Management

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CHAPTER 13
Case Study – Danone
In “Global machinery threatens CEE” posted on The Regional and Environmental Center for Central and Eastern Europe website, Tom Popper states, “Globalisation is making the world smaller, but also increasing economic inequity and pressures on the environment” (2001). The countries of Central and Eastern Europe (CEE) have been eagerly seeking the benefits of globalized free-market capitalism, such as improved communication, increased commerce and international partnering, but they are learning that a profit-run system has drawbacks. Critics of globalization have staged protests at WTO and World Bank meetings and other institutional conferences. The International Monetary Fund (IMF) meeting in Prague brought many CEE concerns about protecting environments and economies to light. Some of the protests ended in clashes between police and demonstrators; other protests have been successful. Let’s look at the multinational food company Danone, a French company with 80 % of its business outside France and over 50 % outside Western Europe. The company began making its way into the CEE in 1989, after the collapse of the Soviet empire, by sending teams to the former communist bloc countries to investigate market potential. The company first began selling its western-made products in targeted countries and then entered into partnerships with local dairies, eventually buying out and taking control of various enterprises such as sweets manufacturer, Cokoladovny, in the Czech Republic. In 1997, Groupe Danone decided to focus on three main markets: dairy products, beverages and biscuits and cereals. To this end the company sold off its grocery and confectionery brands, its container division (1999) and withdrew from brewing, selling off Galbani in 2002. During this time Danone stepped up its visibility worldwide with acquisitions in Asia, Latin America, Central Europe, Africa and the Middle East.

Today Danone employs nearly 90,000 people in more than 120 countries and boasts a market capitalization of € 23 billion and net sales in 2005 of 13,024 million Euros. Danone’s biscuit division operates thirty-six factories across Europe and is still acquiring more. In collaboration with progressive CEE markets, Danone was given tax incentives to take over the 100-year old biscuit factory in Gyôr, Hungary. As part of the negotiations, Danone promised to keep the factory open. However in early 2001 the company was busy making plans to close down some of its newly-acquired factories, including the Gyôr plant, shifting production to its other Czech plant in Székésfehervár to streamline production costs and increase capacity and profits.

Keep this statement in mind: In the global marketplace communication is instantaneous and unrestricted by time and place. Assume you are a Danone executive and supporter of the company’s streamlining plan.

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Case Study – Danone

Write a paragraph outlining the steps you would take, prior to announcing the closing of the plants, to set the stage and make sure the downsizing plan would be seen as a positive action. Next, assume you are a critic of the plan, come up with two or three actions that could be organized to thwart Danone’s efforts to close the plants in general and the Gyôr plant specifically. In early 2001, with virtually no public relations strategy in place, Danone executives developed a plan to close ten factories with a loss of 10,000 jobs. A reporter for Le Monde, the French daily newspaper, got the information of the proposed closings through a leaked memo and the story made headlines. Because the company had prepared neither its employees not its publics for the massive closings and lay offs, Danone saw workforce revolts and a series of strikes and demonstrations against the proposal. The unions vowed to fight against the restructuring and threatened to garner support form the water and dairy divisions of the company. The market also reacted negatively and the price...
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