Eac Nutrition

EAC NUTRITION: REGIONAL EXPANSION STRATEGY

Table of contents

Introduction.............................................................................................................................2

History of EAC.........................................................................................................................3

EAC Nutrition...........................................................................................................................3

Competitors & Market.............................................................................................................6

Target markets........................................................................................................................7

Case questions

1. What are the economics of the infant nutrition industry? What capabilities do firm need to succeed in this industry?.....................................................................................................8

2. Evaluate the attractiveness of the expansion.....................................................................8

3. How might competitors respond to the adoption of the different expansion alternatives by EAC? How does this affect EAC's decision?.....................................................................11

4. Which expansion option would you recommend to EAC? Why? What criteria did you use to evaluate these options?...................................................................................................16

Bibliography...........................................................................................................................17

Introduction

The Senior Management of the EAC (East Asiatic company) planned to have a meeting to discuss the growth strategy for the nutrition business. This meeting should take place in the year 2002 and was mainly deriving from the aggressive corporate restructuring started in 1997 and focusing on the core business, i.e. nutrition on the Asian market.

EAC's marketed products (all milk powder products for infants) are:

- Dumex

- Plus

- Mamex

- Mamil

It has resulted necessary to increase the consumer prices for these products, mainly due to the increase of raw material cost. This measure had weakened EAC's position in Thailand and Malaysia, which were already quite saturated. The only competitive market seemed to be China.

The Asian market, either with the unclear economy and the sometimes not controlled competition generated a stock price which was considered to be undervalued by the management . EAC share price has actually increased, but it seemed to be more and more important to plot and define a new and implemented growth strategy for the Asian market.

Three were the possibility of this "growth- project":

1. to expand geographically in China

2. to enter India's new market

3. to introduce new products in the existing markets

In order to be able to evaluate the situation, there may be presented some notes:

- History of EAC

- EAC Nutrition

- Competitors

- Target markets

History of EAC

1884 - Company is founded by a Danish captain, Mr. Andersen

- Company's goals were to create a network between Europe and

eastern countries

- First EAC office in Bangkok

- Offers of a direct shipping line to Denmark

n.d. - range of traded goods expanded to rice, oilseed, timber and spices

- trade routes were expanded to:

a) South Africa

b) The West Indies

c) North and South America

d) Australia

1970s - adoption of business diversification

- EAC moved up the value chain of products

- acquires manufacturing and distribution facilities

1980s - EAC is the major Danish conglomerate with 20.000 employees in 50

countries

1997 - combined group of 28 business units

- sales revenues exceed US $ 2.18 billions

- revenues grow but profit margin becomes lower

- company has a heavy debt burden

1998 - new management team headed by CEO Mark Wilson

- restructuring aimed to restore financial performance

- divesting of under performing business units

- operational headquarters are moved to Singapore (75% of revenues

derive from Asia)

- definition of four core business units:

a) Nutrition

b) Industrial ingredients

c) moving & relocation service

d) Food

2001 - EAC nutrition contributes over 25% of group sales