Associated British Foods: Comprehensive Strategic Analysis Report

This report offers a comprehensive strategic analysis of Associated British Foods (ABF). It begins with an introduction to strategic concepts, followed by an examination of ABF's growth opportunities and emerging threats using PESTLE analysis. The report then assesses industry attractiveness using Porter's Five Forces model. A detailed analysis of ABF's unique resources is conducted through accounting ratios and an exploration of intangible resources. The value chain concept is applied to ABF, breaking down primary and support activities. Furthermore, the VRIO framework evaluates ABF's resources, and a TOWS matrix is used to develop strategic options. Finally, the report assesses the selected strategy using SAFE criteria, providing insights into how ABF can leverage its resources for competitive success.

STRATEGY IN PRACTICE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
a) Growth opportunities and emerging threats for Associated British Foods..............................1
b) Industry Attractiveness............................................................................................................2
TASK 2............................................................................................................................................3
a) Analysis of Unique Resources of Associated British Food company through accounting
ratios and intangible resources.....................................................................................................3
b) Value chain Concept With Associated British Food ..............................................................4
Inbound Logistic .........................................................................................................................4
TASK 3............................................................................................................................................6
REFERENCES..............................................................................................................................13
APPENDICES...............................................................................................................................15
SWOT Analysis ........................................................................................................................15

