R&D sector sector .

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Int er na nall envir onme onment nt

3.1 Cor Cor e comp competence etence The core comp etence of Deutsches M ilchkonto r is pro ducing, developin g and and im pro ving all all kinds of dairy products. products. They They are focused focused on r esearc esearchh and development to fo rtify t he m arket position. Furtherm ore, another core com petence is the w ide range of prod ucts, ucts, alternatives alternatives and the m arket leading position. 3.2 Syn Syner ergy gy DM K is using the synergy synergy effect of t he bran ds name, w hich is standing for qu ality, and and t he pro gress of its research research program s. They are are pro fitin g on the corp orative sites and and t he agriculture aids wh ich are used used to get t he new est est technologies. technologies. The The nam e Deutsches Deutsches M ilchkontor ilchkontor stays for quality and p roduct innovat ions. A side side effect is that DM K prof its of the legal regulations related related t o health and q uality in Germany and Europe Europe w here th e produ cing cing locations locations are. 3.3 Value Value creati on The dairy dairy pro ducer creates values thr ough th e nam e and the pr ice levels levels of its differen t brand s. But a prob lem is the sm all brand awareness of som e subsidiaries subsidiaries.. DM K is offer ing a w ide range of prod ucts in the dairy sector sector and is bond ed in legal regulations of quality and health. W ith t his big produ ct portfo lio DM K can can reach reach a lot of customers w ithin all societies societies.. Furtherm Furtherm ore there is a w ide range of several alternatives alternatives for each each pro duct t o enables DM K to act in every m arket respectively respectively m arket niche with its different brands.

3.4 Functi Functi onal ana analysis lysis

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Management and Organization The management quality is good. Measurable through the market position and the financial situation The staff quality is high. The educational system in Germany is very well. The company is centralized and includes well- known brands. DMk is bonded on national controls and legal regulations. regulations. Finance DMK is very healthy and market leader in Germany. They have to reduce the high production costs.

Marketing -

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Distribution channels: mostly Supermarkets. Big market share, market leader The marketing and advertising could be more efficient. Customer satisfaction is good. Consumers likes the high quality level.

Production DMK has a good quality control; they are improving also its products and the employees continually. continually. They have to reduce the high production costs.

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Human Resource -

The staff satisfaction is high. Employee experiences are very well.

Research and Development They are known for a lot of product innovations in the health food business sector Great laboratory and technology circumstances

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3.5 Cor orpor por ate cult cult ur e The corp corp orat e cultur e can be described described as adaptable cult ure. The comp any is focused focused on an adaptability adaptability culture w hich can can be determ ined by the fast ability of interpreting and translating translating signa signals ls of enviro nm ental changes like legal legal regulation regulation s. DM K is focused on the extern al market and takes over other companies like or creating creating new joint ventur es to w ork m ore flexible in all all markets and expands the business. business. Furt Furt herm ore, DM K is a learning organization and t hey have to be it as a result of fast changing market s, genetic progresses, progresses, regulations and other thin gs. gs. The The im age below show s an overview of t he corporate cultures. cultures. Deutsches Deutsches M ilchkontor ilchkontor and its subsidiarie subsidiariess know the fact t hat, now adays adays, people are are aware w hat food they buy for their bo dy and health. For For instance, instance, in the genetic food segm segm ent, the consum ers are are w illing to pay higher prices. prices.

3.6 Or Or ganizin g DM K can can be described described as centr centr alized alized organization organization w ith a few of subsidiaries subsidiaries how t o seen on the picture 1.2 on p age four. Furt Furt her, DM K can also also be described as a learning organization organization w ith a view of t otal quality. Deutsc Deutsches hes M ilchkont ilchkont or is bonded t o a lot of external factors and and h as to act act flexible. flexible. The organizational organizational str str ucture is show show n on pictu re 1.3 on page five. Hence, DM K has to adapt to changes in their ext ernal environ m ent. The enter enter prise is adaptive in a sense sense of changing changing in the m arkets and innovation s of th e prod ucts, the clear str str uctur e and centralized organization organization helps to act act in a logical logical w ay. There There is a head office and 25 br ands like Sanobub Sanobub w hich are acting m ore or less less separate eparate in their o w n segm segm ent. One problem can can rise by continually follow ing of this organization organization type if DM K expands expands in oth er cultural environm ents like like Asia, Asia, every office could could not determ ine decisions, decisions, w hich are related to t he environ m ental circum stances, stances, by them selves. selves. An im portant fact fact in relation to the leadershi leadership, p, control control ling and HRM HRM is als alsoo th at the d airies are agricultural cooperatives. This This mod el means that th e cooperatives are ow ned by equally shared shareholders. 3.7 Total Qualit Quali t y Management Management To ensure the Quality, DM K introduced a research research and developm ent p rogram and is using using a control system ystem to ensure the h ygiene ygiene w ithin t he producing areas areas and and t he quality of the ingredients like milk. Anot her benef it is the close bond w ith t he dairies. There are also also contr ols of hygienic in Germ any w hat impr oves the quality enorm enorm ous. Page 11 o f 23

