Q2 Critically evaluate the extent to which the resource-based view explains Raisio’s development in the case study? How important do you feel has been the leadership of senior Raisio managers in the organisation’s development?
1. Raisio Group is a company that for years had been known for grain milling, but in 1996, the company attained international limelight following its success in the production and marketing of a cholesterol-lowering margarine, Benecol, and its active ingredient stanol ester. The popularity and demand for the products both in the local and international markets outstripped the company’s production capacities. The company has been existence for many years and some limited international footprint in countries such as the US. The overseas expansion of Raisio grouped mainly falls in the model of the Uppsala concept, but it has a few aspects characteristic of the Born Global concept.
In terms of firm characteristics, Raisio Company falls squarely in the category of firms with the Uppsala model of internationalism. The company has been in existence for many years, and it took more than 6 years to expand beyond its borders and start doing business in the international markets. Implying that its speed of internationalizing is slow and incremental. The company is relatively large in size, has tangible assets, and has the financial muscle to get into international markets. However, the development and internationalization of the innovative products happened in less than 6 years which is a characteristic of the Born-Global model (Coviello 2015).
Regarding business strategy, the company resembles firms that are theoretically Born-Global in their internationalism (Cavusgil & Gary 2015). The company has a stated strategy of innovation and offers innovative products such as the cholesterol-lowering margarine, which is of high quality, are highly effective and appeal to niche markets for people who are health conscious. These characteristics apply to the new products, but the traditional company products still follow the Uppsala model.
The company’s approach to internationalization has traditionally followed the opportunistic and reactive strategy employed by companies utilizing the Uppsala model. On the other hand, the new products (cholesterol-reducing margarine and stanol ester) closely identifies with the Born-Global model characterized by having a structured and proactive strategy.
Raision has a stable domestic market which gave the company a launching pad to get into the international markets. Having a stable domestic market before venturing into the international market is a basic characteristic of companies following the Uppsala model of internationalization (S?Trach, Wiesinger, & U?Berwimmer 2016). The fact that the company is strategizing on marketing its new products internationally before satisfying the domestic market demand exhibits an aspect of Born-Global model companies.
Psychic distance is not a major consideration nor a hindrance to the company’s internationalization of the new products. At the same time, Raisio’s expansionism is based on the strong knowledge base and technological competence rather than on years of experience in the market. Also, the company views the international market as an opportunity to be exploited for its new products rather than a threat. All these are basic characteristics of firms that employ the Born-Global model of internationalization. On the other hand, the company still produced and exported its former products strictly following the Uppsala model (Lynn, & Jin 2014).
Looked at from the perspective of a company that has existed for many years and progressively expanded its products to the international market, Raisoi has all the characteristics of a company that follows the Uppsala model of internationalism (Figueira-De-Lemos, Johanson, & Vahlne 2011). However, looked at from the point of view of the new products that lower the cholesterol level, the company has all the characteristics of a firm that follows the Born-Global concept in its internationalization.
Porters’ Diamond concept deals with the issue of a country’s competitive factors (Carlos, Daniel, & Paulo 2010). In full, the theory is stated as Porters Diamond Theory of National Advantage tries to explain the competitive advantages of a group or a company which they have due to some factors inherent in the country (Smit 2010). A country can lead to the success of companies either local or international by virtue of its characteristics that support the performance of businesses (Fainshmidt, Smith, & Judge 2016). Also, the theory deals with ways in which a country or a nation can improve and catalyze the factors which are favorable to it making the country favorable in the highly competitive world.
The factor advantages of a country that Porter’s Diamond concept deals with include skilled labor, highly developed technological advancement, and the extent to which the government supports the country’s economy (Lin 2011). In general, the theory is visually presented using a diamond shape with its four points representing the various factors that constitute the economic advantage of a country which include: supporting industries, firm strategy, factor conditions, demand conditions, and structure and rivalry. A country’s factor advantages are more important than the country’s natural resources. For instance, Japan has a limited natural resources base, yet the country has developed a wide dearth of engineers who satisfy the country demand and are exported as expatriates in other countries across the globe.
Finland is one of the most health-conscious countries in the world with the implication that there are many businesses dealing with the production and marketing of healthy food products. In the cholesterol reduction market, there are many competing products including refined products called statins and natural products as flax seeds, garlic, and fish oil. In effect, the competition in the market is very stiff forcing the businesses involved to be innovative in the production of more effective varieties at minimum cost ensuring that they compete effectively in the market. The heightened competition in the health food sector has forced Raisio to develop innovative products and processes ensuring that the company remains competitive in the market.
