Mr Paul Goodwin
20 March 2012
The company’s overall Strategy
Fyffes follows a low cost strategy, but what does a low cost strategy mean for Fyffes? The market size for tropical fruit is really large, bananas being the fifth most important agricultural commodity in world trade after cereals, sugar, coffee and cocoa. Six countries (India, Brazil, Ecuador, Philippines, China and Indonesia) account for 55% of total world production. Bananas and pineapples are common fruits, on average 10 kg of bananas are consumed by each of the 350 million EU citizens; therefore it is not really possible for companies to differentiate fruit products. Because of that it would be complicated for Fyffes to follow a strategy of differentiation. Furthermore the market growth is slow, and it does not change all that much, the main transnational companies between 1995 and 2007 stayed unchanged; they are Chiquita, Dole, Del Monte, Fyffes and Noboa. These transnational companies (TNCs) control over 75 percent of the world trade (Chiquita 26%, Dole 25%, Del Monte 16%, and 8% for Fyffes and Noboa). But Fyffes is the market leader in UK, Ireland, the Netherlands, Spain and Denmark. The difference between each exporter will be in terms of the prevailing production systems and costs of production. Shipping and fuel are the most important costs for Fyffes, but also these costs are not specific to Fyffes, and their increasing is a risk for all competitors. Thus Fyffes requires its direct banana and pineapple suppliers to have low costs in so much as are possible. It also expects the suppliers to comply with policies which are designed to reduce the impact of agricultural production on the environment and to ensure safe working conditions and fair treatment for workers in compliance with internationally accepted labour standards. Fyffes had near monopoly status in the UK and has significant subsidiaries, join venture and associates incorporated in many countries such as Ireland, UK, Netherland, Germany, US, Jersey, Costa Rica.
Based on the BCG matrix and DPM matrix analysis, there are several ways of adding the value to Fyffes as well as one way of removing value.
The top managers of Fyffes take a strategic approach to cost management in order to remain competitive (Geoff Percival, 2012) Fyffes operates through its subsidiaries, joint ventures and acquisition from a total of 66 retail and wholesale distribution facilities and five2 ancillary offices throughout Europe with facilities in Ireland, the United Kingdom and the other countries. The company said that the strategic objective of the board is to enhance shareholder value through a combination of organic growth and by continuing to pursue acquisitions of companies in the General Produce and Distribution Sector. In order to achieve the objective, the four market business (UK, Ireland, EU and Other) should follow up the low cost strategy through the methods which have been decided by the parent. Parental development can create extra value and reduce the management cost. For the UK and Ireland markets, they have a high market share and low market growth (show on the BCG map), and Fyffes thinks they should use the method of organic method. The EU and Other markets have low market share and high market growth (show on the BCG map); they can through the acquisition, joint venture and using organic methods to reach the aims. What the four SBUs need do is follow the parent’s strategy and methods to help Fyffes create the extra value.
* Fyffes plc
Fyffes have already built four market businesses: UK, Ireland, EU and others. Total Produce is primarily involved...