i. Nature of Business
Olam International is a global integrated supply chain manager dealing commodities. They hold leadership positions in agribusinesses such as coffee, cocoa, spices, nuts and rice. Also, they are the leading supply chain manager in industrial raw materials such as wood and cotton.
ii. Company’s Background
The Kewalram Chanrai Group established Olam in 1989 in Nigeria. Their initial objective was to secure strong currency earnings to meet the foreign exchange requirements, through non-oil based export operations. This success brought them to becoming an independent sourcing and export company. Over time, they moved their headquarters to London. The company that began exports of raw cashew nuts from Nigeria to India now grew and began exporting other commodities like cotton and cocoa beans from Nigeria. Olam’s growth strategy was by its clear focus on its core business, supply chain management of agricultural products. Expanding from Nigeria into West and East Africa and India and eventually it made its mark in Singapore in 1995 where it moved base from London to Singapore.
Olam then became Olam International Limited and reorganized their global agribusiness. Singapore was its headquarters and trading center for all operations. Today, Olam has expanded to over 65 countries with over 20 products.
Specific strengths are key to how Olam International has become a leading global integrated supply chain manager in agricultural products and food ingredients. Their consistent performance across both economic and commodity cycles are their main success today. This success is also because of their diversity into the agribusiness. To be specific, they supply over 20 commodities organized into 5 categories and supplied to over 65 countries. However, even though being an integrated supply chain manager, Olam’s focus on food ingredients has been their biggest strength. The reason of focus on this aspect of their business was because food ingredients are inherently more recession-resistant. Through time this promises consistent financial performance to the business.
A continuous review of their strategic plans keeps Olam on the ball and up to date with the world’s ever-changing economy. They review their strategic plan every three years, for the next two consecutive three year cycles. For example, their last review was in 2009 for the next two consecutive three year cycles ending 2015. The review consisted of Olam developing 5 key strategic thrusts –
1. Pursue global integrated value chain leadership
2. Selectively expand into value chain adjacencies
3. Optimise and extract full value from Olam’s core – origination 4. Grow into new adjacent businesses building on the latent assets and capabilities that we have 5. Downsize/exit/prune unattractive businesses, origins, profit centres and activities iv. Weaknesses
Olam’s focus on food ingredients is not only strength but also a potential weakness to the company. Their focus on these agricultural commodities may drive a negative impact from the economic downturn on the overall group’s earnings. Additionally, the focus on food ingredients could also cause a plunge in business when there is a higher demand in other commodities such as metals. Based on their portfolio, under Industrial Raw Materials, the liquidity of spices and wood seem to be low. This is something that could cause potential risk as when the demand for these commodities are on the low or dry up. The problem rising to that would be inventory build up and market losses.
v. Overview of Existing Production As of now, Olam International supplies 20 agricultural products and food ingredients to over 65 countries. Over the last 15 years, the business has evolved from plantation ownership to wood processing...