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Basil Foods Case Solution & Answer

Basil Foods Case Solution

Introduction

Perdition was initiated in 1934 as a grocery store, which was found by Italian immigrants in the state of Catarina, Brazil. The company has evoked vertically by producing: pork, chicken, livestock and slaughtering facilities. It also operated as a distribution subsidiary. After 1980s it started its new business line in the canned food segment, i.e. vegetable, canned soy, beef and other meat items. It was the first company to go for the processed food concept and to use processing equipment in the poultry business. The company was an exporter toJapan, Europe and Saudi Arabia. The company faced financial problems and decided to sell a full stake in pension funds. Along with that Perdigao worked on the re-engineering of the company’s operations, updated its infrastructure and enhanced its facilities and added value for its customers. Additionally, the company started to produce other dairy items. By the end of 2008, Perdition was at the point where it had 59000 employees and its sales had reached to R$ 13.2 billion.

Sadia was also started in Catarina Brazil in the 1940s with the same concept of processing and direct selling of chicken and pork. With time, the company expanded its business and went into the poultry business. It also expanded in beef and frozen beef and other meat items. By the 1980s,Sadia was one of the exporters of what they were producing in the market. It increased protein consumption demand and other trends turned the company’s focus towards Asian market. The company grew and added value for its customers in the same manner as Perdigao did.The company stated the revenue of R$ 12.2 billion with total employees of 47750 in 2008.

Now we would be discussing the current trends and situations which the company is facing. The reason to discuss both the companies is to make the initial background of both of these companies. This case discusses that Brazilian food industry was looking forward to expand domestically as well as internationally. One way out for Basil foods was the merger which they were planning on for so long, i.e.the merger between Perdigao and Sadia. In 2011, the company received the permission from Brazil’s antitrust authorities to proceed with the merger of both the companies. The main purpose behind this merger was to expand and double the sales in the market. Domestically, the company had this objective to increase the business base and to capture the market share, whereas internationally; the company had the intensions to change its status from exporter to a multinational company.

As both the companies had a strong base and background, both of them started from scratch and now they are on the level of merging and focusing on high context picture of the situation. The concerns of the team were very much clear, as they were concerned that both the companies have served as rivals for many years; the culture and staff have different perspectives so how this merger would benefit the company. A statement in the case stated that This uncertainty created an emotional roller coaster,” noted one employee. He added: “I’ve never seen companies that hated each other as much as Perdigao and Sadia.” We can conclude the challenge faced by the companies for this merger. The resources and facilities possessed by both the companies can help Basil to reach its goal. But the differences would be the biggest challenge for the companies to overcome. It was a challenge for the company to bring employees of both the companies onthe same page and to ask them to work as a unified team. Though in 2009, both the companies tried to do this merger, but it was interrupted by the administrative council for economic Defense (CADE), they had this concern that both companies have a monopoly in the market and would create an artificial shortage in the market. But after the years of investigations and reports, CADE finally approved the merger of both the companies in 2011. The consumer trends and increasing demand for protein consumption opened the ways for BRF to explore the domestic and international markets. The main objective of this merger was to double the revenues and to become a multinational brand.

CAGE Analysis

         
  Cultural Attractions Administrative Attractions Geographic Attractions Economic Attractions
China Linguistic and ethnic homogeneity.

Its diaspora.

Easy for doing business.

Enclaves.

Distance between Brazil and China is immense. Large and potential market

Higher-income cost-efficient.

Well organized supply chain

More foreign business

 

Mexico Lesscultural synergy

 

 

Ease of doing business Huge distance Growing market

Demand in middle east

 

India English Language

Westernized

Elites

 

 

 

Common colonizer

Common law

Political friendship

Lower long-run risks

Larger distance Specialized labor

Profitability

Low cost

Infrastructure

 

South Africa Diversified culture

Accept other cultures

Rich culture

Past cultural history

 

Colonialism

Federal republic

  Technologically advanced

The second-largest economy in Africa

Demographic attractiveness

 

Iran Different cultures

Different languages

Federal republic

Ease of doing business

Not favorable Productive trade

Large public sector

Mixed economy

Full foreign ownership

Based on Cage analysis; we have seen that every country has something attractive for Basil, but it is not a smart option for Basil foods to go into the international market in different countries, as it would make the country’s resources extremely thin and much riskier. It would take time for Basil foods to develop and maintain distribution channels in other countries, because the cultural differences would not allow them to sell pork and other meat, such as beef in countries like Iran and India.

The infrastructure in developing countries is discouraging brasil food to expand its business in these countries.The reasons are discussed below: Because the poor infrastructure will not fulfill the actual goal of brasil food in the developing countries. The cultural differences in India, Iran, Mexico, and South Africa will not support the company in the international market. Brasil foods should continue its exports with these countries, but when it comes to building production and distribution stream;China is a suitable and convenient option for brasil foods……………………….

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