Company Background
Kasemanns Cheese Company was formed by Willem Kasemann. The company produces traditional Dutch-style cheeses, which have become very popular in the Gippsland region. The cheese company is supported and operated by the Kasemann family and generates its revenue from selling the Gouda cheese. The increasing demand for the Gouda cheese resulted in the expansion of the factory. However, due to the loss of significant knowledge, experience, and planning of business, the company has reflected on different struggles it has experienced in the past years. Between 2008 and 2012, the company’s sales declined and no new products were introduced and no new markets developed. The company’s business was heading towards failure, necessitating an investigation turnaround intervention. Thus, this analysis is a case study of Kasemann Cheese Company. The analysis will incorporate the PESTLE tool to address different features in the dairy industry including macro external analysis and micro external analysis using Porter’s Five Forces. Moreover, the analysis will incorporate the Key Success Factors (KSF), an analysis of KCC’s resource capabilities and competitor analysis, and a critical discussion of all these aspects. According to Chatellier (2021), the dairy business is a portion of the agricultural sector and oversees the production, consumption, and sale of milk-based products including cheese, butter, milk, ice cream, and cream. In these modern days, several elements influence the management of the dairy industry. Below is the PESTLE analysis of the business:
PESTLE ANALYSIS
Political
- Government regulations and policies concerning agricultural products.
According to Hitihamu et al. (2022), administration policies and regulations often influence the farmer’s resolution to keep livestock and milk them relative to different utilization of livestock.
Economic
- Purchasing power in the economy
According to Shi et al. (2022), the greatest common economic factor in the dairy business is the purchasing power. In its basic form, milk is regarded as an important product and individuals still make an effort to purchase it regardless of their financial status.
Social
- Shi et al. (2022) indicate that in these modern days, the relationship between society and modern animal farming is ambivalent.
- Ambivalence in people appreciating certain factors such as low food prices and increased food safety. This ambivalence reflects two faces of modernity, positive and negative. On the positive side, it incorporates progress, efficiency, and convenience. On the negative side, the ambivalence reflects exploitation of nature and loss of customs.
Technological
The dairy industry has significantly evolved over the past decades. Due to technological advancements, days are gone when farmers used to spend hours milking one cow at a time. Thus, some of the technological factors considered in the dairy industry include;
- Education
- Experience
- Workforce
- Credit usage status
- Income
Legal Factors
The dairy industry has different legal factors that companies should consider when venturing into the business. These factors include;
- Registration of the primary producers
- Licensing of the dairy business operators
- Regulatory permit and consumer safety levy
Environmental Factors
In the more significant systems that lead dairy production, the major environmental factors include;
- Nutrient pollution of soil
- Groundwater contamination
- Surface water eutrophication
- Ammonia emissions
PORTER’S FIVE FORCE ANALYSIS
1. The Threat of New Entrants
-New entrants present innovations, new approaches of conducting activities and place pressure on dairy firms by decreasing price.
2. Bargaining Power of Suppliers
– The main influence of increased supplier bargaining power is that it decreases the general profitability of the dairy industry.
4. The Threat of Substitute Products or Services
-The substitute threat to service or product is increased when it presents a cost proposal that is uniquely distinct from existing offerings in the industry.
5. Bargaining Power of Buyers
-When the consumer base is very powerful for companies in the dairy industry, the bargaining power of the consumers also becomes high, and they advance their capability to seek rising offers and discounts
3. Rivalry among the Existing Competitors
This competition impacts the entire long-term profitability
of the industry.
The threat of New Entrants
According to Singh et al. (2020), new entrants in retail present innovations, new approaches to conducting activities, and put pressure on dairy companies through decreasing price strategy, dropping costs, and facilitating new value proposals.
Bargaining Power of Suppliers
Most firms in the dairy industry purchase raw material from various suppliers. Singh et al. (2020) indicates that suppliers in leading positions can lower the margins. Moreover, leading dealers in the customer services segment utilize their negotiation power to extract increased values from the companies in the retail sector. According to (Shi et al., 2022), the main influence of increased supplier bargaining power is that it decreases the general profitability of the dairy industry.
