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Executive Summary
Thompson (2001) defines a strategy as a word of military origin referring to a plan of action
designed to achieve a particular goal. Strategy is a framework through which an organization
can assert vital continuity whilst managing to adapt to the changing environment to gain
competitive advantage. According to Wheelen (2008), strategic management is that set of
managerial decisions and actions that determines the long run performance of an
organization; it includes environmental scanning, both external and internal, strategy
formulation, strategy implementation, evaluation and control. According to Igor Ansoff
(1984) strategic management is a systematic approach to the major and increasingly
important responsibility of general management to position and relate the firm to its
environment in a way which will assure its continued success and make it secure from
surprises. Consequently strategic planning is that decision making process that aligns the
organization internal capability with the opportunity and threats it faces in its environment.
Nowadays the interface of the external and internal environments is of great importance.
Company mostly can influence their internal environment, but they generally have less
influence on the external environment. Furthermore, the demographic change is challenging
most companies. On the one hand, they have to adjust to the changing customers needs and
on the other hand they have to deal with the decline of the workforce on the labour market.
As leading milk Produce Company Brookside is influenced by external and internal factors in
many ways.
This report is divided into two parts. The first part (Task 1) will evaluate the external
environment of Brookside. External environment will be presented within the scope of the
PESTLE and Porters five forces. The second part (Task 2) will show how cultural
differences and /or cultural change factors influence Brooksides policies and how the
company has responded in the past. At the end, areas of improvement regarding demographic
factors will be proposed.
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Task 1
1. Introduction
Brookside is a Kenyan based dairy, producing fresh milk and other dairy products, and is the
largest dairy operation in East Africa. The company currently has operations in Kenya,
Uganda and Tanzania. It also exports products to Rwanda, Burundi, Egypt and the Middle,
East, as well as to the Indian Ocean islands. Brookside, which was founded in 1993 by The
Kenyatta Family Brookside after Kenyas government deregulated the dairy industry in 1992
and the sponsors saw an opportunity to compete in a key economic sector that had been
formerly been dominated by the government run Kenya Cooperative Creameries (KCC)
now known as the new KCC, has developed into a global company focused growth market of
dairy product. Brookside invested US$ 18.7 million in 2009 from the Africa Fund. Brookside
was originally an investment by Acacia Fund where it achieved a successful exit. Operational
performance since our investment has been strong at 17% CAGR. Over this time the number
of employees has also grown to over 2600 employees as at December 2010 (a CAGR of 11%
since investment).Brookside is Kenyas largest dairy company and is growing worldwide
faster than the market. Its success is based on successful brands and regions with aboveaverage growth potential, a related strict orientation on local consumer wishes, an optimized
supply chain, and management expertise in a lean organization. Brooksides product line
includes fresh milk, long life, yogurt, butter and ghee. The products are generating doubledigit sales annually.
2.0 Primary External Environment Influences
External environment of an organization includes a variety of factors, whose existence,
influence its behaviour and performance. The action of these factors may be direct (for
example, the actions of competitors) or indirect (for example, changes in business climate).
The business cannot control these aspects but can respond to change if needed. The main
problem for business managers is to be able to respond early to change in the external
environment, and this depends on how soon any change is identified. Some external
environmental factors such as economic conditions are reported daily in the media and
managers have a wealth of information on which to develop strategic plans. However, some
external factors may be difficult to identify, particularly if the pace of change is very slow or
is hidden from view. The External influence consists of;
a) Political Environment
b) Economic Environment
c) Socio-cultural Environment
d) Technological Environment
e) Legal Environment
f) Demographic Environment
g) Competitive Environment
2.1 Political Environment
Like law, changes in government policy can be well notified and discussed, or without
warning. As an example of how government policy has an effect, is that many
organisations depend on government financial assistance. For example Brookside was
greatly impacted by the post-election violence. According to a survey done by Land
OLakes, 36% of Rift Valley and 31% of South Valley population was displaced, about
10% of cows were lost or stolen, and milk collection and distribution was severely
disrupted. Milk processors and cooling plants were unable to collect milk, a number of
informal traders and milk bars were displaced or destroyed, and access to feeds and
other inputs was severely disrupted. Total loss to dairy industry, including loss to
consumers, is estimated at 7.1 billion Ksh. Also when there is a change of government,
such funding assistance can disappear in a short space of time.
and try to out compete their rivals who offer similar products or substitute products and
hence the organizations gain an edge in the target market.
