Arla

Group number: 13 / MEC3 Group members: Per Mark Barradas Nielsen

Elena Legarra Martinez

Belinda Yeluma Fombe

Henriett Czekmeiszter

Tutor: Kirsten Ringgaard

Date: 12 October 2005

Project A

Firm: Arla Food Group

Title of the project: Increasing turnover contra decreasing profit

Signature of the group members:

(Reserved for the College) Approved the:

Contents

Contents 2

1. Introductory chapter and problem statement 3

1.1 Motivation 3

1.2 Problem Statement 3

1.3 Partial Problem Statement 3

1.4 Interpretation 4

1.5 Scope 4

1.6 Methodology 5

2. Internal analysis of Arla 5

2.1 Analyzing the new organization structure 5

2.1.1 Analysing of structure 5

2.1.2. Conclusion on structure 7

2.2 Organizational Culture 8

2.2.1 Analysis of culture 8

2.2.2 Conclusion on culture 10

2.3 Strategy 11

2.3.1. Analysis of strategy 11

2.3.2 Conclusion on strategy 12

2.4 Financial review with the help of profitability analysis 13

2.4.1 Profitability analysis 13

2.4.2 Conclusion on financial state 14

3. Final Conclusion 15

4. Process evaluation 16

4.1 Group's criteria for success 16

4.1.1. Group objectives 16

4.1.2. Group rules 16

4.2. The benefits derived, educational and personal 16

4.3. The lessons learned and experienced gathered for the next project 17

4.4. A self-evaluation of the group work 17

4.5. Project Diary 17

5. References 18

1. Introductory chapter and problem statement

1.1 Motivation

The main motivation for choosing Arla Foods Group as our firm for Project A, is that it's Europe's largest dairy company and that it's Danish home based, "well almost anyway":

Arla Foods was formed in the spring of 2000 following the merger between the Danish MD Foods and the Swedish Arla. Today Arla Foods is one of the worlds leading global suppliers of added value, milk based ingredients to selected sectors of the food industry, and is exporting dairy products to Europe, Asia and the USA.

In 2003 Arla Foods merged with the UK dairy company, Express Dairies, which now results in England, Sweden and Denmark being regarded by Arla Foods as their home markets.

1.2 Problem Statement

Why is a huge company with a big market share across Europe like Arla, in a situation where the profit is reducing even though the company turnover is increasing along with the expansion of the company? (see Graph 1. ). Can these circumstances be explained by any internal factors?

1.3 Partial Problem Statement

How could Arla Foods corporate culture have influenced this situation?

How could Arla Foods new organisational structure have influenced this situation?

How could Arla Foods company strategy have influenced this situation?

How has Arla Foods financial state influenced the situation?

1.4 Interpretation

During our analysis we will use the following factors to answer our problem statement, and see how these aspects play/or not play a role according to our problem:

Ð'* The new organisational structure implemented in the company

Ð'* Cultural clashes following mergers, and Arla's organisational culture in general

Ð'* Changes in the profitability ratio

Ð'* If company strategy has played a role in the profit

We want to able to get clear picture of why a co-operative association owned by 13600 milk producers I Sweden and Denmark, who employs approximately 23000 people with their own production in eight countries and has sales offices in 24 countries, who furthermore has huge market shares, isn't able to profit more from their position top global supplier.

(And the interesting thing is that Arla's net-turnover actually shows an increase of 15 %, but the "result of year" shows a decrease of 75 million DKK.)

Our goal is to do this through analysing the strengths and weaknesses of the company, and analysing the corporate culture and strategy of Arla to see if it in anyway have affected the results, or if changes will be made within the company following the release of the annual report.

1.5 Scope

During our analyses we will deal different aspects of the Arla Food Group, on certain aspects the scope of our analysis will deal the Arla as a global corporation, whereas we on other aspects we will concentrate on the Nordic (Denmark, Sweden, Norway & Finland) and the UK business.

On the financial, structural and strategic level our analysis will focus on the global corporation to show the reality of the company as a whole, because that we can not separate these issues if we want a clear picture of Arla Foods for the