Stage 2: Strategic analysis
TEAM A
EXTERNAL ANALYSIS - INDIVIDUAL RESPONSES
1
Stephanie Booth
11 Feb 2016, 17:33Edited by the author on 11 Feb 2016, 17:34
Brasil Foods Key Success Factors
A Complete Supply Chain Management Approach
Brasil foods will need to effectively manage relationships with both consumers and suppliers. Information
sharing and systems integration with suppliers will be key, as cooperation should drive the business
forward. Working closely and managing the entire supply chain will give Brasil foods some wiggling room
if rising costs becomes a problem. They can’t control the world economy, but you can definitely control
the value of your relationships.
Brasil foods will need to be proactive in organising and managing operations, taking advantage of all tools
available to decrease the impact that external factors can have on performance.
Product Innovation
Certain processed food categories are impulse purchase products where consumers look for something
new and different; visibility through attractive packaging is likely to boost consumption. Increasing time
constraints amongst the consumers has boosted consumption ready-to-make products. Innovation in
packaging and product usage is an important success factor.
A Focus on Production Efficiency - Competitive Pricing
By focusing on managing input, inventory control, and decreasing waste. Control over costs will help
Brasil Foods with consumer expectations of competitive prices, and free up funds for new products to
meet consumers varying and changing needs, as more of them “move into cities, entering the
workforce… time and convenience were increasingly important considerations in food purchasing
decisions.” Information systems with capabilities that deliver optimisation calculations of product mix,
tracking of inventory levels & cost and automated quality controls will enable Brasil Foods to continue and
improve controlling costs and increase profit margins, improving production efficiency.
Penetration in Domestic and International Markets
Brasil Foods need to “focus on strengthening brand loyalty and preserving its existing market share.”
Focusing on the bigger domestic opportunity: foodservice, “a fast-growing market as more Brazilians
dined out.” Similarly build brand loyalty in international markets and “acquire companies with distribution
capabilities in order to build direct relationships with retailers.”
Adapting to Government Regulation
Government regulations are a constant and critical concern for Brasil Food. The CADE and other national
regulatory boards as they build a multinational presences in Africa, Asia the Middle East and Latin
America. Although essential for customer safety, regulations can slow down the introduction of new
products and have a negative effect on the manufacturing of existing ones. Basil Foods will have to be
fast and flexible to incorporate new regulation once it comes into play. There is no substitute for keeping a
close eye on regulatory developments, as these are likely to signal future trends. These regulations affect
all companies in the industry, which could lead to a small but substantial window of opportunity to adapt
faster than competitors. Highly advanced information systems, could integrate new regulations with
existing business processes ensuring compliance in food processing.
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2
Helena VereczyPost 3 in reply to 1
11 Feb 2016, 21:02
The STEP analysis
By studying the sociological, technological, economic and political (STEP)
factors, it is suggested, an organisation can understand the potential effect
of very high level shifts in the general operating environment; it concerns the
macroenvironment (B301, B2, p. 17).
Fahey and Narayanan have linked various elements together as they
suggest, for instance, that developments in social expectations will influence
technological factors and vice versa (B301, B2, p. 18).
The STEP analysis of BRF
Looking at the Brasil Foods (BRF) organisation, the diagram suggest that
there are many sociological factors affecting the organisation.
Domestic market
In their domestic fast growing market, people are moving into cities and
raising their incomes. Rapid economic growth, as suggested by the case
study, has an impact on the sociological factors. Meaning that more people
are dining out and spending on food in Brazil was forecasted to grow (HBS,
March, 2012). A study has shown that people spent just 15 minutes on
average cooking a meal. All of this has implications for BRF. The cooking
time spend means that they need to concentrate on production of meals that
are done quickly, including ingredients for sandwiches as they are a common
choice.
International market
In the international market they need to consider the cultural differences as
in some cultures there is no market for pork products. This will affect the type
of products they will be able to export globally, for example having a Halal
line for Middle Eastern.
International and domestic market
One of the most economic factors identified by the analysis as affecting the
BFR are competitors’ prices for equivalent products. This requires close
monitoring which is affected by the availability, effectiveness and quality of a
sophisticated information technology (IT) system needed to constantly study
the market in order to allow for the organisation to adapt accordingly. Which
is a technological factor as the diagram suggests.
Political factors affecting the organisation, as the diagram suggests, is the
risk of trade bans due to safety problems with the products from a particular
region. In case of a trade ban, the organisation would not be able to operate,
therefore they need to ensure their products are made under strict safety
control and that they are producing across the country rather than in specific
region.
The violation of the CADE ruling, as shown in the diagram, is another aspect
the organisation has to keep in mind and control strictly which can be difficult.
With the domestic growth restricted, the organisation needs to focus on
expanding globally. This means that BRF needs to consider the local
markets and increase their understanding of them. The way to do this, for
example, is to have a management team that combines Brazilians who can
relate to the parent company with local people who understand the local
market.
To conclude, the analysis has highlighted many factors by which BRF is
affected and shown how the factors are interconnected. Therefore, BRF
needs to understand how these affect each other.
References:
Harvard Business School (2012), Brasil Foods, Rev: March 1, 2012, Boston,
Harvard Business School Publishing
The Open University (2014), B301 Block 2 Strategic analysis, 2nd edition, first
published (2009), Milton Keynes, The Open University.
Word count: 481
3
Martyna ProrokPost 4 in reply to 1
11 Feb 2016, 21:15Edited by the author on 11 Feb 2016, 21:24
Porter’s five forces model (1980) of Brasil Foods focusing on the domestic environment:
Threat to entry:
General threat to entry in to the industry is relatively high
especially due to the available room for operation and
expansion in an agricultural sector.\
Barriers to entry:

Supply-side economies of scale- BRF has a network of 20,000 producers
and 60 industrial sites); BRF also has its own supply chain and uses 9,000
vehicles to deliver the goods;

Demand-side economies of scale- both brands: Perdigao and Sadia are
well known and desirable across the Brazil and customers are willing to
pay more for those products;

Customer-switching costs- the switching costs are low, the consumers
can simply buy a product of another brand;

Capital requirements- a new entrant would need to invest a large
amount of money in order to be able to compete with the BRF due to its
well established production and supply chain processes;

Incumbency advantages independent of size- the BRF as a well
established organisation with a such an amount of producers has an
advantage over the potential entrants who would not have a direct
access to such large network of ‘raw materials’;

Equal access to distribution channels- 50% of foodservice still informal
hence there is a room for new entrants to fulfil this ‘gap’;

Restrictive government policy- for a long time CAED was against the
formation of the BRF (even though the government supported it)
because the antitrust believed this merge would interrupt the domestic
competition and raise the prices.

The threat of substitutes:
There are other companies offering similar products this threat is low
due to the customers’ trust and popularity in BRF’s products. However
customers demand products with a longer shelf-life.

The power of suppliers:
BRF uses the 3rd party producers however they do provide them with the
food, medicines and technology hence the BRF can be classed as its own
supplier.

The power of buyers:

Bargaining power- BRF has some large customers like: McDonalds,
Burger King but those do have a bargaining power as can switch to
another product from another company but others like CBD, Carrefour
and Wal-Mart hold less of this power due to the end customers
demanding the company’s products;

Price sensitivity- The BRF’s customers are prepared and willing to pay
more for company’s products due to its loyalty to the brand.

Rivalry among existing competitors:
Perdigao and Sadia products have been rated the most valuable brands
within their industry regardless of the similar products being offered by
the competitors. The BRF also offers a wide variety of products at
different price ranges to suit every customer, hence the rivalry may be
high but the position of BRF is still safe.
Summary (the level of threat/pressure):

