Case Study on "Besagi List"

Case Study 10 pages (3070 words) Sources: 4 Style: Harvard

[EXCERPT] . . . .

Besagi Case Study

List and describe the issues or problems impacting on Besagi.

Because the company competes in the international marketplace, it is affected by a number of forces that are common to all organizations as well as some that are specific to its industry, and these are discussed further below.

Drought and unpredictable climate conditions in Australia and for overseas suppliers of generic seeds. According to U.S. government analysts, "Drought, robust import demand, and a strong currency have pushed the trade deficit up in recent years, while infrastructure bottlenecks and a tight labor market are constraining growth in export volumes and stoking inflation" (Australia, 2008, p. 3).

Paucity of casual harvesters for seasonal work for Besagi's seed production business unit. This problem appears to be recurring and the company's response to date has been inadequate and may be highly counterproductive in the future for reasons that are discussed further in question no. 2 below.

c. Dispute between management and labor concerning layoffs of redundant employees from ProSeed. This level of animosity between management and labor is uncharacteristic of historic patterns of labor relations in Australia and has adversely affected the ability of the company to accomplish its organizational goals in a cost-effective fashion. This is not to say that the vertical integration sought by Besagi was misplaced, but rather it was mismanaged. The approach itself was highly congruent with a number of other companies competing in the seed production industry. According to Shurman, Doyle and Kelson (2003), "In recent years, the life sciences firms have integrated vertically and now encompass much of the commodity supply chain, from chemical inputs to seed companies to farming (in the form of production contracts)" (p. 7).

While becoming more vertically integrated represents a worthwhile enterprise in many situations, the numerous consequences and challenges associated with mergers between organizations are well documented and should not have been unanticipated by the leadership team at Besagi. Simply categorizing hundreds of employees as "redundant" without making some type of plan to ease the transition is a sure recipe for a human relations disaster, and the impact on local communities can be pronounced and long-lasting. Any potential benefit that the company stands to gain from its acquisition of smaller competitor has therefore been offset by its loss of community goodwill and the need to compensate these redundant employees.

d. Increased pressure in global markets as a result of exchange rate fluctuations and increased governmental regulations which adversely affect seamlessness of international trade. These issues also affect a number of the other problems currently being experienced by Besagi as discussed above and further below.

e. Geographic supply chain constraints and inordinate use of overtime by manufacturing staff by virtue of the company's reliance on IntraOz as its distributor; IntraOz enjoys a commanding lead in the market with 70% share and only one competitor. Australia is a big country, of course, and the geographic distances involved between Besagi and its customers can be daunting. Nevertheless, this problem appears to be having an inordinately severe effect on the company based on its need to resort to expensive overtime to satisfy the distributor's unpredictable scheduling demands.

f. Loss of domestic and foreign market share to Bettaseeds Ltd. By virtue of its economic of scale realized through outsourcing to overseas suppliers. Notwithstanding Besagi's acquisition of a smaller competitor in the past, it is clearly being "out-outsourced" by its major competitor, Bettaseeds.

g. Need to identify additional overseas customers to prevent further erosion of its canned pet food profit base. This problem may be more complicated than it appears at first blush given the geographic proximity of Australia to many Western nations with high levels of pet ownership. Pet ownership in China, which is much closer to Australia for shipping purposes, for example, is not on par with the United States. Moreover, the case study makes it clear that the leadership team at Besagi failed to discern the recent trend in competition from new manufacturers of healthy and nutritious pet foods that are increasingly preferred over traditional brands and did not capitalize on the opportunity to provide seed products to these manufacturers. According to the Besagi case study, "This market is now firmly held by another of Besagi's Australian competitors, Nutriseed Ltd. Resulting losses to the company are in the order of $550,000 per year" (p. 4). While the company's strategic relationship to fund research with Seedscience may help offset some of these losses in the future, given the inexorable nature of the forces arrayed against it, this may be too little too late for Besagi.

h. Contracts with private pet shop owners are in jeopardy. Like the seed producing industry itself, pet shops have become increasingly concentrated among a few large concerns. The profitability of Besagi's contracts with private pet shop owners have dwindled in recent years, and even the company's efforts to counter this trend by establishing contracts with two such major pet shop franchises are threatened by increasing pressure from overseas suppliers and the company's nemesis, Bettaseeds.

2. Select three issues or problems, explain their causes, how Besagi has dealt with them. a. Three problems faced by Besagi and their resolution. Complex problems require complex solutions and the three problems discussed below are no exception. Fortunately, there are some viable problem resolution techniques to help the company manage these problems and these are discussed further below.

1. Geographic supply chain constraints and inordinate use of overtime by manufacturing staff by virtue of the company's reliance on IntraOz as its distributor. The company has responded to the unpredictable demands placed on its production schedule through the use of highly costly overtime for its union employees.

2. Paucity of casual harvesters for seasonal work for Besagi's seed production business unit. The company's response to this lack of available casual harvesters has been to sacrifice 15% of its crop. Unfortunately, this problem is not going to go away without some aggressive action on the part of Besagi management that will ultimately relate to the need to provide higher wages for such seasonal work if it expects to avoid the levels of crop loss that it has experienced in the past. The company's plans to cease cultivation in response to these problems are deemed ill-advised as noted further below.

3. Need to identify additional overseas customers to prevent further erosion of its canned pet food profit base. The company enjoys a number of strengths and advantages that can help it manage this problem. For example, the case study reports that, "Of some advantage to Besagi is the fact that growth in the Australian agricultural industry is at an all time low, and this is not expected to change. Whilst competition therefore is not expected to increase in the domestic market, Besagi will need to ensure it develops further strategies to withstand intense competition from overseas companies that produce seed products" (p. 4). Further, and despite the company's failures to date, the domestic market for high quality pet foods in Australia remains strong. For example, one industry observer reports that, "While Australian society has seen many changes in recent years, the value Australians place on their relationships with their pets remains constant. Pets are part of the family in 63% of Australian households" (Pet statistics, 2008, p. 1). While Besagi's primary competitor Nutriseed enjoys a commanding advantage in the Australia domestic market for supplying nutritious canned pet foods, the market is enormous with enough room for Besagi to compete: "The pet care industry is one of the largest in Australia. It contributes around $4.62 billion to the economy annually and employs 44,700 people. In aggregated terms, the pet care industry is among the largest in Australia - both in terms of turnover and employment" (Pet statistics, p. 3). The case study was unclear concerning why the company was willing to forego this potential opportunity in favor of simply resorting to overseas sources, but this issue should definitely be on the Besagi management agenda in the future.

b. Would you have done anything differently? Why/why not?

1. Geographic supply chain constraints and inordinate use of overtime by manufacturing staff by virtue of the company's reliance on IntraOz as its distributor. Today, Australia boasts 38,550 kilometers of railroad tracks (Australia, 2008) that could be used to help offset this sole reliance on a valuable but expensive distributor. For example, according to Wildfong, the geographic distances involved in shipping seed products in Canada are not dissimilar from those affecting Australia and rail transportation could be used to good effect: "Once efficient rail transportation and especially a reliable rural parcel post service became common, the inventories of seed companies from coast to coast became available to nearly all Canadians. It was no longer necessary for farmers and gardeners to purchase their seeds locally" (p. 12).

2. Paucity of casual harvesters for seasonal work for Besagi's seed production business unit. Fifteen percent of an entire crop is a lot, and the managers responsible for this loss should carefully review the seasonal… READ MORE

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