Bargaining Power of Buyers
Consumers are usually demanding. In most cases, they want to purchase the best offerings presented by disbursing the minimum costs. Consequently, this puts pressure on the companies in the dairy industry (Shi et al., 2022). When the consumer base is very powerful for companies in the dairy industry, the bargaining power of the consumers also becomes high and they advanced their capability to seek rising offers and discounts.
The Threat of Substitute Products or Services
Hitihamu et al. (2022) indicate that when a new service and product encounters comparable customer requests in several manners, business profitability declines. For instance, services such as Google Drive and Dropbox are alternatives for storage hardware drives. The threat of a substitute service or product is increased when it presents a cost proposal that is uniquely different from existing offerings in the industry.
Rivalry among the Existing Competitors
According to Singh et al. (2020), when the competition among the prevailing companies in an industry is extreme, it decreases the price and profitability of the industry. This competition impacts the entire long-term profitability of the industry.
KEY SUCCESS FACTORS ANALYSIS
| Prominent External Forces | Response |
| Oversupply and Weakening Demand | Control the production of cheese |
| Increase of health-conscious generation | Developing innovative new dairy products that are perceived as healthier alternatives. |
| Political and Economic Volatility | Lowering international trade barriers |
| The decline in Cheese Prices | Control the production of cheese |
| International Markets | Introduction of free trade markets |
Kasemann Cheese Company Resources and Capabilities
| Resources | Capabilities |
| Firm | Has the ability to produce its products, given that it has the materials and equipment to produce dairy products. |
| Experience | The company has been in the industry for several years. Thus it knows different factors including the skills to produce the best cheese. |
Critical Discussion 1
Macro Environmental Conditions
Some of the macro-environmental conditions that influence Kasemann Cheese Company (KCC) include demographic forces, economic and social factors. International economic expansion and the increase of nonrefundable income in developing markets, combined with an upsurge in demand for protein-rich food and the long-term shelf life of cheese products, increase cheese consumption and result in market expansion. Nevertheless, the organization’s revenue and profitability are mainly influenced by the volatility in the milk’s price. According to Shi et al. (2022), processed cheese, which is the main product produced by KCC, is mainly used in fast foods pizzas, burgers, tacos among others, to attain great texture and taste. Shi et al. (2022) indicate that Indian and Asian communities are adopting western fast food recipes with increased cheese content, which will enhance the demand for cheese in the future. Moreover, the significant growth in Brazil’s dairy industry is anticipated to increase the demand for cheese in the future. This also applies to the Middle East and Africa, where the development of several kinds of cheese manufacturers in these areas is expected to expand the cheese market. According to Shi et al. (2022), the availability of workforce and raw products contribute to the draw of major cheese companies which may further contribute to the rising expansion in this market. Thus, KCC can expand to these regions. According to the case study, Kasemanns Cheese Company produces Dutch-style cheese, Guada cheese, which has become popular in the Gippsland region. Given that the company could expand to and purchase a small factory in Wonthaggi, the organization can open up other branches in different regions.
Microenvironmental
The top three micro environmental conditions that influence the organization include the customers, suppliers, and competitors. Hitihamu, Karunarathne, and Indraprabath (2022) indicate that with the decrease in the cost of milk, European production is declining and international supply-demand is balancing. Generally, demand for dairy and dairy products is increasing as a result of population expansion, an expanding Asian middle class, growing urbanization, and favorable demographics. Customer preferences are shifting toward healthier, more natural foods, and rising affluence in emerging nations is also driving demand. From 336 billion US dollars in 2014 to 442 billion US dollars in 2019, the global dairy market is expected to rise by 6% (Hitihamu et al., 2022). The advent of a health-conscious generation that prefers to limit dairy intake may have serious implications for the dairy industry’s growth in industrialized countries. Nevertheless, some firms have been quick to recognize this trend and have been effective in mitigating this industry danger by producing inventive new dairy products that are perceived as healthier options. The fact that cheese is a fundamental component of the European diet and a valuable source of protein is one reason contributing to the high level of cheese consumption in Europe. Cheese is a common element in many European meals, and a diverse range of cheeses, each called for its regional origin (for example, Gouda and Edam from the Netherlands; Emmentaler and Gruyere from Switzerland; Camembert and Brie from France), are consumed in Europe2425 (Hitihamu et al., 2022). North America is also a large user of cheese, but this is due to an expansion in fast food restaurants (and the usage of processed cheese) rather than greater consumption of other types of cheese.