General threat to entry- medium


The threat of substitutes- medium to high
The power of suppliers- low


The power of buyers- low to medium
Rivalry among existing competitors- medium
References:
The Open University (2014) B301 Making sense of strategy, Book 2, ‘Strategic analysis’. Milton Keynes, The Open
University
The Open University (2014) B301 Making sense of strategy, ‘Readings’. The Open University, Milton
Keyneshttps://learn2.open.ac.uk/pluginfile.php/1554032/mod_resource/content/5/11K%20case%20study.p
df
4
Eve Kilroy
11 Feb 2016, 23:07
Brasil Foods Case Study
Drivers of Cost advantage.
Economies of Scale: Brasil foods will take advantage of Economies of scale, particularly with the
merge between Perdigao and Sadia. It exists when ‘inputs result in lower unit costs’. BRF operates
60 units and has a supply network of 9,000 trucks and wants to invest £1.1billion to aid growth. They
have the operational power to be ale to deliver economies of scale across all fronts and brand value
is important to BRF. However they may be at risk as they have a lot of money ‘involved in
investment and planning’, which may impact their economies of scale.
Economies of Learning: BRF have over 60 years experience as a company operating in the food
production market. With this experience they can produce foods with few defects and control their
cost advantage. With a production chain, being described as ‘fine tuned machine’ they can optimize
their output accuracy.
Capacity Utilization: BRF make use of every part of the animal they are selling. They spread
capacity over 42 unites to maximize capital resources. They also have sights for Dairy, Soybean and
Margarine. Spreading production across sights ensures resources are used to capacity, generating
as much capital from the products as possible. BRF’s ‘IT’ system ‘studies the market to adapt
accordingly’ to help limit product waste; this will have a negative effective on the companies cost
advantage.
Drivers of Uniqueness.
Product Features and Product Performance: BRF utilizes all parts of its products, enabling every
part of an animal/unit to have a customer. As many of the products have a short life span, they aim
to not sell anything after it has surpassed more than a 1/3. Compared to Unilever BRF build its
products from scratch, which allow them to have a competitive advantage.
Complementary Services: All food, medicine and controls are provided by BRF to suppliers to
ensure a quality product.
Intensity of Marketing Activities: It is important to BRF to grow brand loyalty. Frozen foods,
particularly meat based are an important part of brazils diet; with BRF growing and marketing to a
‘domestic audience’ they are enabling themselves to play on the customers ideals of branded
products. An increase in income and the need for quick meals on the go BRF could take full
advantage of this opportunity.
Location: It’s important for BRF to be labeled as an international company aiming to expand around
the world in countries such as India, Argentina and the Middle East.
Skill and Experience of Employees: BRF believe ‘the people, and their ability to work together,
determine success’ and this starts in the development of both Sadia and Perdigao to work together
effectively. It is important for the people to understand different markets, BRF will have to assess
and work on this to make sure its people understand the global markets and not just that of Brazil.
Word Count: 477
5
Kris EdwardsPost 6 in reply to 5
11 Feb 2016, 23:54

