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Yildiz Holding Global Expansion Strategy Case Solution
Yildiz Holdings completed the acquisition of United Biscuits, a UK based Biscuits Company after acquiring Godiva, a US based premium chocolate company and DeMet, a US based candy manufacturer as part of its global expansion strategy over the period of past 6 years. Such acquisitions had enabled Yildiz to effectively counter the competition from global giants like Starbucks, Mars and Nestle and even allowed it to enter the premium chocolate market in United States. The aim of the company was to get a global dominion over the confectionary market for snacks and biscuits and at the same time adopt diversification strategies by breaking its business into four main business segments- food, non-food, retail and confectionary, which was its core business.
Following questions are answered in this case study solution
Assumptions and Missing Information
Development of Alternatives
Evaluation of Alternatives
Recommendation to Management
Case Analysis for Yildiz Holding Global Expansion Strategy
Overall, the competition in the confectionary market had increased growing by 2% per annum. However, each region had a different set of preferences for snacks, as while European markets preferred sugary snacks, the American markets were inclined towards salty snacks and Asian markets. Furthermore, the health food segment has also evolved with people becoming increasingly health conscious. However, the company has made acquisitions across various segments of the industry and needs to come up with a strategy that would help it move forward and stay consistent with its internationalization goals.
2. SWOT Analysis
The SWOT Analysis for Yildiz Group Holdings is as follows:
The company has a strong global presence with 300 brands in its portfolio enabling it to offer a variety to its target customers. This is supported by the fact that it has a range of strong brand names like Godiva and United Biscuits making it the world’s third largest biscuit company. Apart from this, the company has a highly diversified business model with product offering divided into multiple business segments catering to different customer preferences. In addition, there has been extensive focus on advertising campaigns and promotional activities for brand building. Lastly, the group is actively engaged in social responsibility initiatives resulting in improved public reputation for the business.
Firstly, rapid acquisitions have placed the business in a vulnerable position in terms of managing internal operations. Furthermore, the non-core business segments do not yield high revenue or margins, yet use up a significant chunk of business resources. This is a major weakness as it is eating up business margins and has made it difficult for the management to run such a large complex business.
It should be noted that more and more people becoming health conscious, which would increase the demand for healthy snacks. Hence, the business has a huge opportunity in this segment. Furthermore, technological penetration has increased which can be used to increase customer awareness regarding healthy food consumption. Lastly, currently it can be seen that technological shift has caused e-commerce to rise. Hence, Yildiz Group can shift towards e-commerce in its retail segment to further expand its market share.
There have been rising number of competitors in the industry and the competitive landscape is expected to become even more intense, which would diminish the market share and the margins of the existing players. Also, being a company with global reach, the company would be more exposed to foreign currency fluctuations and foreign government trade policies and restrictions that may influence the business profitability.
3. Assumptions and Missing Information
It has been assumed that the healthy food market will consistently grow as can be witnessed by the rising trends in the global health and wellness food market. People have become more concerned about having a balanced diet with sufficient nutrition and focus on physical activity to avoid becoming a victim to various heart or kidney diseases. Hence, healthy food market is likely to grow in the future (Business Wire, 2020).
As the business will expand and have international brands under its umbrella, the complexity of the internal operations will rise and decisions for centralization and decentralization will have to be taken to ensure market responsiveness and profitability growth at the same time. Hence, it has been assumed that expansion will create internal challenges for the business (Rondinelli, Rosen, & Drori, 2001).
It has also been assumed that forming a single brand name would overcome internal challenges by integrating companies and yielding synergistic benefits.
It has also been assumed that the business situation in 2014 is the same as now and the company is still facing the similar challenges.
4. Problem Definition
Yildiz had been successful in gaining market share as it expanded and acquired control of some major brands like United Bakers, Godiva and DeMet Candy Company, which allowed it to compete with major competitors in the industry. This helped the company grow and expand its market share. By getting a control of production and the resources, Yildiz was able to influence customers based on prices but the management was unsure now that it had acquired United Bakers if pursuing the same strategy would yield effective results for the business and would be a sustainable way going forward. As the company had grown, it had to manage its internal operations as well to ensure efficiency and decide upon integrating its marketing, manufacturing and distribution functions that would complement its overall strategy.
As Yildiz expanded, it became difficult for the company to manage its various companies. Integration of these companies was necessary to yield the synergistic benefits. However, due to acquisitions, the company became the leading company in confectionary and then in snacks, and was not able to develop a brand name in one area of the industry. Over time, the acquired companies became disintegrated, and Yildiz began to lose its market share in various product lines. From 2011 to 2014, Yildiz’s market share in biscuits, chocolates, and cakes declined, and other international brands began to settle in. The problem for Yildiz thus became the efficient management of all its companies for yielding synergistic benefits, along with regaining the market share its companies had lost overtime.
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