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Exter na nall envir onment

4.1 Por Por t er s fi ve forces Every enterprise is within a speci specific fic industry, industry, thus, M eso m arket environm ent plays a very impor tant role in enterp rise rise strategy. strategy. We use the “ 5 forces m odel” to analyse analyse the b asic asic com com petitive situation in the dairy industry industry to sum m arize arize the m ost ost im portant tendencies. tendencies. Furtherm Furtherm ore, we are looking for a sixth sixth f orce since since DM K is depend ent on legal regulations. Internal /Rivalry /Rivalry// Com petitors Related to o ne of t he brands, Sanobub Sanobub : This This com pany is operat ing in the com petit ive industry, the biggest biggest com petit ors are: Langnese/Ola, Langnese/Ola, M ovenpick, Nestle/ Scholler, Haagen Haagen d azs, azs, Ben & Jerry’s, Landliebe. andliebe. Com Com pared w ith t hose com com panies, panies, Sanobub Sanobub have to develop t he popularity of their b rand and impr ove their ow n brand awareness. awareness. On the oth er hand, all all com com petitors, for instance instance in Germ any, are are bon ded on the sam e legal regulation regulation s. These regulations increase increase the p rodu cing costs costs enormously. Bargaining Bargaining pow er of buyer and supplier DM k produ ces dairy pro ducts but since a small retailing sector, sector, ther e is a big jeopardy if com petit ors gettin g aware of t his gap. gap. As a m arket leader in Germ any, the global player im age age in Europ Europ e and the few brands, brands, DM DM K is is able able to deal with all target target groups and and target m arkets in their operating m arket seg se g m ents and m arket niches. niches. They They are depending on innovations of them self and need t o be focused focused on changes in the need s and desires of th e consumer an d the pr ogression ogression of it s com com petit ors. Therefore, the pow er of buyers is quite low ; in contr contr ast ast t o t he pow er of supplies w hich is very high. W ithin t he last last years, ther e w ere a lot of str ike calls calls and strikes because because the dairy coop eratives w anted m ore m oney for their m ilk derivatives derivatives.. The ingredients can can be delivered by suppliers suppliers w ith a long tim e relation. Useful is a wide range of prod ucts, a good good repu tatio n and satisfied, satisfied, loyal custom custom ers. DM K and its brands can can deal w ith loyal consumer s. The bargaining bargaining pow er of bu yers is low , especial especially ly as consum consum ers are are int erested in th eir local produ cts and DM K is offer ing those. The The bargaining pow er of suppliers is quit e high but cont racts and and lon g term relationships relationships helps to m inimize trouble Potential entr ants W ithin t he ice- cream ind ustry, the entr ance barrier is low , th ere is no need of high scienc sciencee and technolo gy for pr oducing ice cream cream . Therefo Therefo re, som som e local com com panies are are able to easily produce this kind of pr oducts and thr eaten Sanobub Sanobub . To To establish establish the good m arket share, Sanobub should not only m aintain their high quality, quality, but they also also need t o develop th eir ow n features, instance instance of m aking taste taste different from others. As a result result of this the new entrance of comp etitors is quite high.