INTRODUCTION
Strategy in business are regarded as the alternative to mainstream strategies through the
attempt of shifting the attention from mere focus on effects of the strategies over performance
alone for more comprehensive and the in-depth analysis that takes place in the strategy
formulation actually, its planning and the implementation and activities for doing and thinking of
the strategies. The present report would provide the analysis of the strategic position of the
organisation through the growth opportunities and the emerging current threats in the industry
and what are industry attractiveness. It would also discuss the unique resources, distinctive and
the core competencies of chosen company using the strategic tools such as the value chain
analysis, VRIO and SWOT analysis. Lastly it would conduct TOWS matrix to assess the
strategic options for organizations and selection of more appropriate strategies. The selected
strategy will be analysed using SAFE criteria that is very useful and helps in assessing the assets
and liabilities of the company. It will help in analysing the strategies that would help in having
appropriate strategy and provide how company should utilize the resources for competing
successfully in the business environment.
TASK 1
a) Growth opportunities and emerging threats for Associated British Foods
The growth prospects and the emerging threats as posed by the external environment of
Associated British Foods can be determined by using the PESTLE analysis. Such analysis done
by the management shall help in studying the elements in the company's external environment
which are impacting its business operations. Such factors are:-
 Political Factors- There are certain political factors that impacts the British Foods and its
profitability. One of the prominent element is the introduction of the sugar tax in UK.
Such imposition can be an emerging threat for the retailing foods business (De Paula,
2019). The tax liability shall be an additional burden which shall reduce the profitability
of the company. Apart from this the Brexit is also posing threat to the industry as it shall
separate UK from the European Union which leads lot of economic, customs, supply
chain issues. Also, the military invasion is a threat as it shall cause divestment from the
ventures.
 Economic Factors- The macro factors decides the operational efficiency of the business.
The GDP growth of the country, its financial markets, interest rates, employment level
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etc. forms part of the macro environment (Hirsch, Lanter and Finger, 2020). These
macroeconomic factors are favourable in UK so it can generate growth opportunities for
the British Foods. If the potential customers have higher disposable income then it shall
boost the revenues of the company. The tax policies also impact the business of the
company like the imposing of sugar tax.
 Social Factors- The social factors like the trend and the fashion impacts the business both
in positive and negative way. If the impact is positive it shall lead to developing growth
prospects for the company and if such impact is negative it shall drive threat to the
company (Nandonde, 2019). In UK the people have become more conscious for the
health and well being. This drives opportunities for the company to enter new market of
healthy and organic foods. Also, the popularity of the various substitutes for the meat
foods have given the company a chance to derive competitive edge.
 Technological Factors- Technological advancements are generating opportunities for
expansion like the genetically modified ingredients can lead to diversifications for the
industry and the British Foods can capitalize upon this to target new segments of
customers and deriving the competitive advantage. More involvement of the customer
technically help the marketer do the promotions of the company through the digital
marketing campaign and by optimizing the website to generate brand awareness.
 Legal Factors- The newly developed laws have always posed threat on the company and
its practices. Abiding by the laws snatches the freedom of the company like several laws
for the safety and security of consumers, quality standards etc. law to abolish the EU
sugar sales quota has developed expansion opportunity for the company as there shall be
no limit to export, and they are free to try new markets.
 Environmental Factors- Since the company has not got much of wastage generation so its
stands out over other competitors in the industry. The lesser use of plastic and its
recycling has certainly put some restrictions over the operations of the business which is
a threat. But for this if they change the packaging without use of plastic this shall help
them attract customers.
b) Industry Attractiveness
The porters five force model shall determine the attractiveness of the industry.
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 Threat of new entrants- The threat of new entrants in the food and beverage industry shall
remain high because new entrants can involve price discrimination and create better value
for the consumers. To avoid such new competitors they have to gain economies of scale
for attaining low cost per unit, spending more on the research and development activities
so that the industry seems very dynamic to the new entrants (Oraman and et.al. 2018).
 Bargaining power of Suppliers- The bargaining power of suppliers is high in the food and
beverage companies as they can negotiate and lower down the company's profit margins.
To tackle this the British Foods can build an efficient multiple suppliers chain so that
they can retain the power to negotiate. Also, they can do the backward integration by
merging with the suppliers, and they should diversify their usage so that if price of one
raw material goes up they can experiment with another.
 Bargaining power of Buyers- To avoid higher bargaining power of the buyers they should
build a larger consumer base and innovate the products so that they can charge according