image 1.1.PNG
Hi everyone,
Here is my submission, I had hoped to get some information attached before now for further work to
be done although issues with workload and other things have caused me to be unable. After
analysis of the near environment within Brazil foods I believe I have highlighted several areas where
strategic choices can be made and some areas where Brazil foods need to consider when
formulating a strategy.
Firstly I looked at Porters five forces, this framework as we all know analyses the external threats
from new entrants, buying powers, supplier powers, substitutes and competitive rivalry. I am
enclosed a mind map of analysis of these five forces with suggestions on what each force could
consist of. Firstly looking at threats from new entrants, from my perspective Brazil foods have very
little threat coming from new entrants, Brazil foods are a global business with an extensive supply
chain, operations and a vast range of products, the investment required from new entrants to gain
sufficient market share and start interrupting Brazil foods business is very high. Supplier power is
also very limited here which puts Brazil foods in a good position, they have an extensive supply
chain of circa 20,000 producers and within 100 kilometres, so this puts the organisation in a position
to drive costs down with suppliers. The main area of concern within Porters five forces I would
personally suggest would be from substitutions, they are large organisation similar to Coca Cola that
are importing products into Brazil and they are thousands of substitutions that could be made the
attached mind map figure 1.1 covers my analysis of Brazil foods using Porters five forces.
Secondly I looked at competitor analysis using Porter’s generic strategies (Porter, 1985, p.12). From
my analysis and the reading on Brazil foods (Bell 2012), we know that Brazil foods have circa 3,000
products produced across Brazil and other countries and are targeting mid-market to premium
market segments. Due to the variation on the products and volume of different products produced it
would suggest that differentiation wouldn’t be an area of competitive advantage for Brazil foods
although they are able to save revenue through bargaining power over suppliers, the use of their
supply chain so competitive advantage could be discovered within the lower cost segment. By using
the facilities and networks open to Brazil foods they will be able to obtain cost leadership within the
food market, which would make them the lowest-cost operator in the industry.
STAGE 2 TEAM A WIKI – Genaral Overview of
Final External Analysis by All Team Members
External analysis of Brasil Foods and the impact on the company.
The aim of the external analysis is to assess the far and near environment of Brasil Foods and
determine what effect the environment has on the company’s operations.
Far Environment
The STEP analysis (Fahey and Narayanan, 1986) identifies the factors arising from the far
environment and how they affect Brasil Foods and its existing as well as potential operations.
A significant finding was within the sociological factors; outlining how customers’ behaviours and
expectations can be different in domestic and international markets due to the cultural differences,
therefore the company must be able to adjust their products accordingly, e.g. Halal line.
The political factors also have a massive impact on Brasil Foods especially, the CADE whose
restrictions and rulings caused the delay in the organisation’s domestic operations.
Analysis, (attached) has also pointed out the importance of the economic and technological factors.
Brazil’s economic growth has been beneficial to the company, but has also had some implications as
customers became more demanding and growing competition has lead the prices down.
However, legal and environmental factors should also be considered.
Near Environment
The near environment analysis of the market in which an organisation operates is about what drives
the market and the competition.
Porter’s five forces model (1980) portrays an analysis, (attached) of the external threats arising from
the industry the BRF is facing. By using this framework it can be established that Brasil Foods is a
global business with a safe position within its industry due to its extensive supply chain, operations
and vast range of products. However the threat of substitutes is relatively high the company is able
to keep its strong brand position by having a power over its suppliers and customers.
The competitive environment analysis using Porter’s generic strategies (1985) and Grant’s strategic
group map (2013) helps to understand the position of BRF within its industry's competitive market.
These analyses suggested that BRF should take advantage of the drivers of cost advantage and
uniqueness held, (attached) because, they compete in markets where organisations focus on
keeping the costs down and on differentiation in order to generate competitive advantage for
themselves.
The key success factors, (attached) and outline how they relate to Brasil Foods as identified by the
analysis are:
1. A Complete Supply Chain Management Approach
Brazil Foods needs to effectively manage relationships with customers and suppliers to optimize
industry performance.
2. Product Innovation
Brazil Foods needs to develop variations of what the customer wants with attractive packaging to
deliver customer satisfaction and grow their market share.
3. A Focus on Production Efficiency - Competitive Pricing
Brazil Foods needs to ensure that they focus on managing input, inventory control and decreasing
waste, meeting consumer pricing expectations enabling financial growth.
4. Penetration in Domestic and International Markets
Brazil Foods needs to focus on strengthening brand loyalty and preserving its existing market share.
5. Adapting to Government Regulation
Basil Foods will have to be fast and flexible to incorporate new regulations once they come into play,
ensuring compliance and meeting government and consumer expectations.
References
Fahey, L. and Narayanan, V. K. (1986) Macroenvironmental Analysis for Strategic Management, St
Paul, MN, West Publishing.
Grant, R. M. (2013) Contemporary Strategy Analysis, 8th edn, Chichester, Wiley.
Porter, M. E.(1980) Competitive Strategy: Techniques for Analysing Industries and Competitors,
New York, Free Press.
Porter, M. E.(1985) Competitive Advantage, New York, Free Press.
The process USED IN Analysing
First we held a discussion in the TGF about what models we were going to use and who was going
to cover each area for the individual postings. Helena covered the far environment using STEP
model, whilst Kris, Martyna and Eve covered the near environment. Both Kris and Martyna focused
on Porter’s five forces model and Eve looked into drivers for cost advantage and uniqueness. Whilst
Stephanie focused on pulling together the industry KSFs and how they are related to Brasil Foods.
Martyna pulled together and posted the first draft of the wiki with all other team members proof
reading and editing sections to make sure nothing was missed out and to bring it within word limit.
We had a lot of discussions about certain aspects of the final summary.
- Differentiation
- If the organisation is able to control the threat of substitutes
- Whether to include statement about what the BFR were able to see by doing Porter's and Grant's
analyses
- Grammar
We have been able to agree on most aspects by voting or other means.
The most difficult aspect to agree on was the actual wording of sentences as everyone wanted to put
their ideas forward.
Another aspect that needed clarification was staying away from proposing the strategic direction of
the organisation as this was not part of this process.
Words: 222