Furthermore, the Finish government does not have strict policies against the health food innovations which ensures that many companies and individuals can easily get into the market thus heightening the competition in the niche. Due to stiff competition companies develop the stamina that enables them to survive in any competitive environment, both in the domestic and the external market.
The improvements resulting from the stiff competition in the Finish health food market has made Raisio develop effective policies, strategies, and procedures that help the company to weather domestic and international competition. The department of research and development do their work with an eye for ensuring that the products they produce enable the company to withstand competition from similar companies engaging in similar activities. The company’s success in the international market can be attributed to the highly developed policies and procedures developed over time through stiff competition. In the international market, the company easily fights off stiff competition courtesy of the strength and business muscle the company has resulting from dealing with the highly competitive environment at home.
2. The main proponent of the Resource-Based View (RBV) was Grant, who in 1991 opined that the main component of a highly successful business strategy is one that is based on the internal strengths and resources of the country (Jeske & Stamov 2016). The analysis using RBV starts with a comprehensive review of the company’s operating competencies and capabilities. The RBV provides explanations as to why companies with inimitable, rare, well-organized resources outperform their competition.
A company’s sustainable Competitive advantage is based on its unique company-specific assets that are not easy to imitate or replicate. A firm with assets which cannot be copied, imitated, easily transferred, rare, cannot be traded, and are of great value will outperform its competition irrespective of the financial muscle of the company (Bromiley & Rau 2016). RBV focuses on the issue of the unique internal resources which a company possesses and which differentiate it from the competitors who are operating in the same field (Breznik & Lahovnik 2014). RBV approach is interested in studying how companies or businesses combine their internal resources to come up with processes and business results which are unique from the competitors yet they operate in the same line of business, are affected by the same environmental constraints and exploit the same resource base (Lockett, Thompson, & Morgenstern 2009).
Raisio has unique assets and resources that differentiates it from the rest of the pack in the field. First, the company has human resources who are unique in their innovativeness. For instance, the company’s employees built the first oil-milling factory through improvisations using anything they could lay their hands on including scrap metal and spare parts. This kind of ingenuity in the company’s human resource base is unique to the company and it is hard to copy, imitate or easily trade. Second, the company spent a lot of money on research and development ensuring that the company had a constant supply of innovative products and resources to push the company forward. The tradition of continuous research, innovation, and improvement culminated in the production of the cholesterol-lowering margarine and the active ingredient stanol ester which propelled it to international acclaim with investors across the globe making beeline for the opportunities to invest in the company. The idea of cholesterol-lowering products from vegetables had been a topic of discussion in the food industry for years. However, only the unique resources available within Raisio was able to use its internal capabilities and competencies to produce a unique and effective product from ideas every company in the industry had access to. The resource-based view of company strategy can apply to Raisio as it has proven over the years that it has internal unique traits that are valuable, unique, rare, and imitable and cannot be traded.
Company leadership is the most significant resource and can determine the success or failure of the business. Leadership that is focused, innovative, considerate and visionary lead the company to greater heights (Wales, Patel, & Lumpkin 2013). However, the opposite is true with bad leadership and incompetence leading to the end of many businesses. Leadership is the cog in the firm that has an overview of the organization and the industry. The industry-wide view enables the leaders to see the strengths, weaknesses, threats and the opportunities have a bearing on the company’s profitability and sustainability (Langley, Smallman, & Van de Ven 2013). The leadership then strategizes on the best ways of organizing the company’s resources to be able to efficiently and cost-effectively leverage the strengths in the company to take advantage of the available resources to deal with threats and weaknesses (Amlus, Jusoh, Osman, & Ibrahim 2014).
The leadership of Raisio is one of the most visionary and effective among the firms in the industry. The leadership is not content to sitting down and dealing with things as they are, rather, they look for ways to that the company can produce better and high quality and innovative products that have value to the customers. In a normal company, the leadership would be interested in competing with the company in the red zones and their only concern would involve how to beat the competition through various policies and practices such as price cuts to the existing products. On its part Raisio’s leadership spent a lot of money on research and development to ensure that the company produces new innovative products which usher it into the blue ocean strategy where there is zero competition. Through the consistent insistent on the research and development and improvement of products has enabled the company to produce quality products that make the company more valuable and profitable. Instead of cutting the prices of its products, the company made innovative unique products and sold the same at higher prices than the competing products yet they sold out within no time. The Benecol margarine costs $4.50 for the 250 grams while the competing margarine retails at $4.00 for the same weight
Raisio’s Company CEO Matti Salminen and the rest of the leadership have through focus and having a great vision or the company ensured that the firm improves in profitability and at the same time has increased the shareholder value. The production and sale of the cholesterol-lowering products have increased the profile of the company making it attractive to investors. The company shares increased four-fold and the company’s market capitalization increased in terms of billions.
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