Identify the problem
Valio faced few problems. They had lot of stakeholders
and they were a matured business that did not face much competition. There were
17 dairies and the company was founded in 1908.
They were bloated with people, after they started
change in the organization, we see that they had to downsize. That shows, the
company had more people that it needed. It also shows that the company was not
efficient.
They were not innovating either. As we see, they
started R&D only after they decided to undergo the change.
They were not innovating either. As we see, they
started R&D only after they decided to undergo the change.
One external challenge they faced, and I believe this
forced them to change, was Finland was joining EU, and that meant the Finland
market was being opened to EU members.
Diagnose the cause(s)
Valio was established in 1908 with 17 dairies, they
were manufacturing butter, cheese etc. Being a 80 years old organizations, they
got used to doing things in certain ways. Change must had been difficult. When
they entered into the period of change, they had to downsize and they had to
invest in research and development. Because of the number of stakeholders, the
organization was bloated. They had more employees than they actually required
and they did not invest enough in research and development. Basically the
organization was uncompetitive. The products costed more, so they did not have
low cost advantage either.
For Valio the causes were both internal and external.
The company was old and inefficient with the processes and people. The company
had cost disadvantage too. And they did not have any research and development section,
so they did not try to innovate. When Finland joined EU, they market was open
to other EU companies. And that made Valio vulnerable. Finland joining EU was
not something Valio had control over. This was external factor.
Prescribe possible alternatives
Valio decided to cut cost, downsize their employee
strength, shut down plants. After gaining access to external market, they
started looking for opportunities outside.
Viola should have searched for opportunity within
Finland too. They could invest in Research and Development and come up with new
products, such as low fat or sugar free products. They could come up with value
added products too. Such as milkshake or snack able cheese platter etc.
Externally, they should scout EU markets for new opportunities.
Whichever market has some product gap, Viola can produce that product to fill
the gap.
They can tie up with café or restaurants to be
exclusive suppliers too, and this can be done both in Finland and in any other
county.
Recommend a plan of action
I think they are right to close plants, and look for
opportunities outside in the EU markets, The accession of Finland in the EU in
1995 found Valio in the middle of a substantial reorganization project that
eventually changed its business model (Lamprinakis, 2012). They should look for
opportunities in other markets in EU, like if they can introduce any new
product or introduce lower cost and better quality.
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