to their profit margin. Also by targeting niche market the freedom of price and power to
negotiate remains with the buyers.
 Threat of Substitutes- It is an important factor that describes how attractive an industry is
like if there is low substitutes for the market it shall be more profitable for the company.
If British Foods wants to avoid the risk of substitutes they need to create value of their
products. Similarly, they should also try increasing the switching costs so that it becomes
difficult for the consumer to switch (Souza-Monteiro and Hooker, 2017).
 Rivalry amongst existing competitors- There is cut throat competition in the industry and
so to retain the market share British Foods have to strive a lot. They can avoid such
circumstances by developing the core competencies and also can focus on differentiation
so that can achieve the competitive edge over the competitors. Merging or collaborating
with the competitors for economies of scale is also a good staretegy.
TASK 2
a) Analysis of Unique Resources of Associated British Food company through accounting ratios
and intangible resources.
Financial ratios of the company helps the firm evaluate its position rgarding profitability, assets
and debt paying capacity.
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Profit Margin Ratio of the organization in the year 2018, 2019 and in 2020 are 6.47, 5.55
and 3.27 respectively which is showing that company's profitability has reduced from 2018 to
2020 it means its sales of product has also declined that has resulted low profitability. Reduction
of irrelevant cost, cost control strategies ned to be done by management of firm so that it can
again pickup the uptrend profitability (Associated British Foods, 2020).
Current ratios shows that how much company have current assets to pay its current
liability. The associated British food have current ratio of 1.63, 1.82 and 1.83 in the year 2018,
2019 and 2020 respectively which clearly shows that company's management is effectively using
its current assets. It's also representing that organization current assets are effectively used by the
company.
Return on equity ratio shows how much company is paying on its equity, ratio for 2018,
2019 and 2020 are 11.48, 9.41 and 4.84 receptively which shows that company's retuning
capacity has decreased from 2018 to 2020 that has been declined for 5-6% which need to be
improved through proper allocation of resources.
From the analysis of accounting ratios and intangible assets it can be state that the company have
effective management of current resources and its profitability is also good when compared to its
industry competitors, and it need to improve its return on equity.
b) Value chain Concept With Associated British Food
A value chain is a business model that describes business activities to produce product or
service. Associated British Food uses value chain for bringing conception of their products to
distribution of products and everything in between of these two steps (Eling and Lehmann,
2018). In this concept the activities are divided into two parts, primary activities and supportive
activities.
Primary activities of Associated British Food
Inbound Logistic
Associated British Food need to identify each activity that is getting transformed from
raw material to Finished good. It need to analyse the activities to avoid problems in product
dvelopment phase. The inbound logistics of the firm is obtaining raw materials and distributing
raw material.
Operations
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The important activities that includes in operation of the organisation is testing,
assembling, packing and machining (Hernández and Pedersen, 2017). Analysis of operational;
activities is important to improve production, maximization of efficiency of work and being
competitive to be on top position in industry.
Outbound logistic
Outbound logistic of company includes all those activities that help the company to
deliver its products to customers through various distribution levels. The company can analyse
its outbound logistic to determine its optimal cost and product delivery time without damage of
any product. This step includes all the activities like warehousing, scheduling, handling and
transportation of goods. It need to take more care in the case of perishable products.
Marketing and sales
In this step the company mentions all those benefits that company is providing to its
customers than its competitors.
Service
Customer value post sales services more important which make them loyal towards
company's product or services.
Secondary activities
Secondary activities help the company to use primary activities in systematic manner
Firm Infrastructure, human resource management, technological development and procurement.
all these factors helps company to grow along with establishing primary activities in the best
possible way.
c) VRIO concept
Value
Associated British Food Have various resources like Research and development team,
financial resources, technological resources, business structure that help the company to add
value in their process of working (Indartono and Wibowo, 2017).
Rarity
Rare resources that Associated British Food have are Human resource management with
skilled knowledge, Product innovation, research and development, compensation policy and
financial budgeting are rarity sources
Inimitable
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these are those resources that Associated British food company have employees,
financials sources budgeting, technological advancement and business structure, product
innovation.
Organisation Wide Supported
Associated British food company have strategic management, HRM, reporting structure,
budgeting system and compensation policies that company have which serves the firm
advantages to be on to ton position as compared to other competitors (Hernández and Garcia,
2018).
Resources Value Rarity Inimitable Organisation
wide supported
Human Resource
Management
   
