Dairy Farm Financial Analysis and Business Strategy

Summary

Supersite is a dairy farm with the objective of enhancing quality and providing good products to its consumers. Like other profitable organizations, Supersite possesses good management, has approachable policies, and ensures quality for its users. For any firm or industry, the most important concern is maintaining its market share and number of customers in a competitive market. For that, every firm seeks policies and actions that meet the goals before it. The same is the case with the Supersite Company. We focus our study on evaluating the case of the firm. For that, the very nature and principles of the firm will be explicitly discussed.

The firm, in this case, is a dairy company that has supplied milk to customers for over a decade. The gains and losses of the company were drafted after each year, and they were analyzed for profit. Different ratios were considered for evaluating the firm’s profit, such as the sales-to-profit ratio, profit-to-loss ratio, and net-gain ratio. These ratios are indicators in the economic analysis because they show whether the firm’s performance is improving or entering a recession. The data table in the article shows the sales of the firm over a long period. These yearly data show the economic performance of the firm in past years (U.S. Department of Agriculture, Economic Research Service, n.d.).

Superlite is a profitable dairy firm with core values of better quality, trust, and reliability. The reason behind the success of this firm is its tradition of maintaining quality and trust in its products. In an interview, Mr. C. L. Litany said that success is due to maintaining quality that is superior for the consumer. This firm was launched in 1929 with a proper setup. The trucks were properly painted and used for sales. Officers were given clean, necessary uniforms, and people started purchasing their products because the organization was founded on the concept of quality, with customer satisfaction as its first objective.

Objectives

The objective of the evaluation of this paper is to outline a few things that are important aspects of the business firm. To start a business, we need a clear objective and planning. Without outlining the objective of the business, we cannot achieve the target. The important concept involved in business is choosing the right time for the right business. If you have a good plan and enough money but do not know when to launch that program, then both your assets and opportunities may be wasted. Calculation of the right time involves a few steps and procedures. These procedures are proper analysis of the issue and opportunity, analyzing the kind of market, calculating the competitiveness of the market, evaluating the nature of your product and comparing it with the nature of the market.

Choosing the market depends on the type of product. Your product’s nature and quality must meet the criteria of the market and its customers. The primary thing around which the business objective revolves is the selection of the right time for the right work. In the given case, the dairy firm’s sole objectives of customer satisfaction and maintaining product quality make it the most profitable firm in its area within the competitive market. If we consider the scenario and reflect on it, we ultimately come to realize what a successful and effective firm demands from us.

The initiation of this dairy farm in the middle of 1929 was the perfect time for its owners and managers to launch the firm despite the presence of competitors. Despite the competition, Superlite excelled in the market because it targeted the market by enhancing product quality and choosing the right time. Thomas Baker, the founder of the company, knew what to launch, where to launch and when to launch. In addition to these questions, the most important question he considered helped put his company above the others. That one question was how to launch his product. He improved the quality of the milk to win people’s trust; this illustrates the importance of outlining the objective of one’s work. The company was initially launched using conventional methods, but it was updated over time. A revolutionary change was brought to the company by Hollingsworth through the introduction of new marketing methods. Those methods included introducing trucks for the delivery of milk to households; the trucks were painted, and laborers were given uniforms. That was a new change to the firm that improved its performance in the competitive market. The innovation was key to its sustainability amid the 1938 recession. This is how the outline of the objective works. If your objective is clear before you, then you can sort out policies and required actions. In short, the objective of the firm was clear before it, which was attaining the highest quality in the product market and capturing more market share.

Every business firm works within the two main business perspectives. Those are long-term or short-term policies. You have to decide whether to operate in the long run or the short run according to the assets and size of the firm. After that, the policies and setup of the firm will be organized. How to carry a small firm in the long term is an important question since a small firm’s size matters a lot from a time perspective. The long term is the period during which a firm operates for an extended time, with assets and firm size also considered. From the case study of the dairy company, we got the idea of how a small firm can be useful in the long run. From the day of its initiation, the company made a remarkable profit every year. The progress of the company from 1929 to 1968 gives us the idea of long-run growth and the steps and policies necessary to carry a small firm into the long run. From 1965 to 1968, the profit increased to 18%, and the work behind the advantage is essential to be discussed. The reason is that it sustained itself even during the 1938 recession and continued to attain its goal. The findings for this reason will outline the concept of the long run and transform a small firm into a long-run firm. The dairy company, in its early stages, made progress in increasing the firm’s size and allocating capital to new small projects. The managers never stopped implementing new methods and never hesitated to take further steps and risks; this is the only reason they sustained in the long run despite the size of the firm and capital.

