How can Vitarich Corporation achieve sustainable competitive advantage?

• Main Author: Lim, Oliver L.
• Format: text
• Language: English
• Published: Animo Repository 1996
• Subjects: Business Administration, Management, and Operations
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/2179
• Institution: De La Salle University

This study aims to assist Vitarich in formulating a sustainable competitive strategy. The company main product, chicken, is a basic commodity which can be sold without advertising or promotional effort. Being an undifferentiated, the competitive advantage can be gained through cost leadership. According to Michael Porter in his book Competitive Strategy, Cost Leadership is one of the three generic strategy to outperform other firms in an industry. This strategy sets to achieve overall cost leadership in an industry through a set of functional policies aimed at this basic objective. Cost leadership requires aggressive construction of efficient-scale facilities, vigorous pursuit of cost accounts, and cost minimization in areas like R&D., service, sales force, advertising, and so on. A great deal of managerial attention to cost control is necessary to achieve these aims. Low cost relative to competitors becomes the theme running through the entire strategy, though quality, service, and other areas cannot be ignored. All key players in the poultry industry are fully integrated from milling, to broiling, to dressing. Many of them are giant fully diversified corporations engaged in non-poultry related business like SMC, RFM, URC, Purefoods and General Milling. Vitarich is the only distinct purely agri-based industry until it acquired to franchise Churches (Texas Chicken) and Popeyes in 1995. With large number of fast food chicken chains sprouting all over the country and a higher domestic consumption, Philippines poultry production has increased by about 17% a year between 1992 and 1995. The rise in per capita income, coupled with diminishing fish supplies, has contributed to higher poultry demand in recent years. In 1996 however, with the industry players anticipation of better performance, everyone expanded aggressively thus triggering an oversupply of poultry and shortage of feeds in the market. Every players in the industry like San Miguel, Swift and General Milling suffered losses but Vitarich caught the greatest impact because its business portfolio is the most undiversified and it is undergoing an aggressive expansion program during that time. The oversupply situation is likely to continue and the glut may last longer than expected with the new entry of JAKA Food Processing with 18 million dollars investment in 1996. Because of this adverse situation, Vitarich is currently undergoing a Business Process Reengineering (BPR) to improve production efficiency. Specially, Vitarich should first stop the bleeding through cost leadership by focusing on production efficiency and aggressive cost cutting on non value-added activities in order to have some legroom to pursue, the company should diversify concentrically into other businesses like customer focused value-added chicken products, corn related businesses and aqua-contract growing. Furthermore, Vitarich should also concentrate on strategies like technological leadership, product quality, and increased value-added to strengthen its competitive position.