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Substitutes/Complements Ice Ice cream, as a kind of d esserts, esserts, is very pop ular all over th e w orld, th e dem and of ice cream is quite a lot and basically basically there are a lot of substitutions for t his kind kind of product. In conclusion, conclusion, w ith t he analysis analysis of Sanobub Sanobub by the Porter's 5 For For ces, ces, it can can be sugges suggested ted t hat Sanobub needs to develop a w ider m arket range and and attract m ore custom custom ers by making good good t asting asting ice cream cream , so so that keep the foot hold in the fierce compet ition. 4.2 PE PES STEL Analysi Anal ysis s Political Deutsches Deutsches M ilchkontor ilchkontor is bonded on regulations regulations of goverm ents, w ithin countries they are operating. Anot her im port ant aspect aspect is the ro le of the Euro Euro pean Unio n. These These regulations are influen cing the m arket, so, so, even even the competit ors. The European European Union and t he governm ents are are trying to im prove and ensure quality. In In fact, DM K is profiting of contro ls and and regulations to ensure quality but the competit ors “have to” participate participate in t he sam sam e w ay. In the international scale scale,, due to t he produ cing costs costs there could be a chance for com panies in countr ies beyond o f the European Unio n. Economical Increasing Increasing costs, costs, in particularly in the prod ucing sector, sector, are a com m on issue. issue. All com panies are faced faced w ith th e problem and m ust be focused focused on changes in research, research, development and their environm ent as w ell. For For in stance, there is a lack lack of eff iciency iciency by using solar solar energy du e to t he low solar radiatio n. Therefore, DM K is depending on innovations and imp rovem ents beyond their ow n business business and and business business ccom om peten ces Until now , DM K could could face these problem s and and is, in in Germ any, market leader and a global player. player. Social/ Cultural/ Dem ographical Social cultu cultu ral aspects aspects are very im port ant for Deutsches M ilchkonto r because because ther e are different desires in diff erent cult ures. For For in stance, stance, in some cou ntr ies of Eas Eastern tern Europ e, people using m ore goat m ilk than cow m ilk. The The effect of dem ographical ographical structures structures w ithin a society society is low. DM K is reaching all all target groups wit h its differ ent brand s. Technological DM K is operating on a high technology level leve l w hich is underlined by t he m arket leading leading position position in Germany and the im portant r ole they are playing playing in all all of the 100 countries, countries, worldw ide. Ecological DM K is success uccessfully op erating in or ganic food . This This exam exam ple can be used used to highlight th e im por tance and aw areness of ecological ecological circum stances. stances. Legal regulations The jeopardy of legal regulations has risen to a big problem of th e DM K. The Europ Europ ean Union deter m ined salaries salaries of dairy pro ducers in the EU. EU. Hence, com panies from abroad respectively out of Page 13 o f 23

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the European European Union can can skip these regulations regulations but direct comp etitors are bond on th e sam sam e regulations. As a m arket leader, DM K can can use its position position to force a cost leadership str str ategy.

4.3 SWO SWOT T Analy An alysis sis

Strengths    

     

60 years of experience Latest te chnologies Prem ium ingredients Fresh resh m ilk & cream cream are a major part of the ingredients. High quality standard Nature based based ingredients Authentic t aste aste Customer loyalty Financially health Innovations

Weaknesses      

Sm all brand aw areness W eak m arketing Sm all distribu distribu tion area Ret ail secto secto r Seasonal pro duct High productio n costs costs

Opportunities   

Strengthen m arketing Expand in new m arkets Broaden Broaden t he distribution area

Threats   

W ell know n and strong com com petitors Still in creasing creasing of p rod uction costs costs Changes in legal legal regulat ion s

4.4 4. 4 Confr Confr ontati on matr ix

Strengths   s   e    i    t    i   n   u    t   r   o   p   p    O

  s    t   a   e   r    h    T

Weaknesses

S1 - market position O2 – expand in new niches S8 - costumer loyalty O1 – strengthen marketing S7 – authentic taste O5 – broaden the distribution channels and areas

S1 - market position T3 – changes in legal regulations S10 – innovations T2 – high producing costs S5 – high quality standard T1 – strong competitors S8 – consumer loyalty T2 – high producing costs

W1 – small brand awareness O1 - strengthen marketing W5 – seasonal products O2 – expand in new niches W2 – weak marketing O1 – strengthen marketing W3 – small distribution areas O4 – broaden the distribution area and channels W1 – small brand awareness T3 – strong and well known competitors W2 – seasonal products T1 – high producing costs W3 – retail sector T3 – changes in legal regulations

This type of a confron tatio n m atrix is chosen chosen because because th e mo st impo rtant stren gths and and w eaknesses eaknesses respective respectively ly oppor tunities and th reats are are m atched atched and the founding em erges obviously. obviously.

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4.5 Con Concl clusi usion on SWOT SWOT There are a lot of strengths of DM K, wh at underlines the quality of the com pany and its goods goods but it should also also clarify clarify the im portance of awareness awareness in in the m arket and imp roving of the pr oduct quality, prod uct innovat ions and and po ssible ssible new m arket niches to r each new custom ers. The SW OT illustrates the danger of exter nal and uncont rollable for ces like the legal regulation regulation s. It is extrem ely im im portant t o force the strengths, strengths, the m arket position position and the br and reputation to avoid big entrances of com petit ors or loss of m arket shares. Im port ant th reats are are the p ossibilities ossibilities of changes in the legal regulations. DM DM K has to deal w ith t his impo rtant issue. issue.