Research and
development
 
Technological
resources
 
Product innovation  
Financial Budgeting    
Compensation
policies
 
Business Structure   
In the VRIO analysis it can be state that human resource management and financial
budgeting are the core competency that help the Associated British food company to stand
strongly in the competitive market.
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TASK 3
TOWS is a metric used by the organisations to assess and develop strategies for the
business. It helps in developing number of strategies which would help in growth and
development of the company. Associated British Foods is diversified international foods,
ingredients and the retail group that is operating in more than 53 countries. It has headquarters in
the London, UK (Pinto and et.al., 2017). The ingredients of company is 2nd largest producer in
world of baker's yeast and sugar and have major production of enzymes, emulsifiers and the
lactose.
TOWS matrix
It is an effective tool which will help the managers in developing the most effective
strategy that will increase the efficiency and productivity of business. The four types of strategies
could be formed as follows
SO strategies – use of internal strengths to get benefits from external opportunities
WO strategies – It aims to improve the internal weaknesses taking advantage of the external
opportunities
ST strategies – use of strengths to reduce and avoid impact of the external threats
WT strategies – using defensive tactics to reduce internal weaknesses and to avoid external
threats.
TOWS analysis of Associated British Foods
SO – Strategies WO strategies
 As company is leading it could increase
production to new geographic regions
and offer discounts and offers that
small retailers could not provide.
 Adopting new technology to develop
new products as people are becoming
more health conscious, and they are
preferring high hygiene and nutritional
contents in products (Ehgartner 2018).
 Establishing units in lower tax regions
 Effective marketing strategies to
increase the brand awareness among
new regions.
 Hiring high skilled employees for
operational effectiveness that could
operate new and advanced tools and
machines.
 Increasing reach through new
distribution channels after assessing the
requirements of different business
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and that would decrease the costs and
focus over quality management at
affordable prices.
 Increasing brand awareness using
effective promotional strategies and
offer products over online and offline
platforms.
markets.
 Asian markets are still exposed to the
retail shopping and ABF could take
advantage through the market
expansions offering products at
affordable prices.
ST strategies WT strategies
 Using penetration strategies in new
markets as food market has high
competition
 Meeting customer demands through
new products assessing the customer
tastes and preferences
 Increasing the efficiency using
technological advancements and
creating brand value in country where
they are operating
 Increasing customer loyalty providing
quality products at the reasonable
prices
 Making strong benchmarks for
performance targets and reducing the
existing weaknesses of products.
 Adoption of technology for increasing
productiveness and to remain
competitive in the market
 Assessing the government policies that
are beneficial for the company.
 Assessing the foreign market and their
culture to provide the products that will
best succeed in the market (Sai, Sevruk
and Tunitska, 2018).
Carrying out the above TOWS analysis ABF has come with two new strategies that
would help the company in its growth and development. The two strategies chosen by the
company are
 Strategy 1: New products in existing markets
 Strategy 2: Expanding to new geographic regions
Strategy 1 New Products in existing products
ABF under this strategy would be developing new products for the existing markets in
which it is operating. It would be using technological advancement for the development of new
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products that are healthy and nutritional for the consumers. The new products are mainly focused
towards increasing the strength of human body and to strengthen the immune system without
losing the tastes of products. Using the Ansoff matrix the following strategy falls under product
development as ABF is introducing the new products in existing market. It would carry out the
market analysis for assessing the needs and demands, current trends of customer tastes and
preferences (Zhan and et.al., 2020). Based on the market and customer analysis healthy and
nutritional products would be developed to gain the customer attention and acceptance.
Strategy 2 Expanding to new geographic regions
The strategy suggests the company to expand the business over new geographic regions
in which company is not present. Company has to assess the different markets their needs and
demands and that provides beneficial opportunities for the business to establish their business in
other countries. It is known as market development under Ansoff matrix that focus over entering
in new markets using the existing products. In this strategy company would not focus over
completely introducing new products but developing new markets and providing products by
light modifications that would best fit the consumer tastes and preferences. It would require the
company to identify the government policies of countries, fiscal and monetary policies different
tax over products and expenses and select the country that would help in reducing the cost of
establishment (Bodolica, Spraggon and Soueid, 2019). For competing successfully in the new
market it has to introduce new marketing and promotional strategies to increase the brand
awareness among customers.
Strategic Option and evaluation using SAFe
On further analysis of the market trends and businesses company has analysed that
expanding in new markets would require additional resources and also require raising new funds
for the business. Therefore, company has adopted strategy 1 for the company based after
assessing the existing economic and business trends. Strategy 1 less requires less investment and
also exiting resources could be utilized for the strategy. Development of the new product would
required advanced technology and market analysis identifying the customer tastes and
preferences. Research and development has to be carried out for the development of products
that will best satisfy the needs of consumers keeping their health in mind.
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Selection of right strategy is a critical task for the business, it has to be selected after evaluating
the implementation possibilities and effectiveness for the business. The strategy of developing
new products is more beneficial and it is evaluating the Safe criteria
Suitability
It is considered as important factor in this criteria as suitability of option is dependent on
whether strategy will do what is required by the company or not. Suitability is assessed based on
the various criteria like environmental suitability, capability suitability and capability suitability.
The categories are further divided to reflect the need of company. The strategy is suitable if it
utilises the strengths of company effectively and overcome the issues that were identified in
analysis. It is also to be analysed whether strategy falls in line with the goals and objectives of
the organisation as whole. The chosen strategy is beneficial for the business as company is
having brand recognition in the existing market and also have strong distribution channels. It
could be also assessed that the customer loyalty is also high in the existing market and it would
not require to invest for advertisements and gain customer loyalty. As per the existing monetary
resources and financial performance it would be able to raise funds for capital expenditures of
advanced technology (Hanaysha, 2018). It would also require spending for research and
development of the products that would best suit the customer demands and expectations. On the
other if company chooses to adopt for expanding the business in new region it would be more
risky and costly. New establishment would require company to have funds for each and
everything. Also the economic slowdown prevailing in the countries would not enable the
company to recover the costs and investments. It would take time to establish its business and
gain market confidence for the products. It is difficult to gain customer loyalty and also it has to
sell products at initial stage at lower prices due to strong competition. Based on the existing
strengths and opportunities strategy 1 is more suitable for the company that aims at introducing
new products in existing markets.
Acceptability
This aspect of the SAF model which states about measuring return, risks and the
stakeholder reaction from a particular strategy. Returns are measured on basis of benefits which
the stakeholders would expect from strategy and it could be financial or non financial factors
depending over stakeholders decision. The return analysis is generally performed through
number of ways like profitability analysis, cost benefit analysis, real option analysis and the
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