Eac Nutrition: Regional Expansion Strategy

EAC NUTRITION: REGIONAL EXPANSION STRATEGY

Brief introduction to the case´s situation

In 1884 the East Asiatic Company (EAC) was founded by a Danish captain, Mr. Andersen; its goals were to create a network between Europe and Eastern countries. The first office was in Bangkok and in 1980, EAC was the major Danish conglomerate with 20.000 employees in 50 countries. In 2001, EAC Nutrition contributed over 25% of group sales and 34% of group operating profit. The Senior Management planned to have a meeting to discuss the growth strategy for the nutrition business. This meeting was mainly deriving from the corporate restructuring started in 1997 and focusing on the core business, divesting of underperforming business units and operational headquarters are moved to Singapore. EAC's marketed products (all milk powder products for infants) are Dumex, Plus, Mamex and 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": to expand geographically in China, to enter India's new market or to introduce new products in the existing markets

Porter Analysis of baby food industry

Threat of New Entrants.

The food processing industry is very large and competitive; it is not uncommon for firms within the industry to do quite well. As a result, many companies enter into the market every year in an attempt to gain a portion of the profitable market.

Availability of Substitutes

Due to the nature of the industry, from bottled water to milk-based products, there are arrays of similar products that compete directly with the companies of this sector. There are many local competitors in food and beverages industry that provides similar kind of products. It is vital for the firms to continuously find new ways to improve their products because competition is so fierce. In recent years, the companies have focused on the health and wellness aspects of their products to maintain its competitive edge and customer loyalty in the market. But breastfeeding is another option for customers.