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St r ategi ategic c gap gap

The Strat Strat egic gap is related t o th e gap gap betw een the cur rent and t he desired situat situat ion. 5.1 Cur 5.1 Cur r ent sit uation DM K is operating in countries and m arket leader in Germ any. Deutsc Deutsches hes M ilchkontor ilchkontor is offering a w ide range range of dairy products w ith its brands. brands. With an amoun t of 6.7 billion litre litre of m ilk per year year they produces, produces, DM k get an impo rtant leading player in the dairy m arket in Europe. Europe. The product p ort folio; seen seen on t he picture 1.3 on page four, show show s the goods w ithin th e dairy segm segm ents w hich are produ ced by DM K and br anded by it s brands. There There is a w ide range of several parts w hat helps to m ake DM DM K as an impor tant com pany w ithin the segment segment . DM K is a merger of tw o com com panies w hich w anted to bond th e pow er of both comp anies – Humana and Nordm ilch. ilch. Whereby, DM K get a mighty company w ith a lot of strengths. Hence, Hence, it can can be determ ined that the m ain iss issues and jeopardies jeopardies are not internal, but rather external. How ever, Deutsches M ilchkonto r could reach a still still bro ader group of clients if the lack of distrib distrib utio n channels and areas gett gett ing adjusted. The ow n brands are are w ell know n like the comp etitors as w ell. On that account, account, there could a problem of m arket share loss arising. arising. Accord Accord ing to t he SW SW OT Analysis Analysis on page 13, ther e is a big loyal loyal custom custom er base but a lack of brand aw areness and m arketing, although th e comp any is in view of th e financially financially aspect aspect very prof itable. 5.2 De Desir ed sit sit uati on DM K wants to keep the m ilk price stable. stable. The The next logical logical step step of DM K w ould be to get higher market shares outside Germ Germ any and and introd uce its its brands in new m arkets. arkets. A potential new m arket could could be Asia. Deutsches M ilchkonto r is a richly com pany and should should o btain th ese circumstances. circumstances. W herefo re it seem seem s im port ant to keep the research volum e runnin g. By intr oducing a new strategy or acces accessing sing a new m arket t here are several goals goals necess necessary. ary.

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5.3 Gap DM K is operating in a segment segment w ith w ell- known brands and; acc accordingly, ordingly, an im portance of pro duct innovations. innovations. If a com com pany is w orking on such such an international scale scale with a profit of four b illion € per year, ther e is a huge need of occupation in ot her m arkets, respectively getting a bigger bigger foot hold in these import ant m arkets in Asia. Asia. Another gap is w ithin the functional strategy. strategy. Whereas the part of R& D and the finance is very w ell, ther e is a lack lack of market ing and distrib distrib utio n. 5.4 Limi 5.4 Limi ti ng co condit ndit ions A m arket entrance leads leads to a big financial financial expenditure, expenditure, a company restructuring and a lot of t im e. An access access to get a bigger bigger m arket share is estim ated w ith a tim e span span of t hree years. 5.5 Ne New go goals als of t he desir desir ed sit sit uati on: - Analysing Analysing of the Asian m arket and th e cultu cultu ral differen ces - Evaluate current legal regulations - Looking for joint venture, m erger or acquisition acquisition opt ions - Expansion xpansion rath er than red eveloping of the m arketing strat strat egy - Persevere ersevere competit ors and their m arket share share - Deciding w heth er m arket acces accesss seem seem s succe success ssful ful - Reconsidering of com com pany str str ucture This part show s th at th e gap gap com es up du e the lack of the distrib utio n areas. areas.

