The Tavazo company is a family-business which operates in the food industry. Started upon an entrepeunarial initiative in the 1930s in Iran, its business has been developed such as Tavazo now commercializes products such as dried fruits and nuts and operates in activities from growing to retailing. The development has also been geographical as it entered the Canadian market by 2010. Now considering further expansion, the company asks for recommendations to decide of its future strategy. The Tavazos have considered two different strategy lines, which are namely geographical diversification and vertical expansion. The first strategy consists in whether to enter new geographic markets or to focus on the current markets and expand within them as retailers. The second strategy consists in vertical integration by focusing more on the wholesale side. As a small business operating in a sector with few players, Tavazo copes with particular issues that CPH International intends to answer. Appraising the geographical expansion as the best option for the company, the report is structured as follows. In a first part, the resources and capabilities of Tavazo Co are identified. Then, a pattern for geographical expansion (within and outside the current markets) is suggested. In conclusion, further recommendations related to the organizational issues faced by the company.
THE TAVAZO COMPANY
The Tavazo company is a family business started upon an entrepreneurial initiative in Iran in the 30s. Its business is vertically integrated and encompasses activities such as growing, manufacturing, wholesale and retailing. Most of the value of the company stems from the retailing activity, which counts for 80% of the current sales. The strategy of Tavazo lies on differentiation by offering high quality products at a premium price (Porter, 1985). In Iran, the company has managed to build loyalty over time, targeting customers with quality as first priority. The demand is steady throughout the year with a peak time around March for New Year’s celebrations.
Throughout the analysis of its value chain, several resources and capabilities can be identified as key strengths for strategic development. Tavazo has established a strong network of suppliers based on long-term relationships and financial reliability. As a result, the company is provided with high quality products with low uncertainty and risk. As a family business for several decades, Tavazo has developed a strong knowledge in manufacturing processes. Everything being done in-house, the high-quality of the products is assessed and acknowledged. Focus has been devoted to the retailing activity. Tavazo has been oriented to customer satisfaction by offering a whole store concept (presentation, packaging and sales). It has led to the recognition of the company as an influential retail brand among the industry, in particular in Tehran which stands for the main influential business area in Iran. The Iranian population is also highly receptive to the quality offered by the Tavazo’s products. Therefore, the key strengths of Tavazo are intangible- namely suppliers relationship, knowledge and reputation. By the same token, the competitive advantage of Tavazo lies on differentiation by offering high-standards products and putting emphasis on branding and services in the retailing activity.
However, the perception of Tavazo’s business is highly bound to the Iranian culture. Nuts and dried food are part of the food tradition. As a consequence, the demand mostly comes from the Iranian population in Iran as well as in foreign markets. The commercialization of the products abroad mostly relies on the diaspora such as 70% of the retail store customers around the world are Iranian. However, if Iranian customers agreed on paying a premium for the Tavazo’s products, foreign markets are less receptive and more price sensitive so that the differentiation based-competitive advantage...
References: Grant R. M., 2010, Contemporary Strategy Analysis, Wiley, 7th edition
Johnson G., Scholes K
Lu J.W. and Beamish, P.W., 2001, The internationalization and performance of SMEs, Strategic Management Journal
Namiki N., 1988, Export Strategy for Small Business, Journal of Small Business Management
Wolf A.J. and Pett T.L, 2000, Internationalization of small firms: An examination of export competitive patterns, firm size and export performance, Journal of Small Business Management
Young S., Hamill J., Wlieeler C
Source: Adapted from H. Ansoff, Corporate strategy, Penguin, 1988
Please join StudyMode to read the full document