A corporate strategy for restige foods corporation

• Main Author: Martinez, Ma. Teresita S.
• Format: text
• Language: English
• Published: Animo Repository 1996
• Subjects: Food industry and trade Philippines; Restige Foods Corp.
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/3914
• Institution: De La Salle University

Restige Foods Corporation (RFC) is a family-owned corporation having multiple product lines. It belongs to the food taste enhancement industry because it answers the need to enhance the taste of food in its preparation or cooked stage. The objective of RFC for the next 5 years are the following : (a) to achieve a 23% annual growth rate in gross sales (b) to maintain a gross profit margin of at least 40% of net sales (c) to achieve a net profit margin of at least 11% of net sales and (d) to achieve a return on investment (ROI) of at least 19%. A structural analysis of the food taste enhancement industry revealed the following: (a) there is a high threat of entry because of low entry barriers such as economies of scale, product differentiation and switching costs (b) there is intense rivalry among its existing competitors because of the presence of numerous and equally balanced competitors, high inventory carrying costs associated with the products and lack of both differentiation and switching costs (c) there is minimal pressure from substitute products such as artificial flavorings and seasoning (d) its buyer group is powerful because the products represent a significant fraction of the buyers' cost or purchases, the products are standard or undifferentiated, there is the low switching costs and the buyer has full information (e) its supplier group has minimal power because the industry is an important customer of the supplier group, and the products of the supplier group are not differentiated and have low switching costs. The opportunities that the company could exploit are more product lines, economies of scale, changing buyer preferences, and improves supplier relationships. The threats facing the company are that new entrants could come in at large-scale and rivalry among existing firms. A strategic mapping of the industry showed that RFC belongs to the medium range and mechanized level of techniques employed. RFC's strengths are that it has short to long term borrowing capacity, financial management capability, distributors with wide reach, popular brand name, expertise in low-cost products, high market share in flagship products and good labor force climate. Its weaknesses are the lack of in-depth market research capability and a declining trend in both ROI and ROE. The corporate strategy that RFC needs to adopt is within the generic framework of overall cost leadership as it should diversify into other product lines, improve on the level of techniques employed, seek vertical integration, maintain low administrative costs and increase use of products in present and new market. Its competitive advantage that leads to a cost advantage stems from being an innovator of new products. having better sources for quality raw materials, assured product availability, having better handling of finished goods and better monitoring of distribution and retail outlets. The functional strategies for production stresses on improvement in mechanization, vertical integration and desired level of production and inventories. For marketing and sales, it should identify the customer needs for the product, maintain competitive pricing, lessen the degree of reliance on distributors and increase brand awareness and recall. Financial strategies focus on capital acquisition and allocation. dividend policies, working capital management and accounting personnel requirements. Using the 7-S framework in the implementation plan of the corporate strategy, minor changes in the structure of the sales and marketing group, full support by top management, instilling the culture which is based on good relationships with suppliers and customers, doing the best of your ability, entrepreneurial spirit and open communication and giving more incentive to motivate the workforce are needed for its success.