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Strategic choice

The part illustrates the differ ent strat egies w hich are considered considered and leads to a logical logical result how to im prove th e w eaknes eaknesses of DM K. The str ategy to expand the com pany in other m arkets is the Grow th Strat Strat egy. This m eans ther e is a grow th in t he staff, staff, the pro fit and pro duct port folio but it leads also also to m ore costs, costs, expenditures and an increasing increasing in the staff and presumably a change or expansion in the pr oduct p ort folio t o serve serve new goods for new clients clients with a other social, ocial, cultural cultural or dem ographical ographical background background and reach their needs. There are three options to acces accesss new new m arkets for DM K Option one, m erger or acquis acquisition ition w ith/ of an Asian Asian com com pany or a company w ith experiences experiences of the market M erger: There There is the possibility possibility to loo k for an Asian Asian com pany and m erge wit h it. The plus of this option is that the Asian Asian com pany can can learn fro m the t echnologies echnologies of DM K, the procedures and and u se the success successful ful com pany strategy. The costs costs of a m erger are quit e high due t o t he sizes sizes of bo th companies. companies. How ever, the prof it in Asia can can be m uch higher if they are offering w ith th eir distribution distribution channels channels and the nam e in a; for this company, well- know n m arket. Acquisition: The The benefit s are slightly slightly the same like by the m erger opt ion but an acquisition acquisition is mu ch m ore exp exp ensive. ensive. Another im portant aspect aspect is that a potent ial com com pany w hich is interested interested in an acquisition acquisition is m ostly unsuccess unsuccessful ful and un able to w ork alon e. Therefo Therefo re, the costs of restru cturing and im pro ving are also also expensive. This opt ion seem s therefore p roblem atically. atically. The The suitability could also not b e given since since there are no experiences in this social social cultu cultu ral environm ent. But the pr oject is feasible. Option tw o, joint venture of an Asian Asian com com pany or a com pany w ith experiences experiences in this market A joint ventur e w ith a company w hich has equal rights rights is the easies easiestt w ay and wou ld not b e that m uch expensive. expensive. Anoth er benef it is the cost and risk sharing. M oreover , DM K has also also experiences in building up joint ven tur es. es. The pr oject seem seem s feasible feasible and due to th e risk risk m inim izing izing also also suitable and acceptable acceptable as w ell. Option three, own entrance Option t hree is related to an ow n acces accesss in th e m arket. The costs are quite high, the nam e is presum presum ably unknow n in Asia Asia and and there is no know how or experience experience in the m arket. Bes Besides ides,, DM DM K has to build up , by a botto m up strategy, completely new distribut distribut ion channels channels and and find new suppliers. suppliers. The The expendit ures in costs costs and tim e are very high. The suitabilit suitabilit y could also not be given since since ther e are no experiences in th is social cultu cultu ral enviro nm ent. But t he pro ject is feasible. feasible.

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The altern altern atives are are based on the SW SW OT analys analysis is and t he confron tat ion m atrix. Below, ther e is a table w ith im portant aspects aspects and suitable rating rating of t he opt ions. ions. The rating system system has been estim ated as follow s: 1 = very well, 2, 3 = mid dle, 4, 5, and 6 = very bad.

Strategic confrontation matrix

Option one

Option two

Option three

Time

4

2

5

Costs

4

3

5

Volume of restricting restricting

5

1

1

Expected pro fitabilit y

3

2

4

Risk of failing

1

3

5

Acceptabilit Acceptabilit y

3

2

4

Feasibility

2

1

4

Suitabilit y

2

1

2

Sum

23

15

30

In light light of t he results, results, the best option to int roduce in the m arket of Asia Asia should should be option t w o; building up a joint venture.

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Implementation

The im plement ation part is describing describing the steps how to im plement the strategy. strategy. The im plem entat ion p rocess is very easy, easy, especially especially because because there are a lo t of exper iences in join t ventu res by DM K. Deutsches M ilchkonto r can use use its technologies to pr oduce th e produ cts and and get the chance chance to learn how other companies w ork. The The joint ventures have have to build up new distribut distribut ion areas and and get new local supplier supplier s in Asia. Asia. The cultural conversion conversion rather than adjustm ent is one of t he im portant aspects aspects in t his project. project. There is a huge risk risk by dealing w ith a differ ent social social or cultur al behaviour. DM K needs to understand and im plem ent an Asian Asian w orking etho s. The factional and oper ational planning is described described on page 17 or illustrated illustrated below : New goals goals of the d esired esired situation: -

Analysing Analysing of the Asian m arket and th e cultu cultu ral differen ces Evaluate current legal regulations Looking for joint venture op tions Expansion xpansion rath er than red eveloping of the m arketing strat strat egy Persevere ersevere competit ors and their m arket share share Reconsidering of com com pany str str ucture Considering of prod ucts; consumer n eeds Considering onsidering how to operate and building laboratories. laboratories. Introducing