The long term can only be achieved if the firm’s size is updated over time and innovations are made so that its capacity increases to meet changing demands. In addition to supplying milk, the firm became a milk processor and distributor; these changes increased the size of the company and, in economic terms, represent vertical expansion. From here, we can get an idea of how to convert a small firm into a long-term firm. The conclusion to this is that to carry the small firm into the long run, the size of the firm and changes will be made from time to time as demand increases.

Key Issues

Dealing with a business firm mostly encompasses challenges and risks. The managers use their expertise and talents to encounter the obstacles. Some problems are permanent, and some are temporary issues. The policymakers and managers adjust their policies and tasks according to the situations that lie ahead of them. Identification of risks and challenges is a different skill, and dealing with them with expertise is different. What issues do we face in the short run, and what problems do we encounter in the long run? Long-run issues are different from short-run issues. By analyzing the case, we came to know how to identify the risks and problems in both the long run and the short run. The primary issue faced by the dairy company was in the hiring of the labor force. The labor force they hired at the initial stage was largely unskilled and inexperienced. Three hundred laborers were engaged in unskilled tasks or semi-skilled tasks. Hiring such a labor force is a threat to the company. This is because the skills and abilities of the labor force are responsible for the quality and reliability of the product. Superette’s 300 employees are engaged in unskilled or semiskilled tasks, and that much unskilled labor is enough to throw the firm back into a quality crisis. Among them, most do not even have any experience in a dairy firm (Laverty & Littel, 2020).

These issues were internal issues of the company. The next issue was the making of unions in the company. The attempt to make a union was made in the organization. Union making in any organization is a threat to the company, as it can drive the labor to go against the policies or create a separate power within the organization to claim their rights whenever they want. These and other issues are the concern of the specified department. They had to monitor what was happening in their department, and they had to rule it out. To mitigate the problem of unskilled labor, the HR department had to address it. Giving training to the workers and guiding them to learn the skills is the responsibility of sub-departments or HR.

External Threats

Similar to internal issues, every business firm faces external challenges. These external challenges may be from other competitors, the environment, the government, the ordinary public, and the market. The first thing is to identify the obstacles, and the second is to sort out policies to retaliate against those challenges. In the dairy company, the external challenges they faced from their initial stages were the market challenges. For the time being, the high official, Charles Linty, said that there was no seller in the Nashville market that met their quality; thus, they were in a situation of monopoly in the market, but experts rejected his statement, arguing that there were other competitors in the Nashville market to compete with Superlite. The second external issue they faced was customers’ concern about the skills of the laborers. Customers are a bit hesitant about the quality due to their unskilled labor. The solution for that is simple and straightforward, that is, to train the laborers to the highest degree.

External Opportunities

The success of the firm lies in accurately using external opportunities; even more important is creating external opportunities. If the firm seeks opportunities, then ultimately, it competes in the market. Opportunities available for the dairy firm were in its vertical market. As they were not restricted to supplying milk, they started processing it and selling additional milk products. They produce secondary milk products and sell them in the market. In this way, they cover more of the market.

Internal Weaknesses

The internal weaknesses were discussed in the issues as well. The biggest weakness of the company was its procedure of labor hiring. They hired excessive labor, and most of them were unskilled. Almost 300 laborers did not even know about dairy farming. To overcome such issues, the HR department should fix the problem through training and sessions.

Internal Strength

The internal strength of the company was seen in the progress it made since its launch. The internal strengths were their dedicated, punctual, determined, and optimistic managers and policymakers. As the employees stated about one of their managers, he was honest and dedicated. The decision-making power that Superlite’s managers and policymakers had was their biggest strength. The bold decision made by Hollingsworth to introduce trucks and a home-delivery service was historic because it brought holistic development to the company. The decision was risky and challenging, but they dared to take it. This is the spirit of a businessperson..