Critical Discussion 2
The theory of constraints (TOC) is a structured management strategy that focuses on actively controlling the constraints that obstruct a company’s development toward its objective of generating profits and efficiently utilizing its resources. One of the limitations of KCC products is that as the business expands, so does the demand for cash to finance equipment, inventory, and receivables (Kocabaş, Lyne & Ustunol, 2021). Unfortunately, sales could not keep up with the company’s founding. Because the company is unable to keep up with demand, KCC has to borrow the maximum amount available from its lenders. Expanding capacity will aid in the alleviation of the constraint. Using the Theory of Constraints, we identified stage 3 milling as the bottleneck. The next stage is to find a way to take advantage of the congestion. The KCC management must be used regularly in different approaches. One method is to guarantee that the bottleneck is focused on the most important tasks, such as milk production and supply (Kocabas et al., 2021). Between 2008 and 2012, sales decreased considerably, and no new items or markets were developed. The company was on the verge of failing, and it was time to look at turnaround options. As a result, the next stage will be to verify that the company has manufactured and delivered new products depending on the demand in the market.
Critical Discussion 3
Kasemanns Cheese Company, according to the case study, makes Guada cheese, a Dutch-style cheese that has proven famous in the Gippsland region. Because the company was able to develop and purchase a small factory in Wonthaggi, it is now able to open other branches in different areas. Moreover, the company has an advantage over its competitors given that it has created a name for its products in Dutch and its brand has become a household name. The increasing health-conscious generations present an opportunity for Kasemanns Cheese Company, given that the company is known for producing less fatty cheese, Guada cheese, which is produced in the Dutch style and was accepted by different people. This product can be known and accepted in other regions, which are adopting the western fast-food culture. In these modern days, cheese is often used in fast food. This is also another advantage given that the company will attain more sales to the fast-food joints in different places.
Strategy Summary
As supply and demand are expected to be reflected in price mechanisms, market-oriented business strategies will become increasingly vital for the company’s performance. Farmers’ entrepreneurial orientation, on the other hand, is still poorly understood, because strategic decision-making on farms differs from that in businesses. As a result, generalizations from the company should be tested before being applied to farms (Grout et al., 2020). The organization should pick strategies that match their external strengths and weaknesses with external opportunities and threats (O&T), according to PESTLE assessments, because this increases their performance. In the context of farming, this means that strategic decisions should be made to maximize the farm’s strengths, take advantage of opportunities, and avoid risks posed by the business environment to achieve the company’s objectives. The organization’s abilities, size, and partnership relationships should all play a role in strategic decisions. Firms, particularly in Europe, are typically modest companies with only family labor or one or a few hired laborers. In comparison to major corporations, strategic planning is more informal and intuitive (or subjective), with fewer procedures, less rationality, and less market research assistance, but more quick and well-coordinated decision-making.
References
Chatellier, V. (2021). International trade in animal products and the place of the European Union: main trends over the last 20 years. Animal, 15, 100289.
Grout, L., Baker, M. G., French, N., & Hales, S. (2020). A review of potential public health impacts associated with the global dairy sector. GeoHealth, 4(2), e2019GH000213.
Kocabaş, D. S., Lyne, J., & Ustunol, Z. (2021). Hydrolytic enzymes in the dairy industry: Applications, market, and future perspectives. Trends in Food Science & Technology.
Hitihamu, H. M. S. J. M., Karunarathne, H. A. C. B., & Indraprabath, J. K. (2022). Identification of Value Chain Gaps and Suggestions for Dairy Development in Sri Lanka. International Journal of Recent Advances in Multidisciplinary Topics, 3(3), 10-19.
Shi, W., Fenton, O., Ashekuzzaman, S. M., Daly, K., Leahy, J. J., Khalaf, N.,& Healy, M. G. (2022). An examination of maximum legal application rates of dairy processing and associated STRUBIAS fertilizing products in agriculture. Journal of Environmental Management, 301, 113880.
Singh, K. M., Singh, P., Sinha, N., & Ahmad, N. (2020). An Overview of the Livestock and Dairy Sector: Strategies for Its Growth in the Eastern Indian State of Bihar. 0787217948