The organizational organizational structur e w ill be the same since the joint ventu re is mor e or less a subsidiary subsidiary and therefore n ot affecting the com pany. However, the joint venture needs an individual individual organization, organization, ordin arily consisting consisting of bot h com panies. The organization organization includes an inform ation system system , an ow n m ission, ission, separate separate goals; goals; this m eans separate separate to the com panies w hich are operating m ainly in other m arkets with other conditions, a clearly clearly structured structured m anagem anagem ent plan and a leadership leadership m odel. The Hum an Res Resource ource M anagem anagem ent can be used used fr om DM K due to it s high high standard, standard, the qu ality and the t echnologies w hereas the staff should be locally based based to red uce costs costs and and bon ding the jo int venture w ith t he areas and create create a friendly and t rustful im age. age. The implem entat ion of a joint v entu re seems very eas easy due to t he risk, costs costs and respon respon sibility sharing. If DM K chose chosess a company to build up t he joint vent ure, they should should be aw are that th e partn er gained experiences in the Asian market.

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Conclusi onclusion on and Reco Recomm mm endati on

Deutsches Deutsches M ilchkontor ilchkontor is a healthy healthy com pany w ith a lot of benefits. The The comp any is m arket leader and its brands got a nice image. There There are a lot of str ength s and oppo rt unit ies but th ere are also also w eaknesses eaknesses and th reats as w ell, especiall especiallyy by access accessing ing a new m arket w ith a dif ferent culture. The recomm endation is to expand expand in t he Asian Asian markets by building up a joint venture w ith a com pany w hich gained gained already experiences in this m arket. The advice advice is to exten d th e chances chances of DM K to get a leading global global player. The The opt ions seem seem s hopef ully and pr om ising a good fut ure. The expansion expansion rat her t han gettin g a bigger m arket share should should be the n ext logical step.

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Refer ences



 









Brands Brands - DM K Deutsc Deutsches hes M ilchkontor ilchkontor GmbH. (n.d.). (n.d.). DM K Deutsc Deutsches hes M ilchkontor ilchkontor GmbH. Retrieved etrieved October October 22, 2011, 2011, from from http:/ / w w w .dmk.de/en/ .dmk.de/en/ produkte-m produkte-m arken/m arken/m arken. arken.htm htm l DM K. (n.d.). (n.d.). DM K. Retrieved October October 23, 2011, from htt p:/ / w w w .dmk.de/ de/index.htm l M anaging anaging bodies - DM K Deutsches Deutsches M ilchkontor ilchkontor GmbH. (n.d.). (n.d.). DM K Deutsches Deutsches M ilchkontor ilchkontor Gmb H. Retrieved Retrieved October 22, 2011, from http://www.dmk.de/en/dmk/organisation/organe.html Produkte - DM K Deutsc Deutsches hes M ilchkontor ilchkontor GmbH. (n.d.). (n.d.). DM K Deutsc Deutsches hes M ilchkontor ilchkontor GmbH. Retrieved etrieved October October 21, 2011, 2011, from http:/ / w w w .dmk.de/de/ .dmk.de/de/ produkte-m produkte-m arken/produkte.html arken/produkte.html Profit- DM K Deutsc Deutsches hes M ilchkontor ilchkontor GmbH. (n.d.). (n.d.). DM K Deutsc Deutsches hes M ilchkonto ilchkonto r Gm bH. Retrieved etrieved October October 22, 2011, 2011, from http:/ / w w w .dmk.de/de/ .dmk.de/de/ dm k/zahlen. k/zahlen.html html Research esearch & Develop m ent - DM K Deut sches M ilchkont or Gm bH. (n.d.). (n.d.). DM DM K Deutsches M ilchkontor ilchkontor GmbH. Retrieved Retrieved October October 22, 2011, from http:/ / w w w .dmk.de/ en/ forschungforschungentwicklung/index.html Strategy - DM K Deutsches Deutsches M ilchkontor ilchkontor GmbH. (n.d.). (n.d.). DM K Deutsches Deutsches M ilchkontor ilchkontor GmbH. Retrieved October 22, 2011, from h t t p : / / w w w . d m k . d e / e n / d m k / s t r a t e g i e . h t m l

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10 Exhibits Exhibit 1.1 Organizational structu re, Deut Deut sches sches M ilchont or ............................................................................... 5  Exhibit 1.2 firm struct ure, DM K Deutsches M ilchkont or Gmb H ............................................................................ 6  Exhibit 1.3 brand s, DM K Deut sches sches M ilchkont or Gmb H ...................................................................................... 6  Exhibit 1.4 Prof Prof it - DM K Deut sches sches M ilchkont or GmbH. ...................................................................................... 7 

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