Ratio Analysis Of The Sales And Production

In 1968, milk and cream accounted for 45.7% of the total milk supply. This was a 0.7% increase from 1967, when sales were recorded at 45%. In that year, frozen products like cheese and butter, however, increased in sales. When we compare this with the era of 1952, we come to know that the sale of milk has decreased since 1952. The cash received by farmers from selling milk and its processed products was $224 million more in 1968 than in 1967. In three succeeding years, the income increased by 18%. Compared to 1965, the income gained in 1968 was $925 million more. However, inflation was seen in 1968, as consumers paid higher prices than in 1965. The following shows a detailed analysis of milk production and its sale in different states. The following data analysis shows the business impact in different states.

Some countries import milk from their neighboring countries. The impact of the Supersite dairy firm in the United States varies from state to state. In some states, the net income earned by the company is higher, while in other states, it is relatively low. This shows the preferences of the states to other companies. The United States earned the maximum, while Wisconsin scored second in net earnings. This table represents the production of different industries in the United States.

Sale And Supply Statistics Of The Company

To analyze the company’s sales and statistics, a few examples from its progress are taken. The data given above shows the sale of Superite in the United States in different eras. The three main eras are given above in the table, which shows the sales of different milk items in different years. Each year has its own gain and share in each item.

Fluid Milk Products Sales. 1960-1968

Financial Analysis Of The Supersite Performance;

After going through all the given data and the sales table, we know we are in a position to reflect on the financial progress of the firm. The year 1960 was the best year for the milk-producing company as more milk products were sold out in that year. Whole milk production and sales decreased relatively from 1960 to 1968. In comparison, low-fat milk production and sales increased from the 1960s to 1968. Whole milk production was 87% in the beginning and dropped to 78.5% in 1968. There was almost a 10.1% drop in milk production from 1960 to 1968. This period shows a low financial growth for the company.

Organizational Development

Organizational development seems weak in the above analysis of performance. It has been shown that the production of fluid milk dropped from 1960 to 1968. The internal management and setup are weak to form policies to enhance the production level. The lower production of milk shows that the organization is not properly using its resources; thus, the company is lacking efficiency and productivity. Lower production also provides evidence of low labor productivity or unskilled labor.

Alternative Strategies

Alternative policies are two or more approaches to attaining the same goal. These are methods and policies used by the firm to achieve its goal, which is to maximize profit. These policies are applied when one of the systems they adopted fails or is incapable of achieving its goal. Four other competitors faced the dairy company in the market of Nashville. To cope with the challenges and threats from these companies, they identified different approaches; the scenario at Superlite was different. They had a legacy of good management and effective decision-making. They held the legacy of their managers from time to time. The policies they had adopted for the sales were working for them to the highest of their target. But after reviewing the whole case, a few strategies and plans can help the managers boost their sales. These policies are in response to the weakness I found in their entire setup. The selection criteria of laborers are to be changed if they want more effectiveness in their product sales. The selection criteria must be merit-based. The worker should be hired after taking proper tests and interviews. Their performance must rank laborers in the organization. Besides this, the vertical expansionary and horizontal expansionary strategies must be followed. These strategies help any firm expand its products vertically and horizontally in the market and attain diversity. Above all, diversification of goods is the best policy for the business firm.

Choice Of Strategy

The choice of strategy depends on the nature of the firm, the market, the environment, and the type of customer the firm is targeting. The best strategy for Sprite to adopt is the horizontal and vertical expansionary strategies. The strategy must be focused on the internal management setup and resource utilization. The strategy must also ensure and outline the basic steps to overcome the problem of labor productivity which is very weak in this company.

Marketing

The marketing guideline for this company is that the quality of the product must remain high, as it did in the company’s initial stages. To capture more of the market, the company must produce various milk products. Products like cheese, butter, and ice cream can help maintain market share by attracting more customers.

Implementation Of Strategy

The chosen strategy must be applied at different levels in the organization. The first thing is to develop a competitive environment in the company by hiring skillful labor. The second step is to increase efficiency and productivity through technological innovation and improved labor productivity. The next step is to differentiate products and maintain quality to compete with other competitors (Farm Financial Standards Council, n.d.).

References

U.S. Department of Agriculture, Economic Research Service. (n.d.). Dairy. https://www.ers.usda.gov/topics/animal-products/dairy

Laverty, M., & Littel, C.. (2020). Entrepreneurship. OpenStax. https://openstax.org/books/entrepreneurship/pages/1-introduction

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