Not only will competitors come and go, but they will also change marketing strategies,
product lines and prices. Often such changes are not heralded and business managers
must be alert as to what competitors are doing.
Brookside main competitor is the New Kenya Cooperative Creameries; the New KCC
has also made a significant contribution in the dairy industry through individual
investments and strategic partnership with various stakeholders in the dairy industry to
facilitate provision of goods and services to support the dairy farmer.
2.3 Economic Environment
Prevailing economic conditions of the nation will have an effect on the spending
patterns of citizens. Increases in interest rates and/or a high level of unemployment will
depress consumption of non-essential goods and services. Brookside bases on a
complex economic test aims to measure how far retailers or producers could raise their
prices in any market without being punished through losing customers.
Economic conditions are global as well as national, and when there is a global financial
crisis as in 2007, changes in the external environment can be dramatic.
2.4 Social-cultural Environment
Focusing on the concept of commodity chains within the food industry, this paper
analyses the term's widespread and variable usage in both academic and policy-orientated
work. Despite recent criticisms, the concept has retained its popular appeal alongside
competing metaphors such as networks, circuits and assemblages. Examining the concept
in more detail demonstrates a range of diverse and inconsistent definitions such that
commodity chains are in danger of becoming, according to Andrew Sayer's terminology,
a chaotic conception. When valuing dairy as a source of livelihood, the statistics are
equally imprecise.
According to KDB (2006) It is widely cited that about 70-80% of milk production comes
from smallholders, with the remainder from larger producers, estimated at about 5,000.
The estimates of the number of smallholders vary. The number of 600,000 (Omore et all,
1999) has been widely cited for many years. According to SDP, the Kenyan population has
grown significantly over this period and the number is no longer valid. According to their
revised estimate the number of smallholder dairy farms is much greater at about 1.8
million. Specifically, we argue that the concept objectifies social relations, fore-grounding
certain (technical and economic) features and back-grounding other (social and
environmental) issues.
Task 2
1.0 Cultural differences
The recent business trends of globalization and increasing ethnic and gender diversity are
turning organisations' attention to the management of cultural differences. The
management literature has suggested that organizations should value diversity to enhance
organizational effectiveness. However, the specific link between managing diversity and
organizational competitiveness is rarely made explicit and no article has reviewed actual
research data supporting such a link. This reviews arguments and research data on how
managing diversity can create a competitive advantage. We address cost, attraction of
human resources. Marketing success, creativity and innovation, problem-solving quality,
and organizational flexibility as six dimensions of business performance directly impacted
by the management of cultural diversity.
Brookside Dairy Limited procures processes, produces, and markets milk and milk
products. The company offers fresh pasteurized milk, cream, butter, yogurt, ghee, and long
life milk products in Indian Ocean Islands, East Africa, Rwanda, Burundi, Egypt, and the
Middle East. It provides products through distribution depots, agents, and sub agents to
outlets in East Africa. The company was founded in 1993 and is based in Ruiru, Kenya. It
has operations in Kenya, Tanzania, and Uganda. Now the demography of Brookside is
spread across the globe with its presence in many parts of the countries and connected to
its customer.
The culture of a region includes our values, beliefs, customs, languages and traditions.
Culture is reflected in our history, in our heritage and in how we express ideas and
creativity. Our culture measures our quality of life, our vitality and the health of our
society. Through our culture we develop a sense of belonging, personal and cognitive
growth and the ability to empathize and relate to each other. Direct benefits of a strong and
vibrant culture include health and wellness, self esteem, skills development, social capital
and economic return. Theoretically, the larger the population in a region, the grater the
market potential will exist. In addition, the composition of a population in terms of age
and sex will also influence the potential demand for specific products. For example, if a
company wishes to market disposable nappies abroad, the number of women in a
particular target market who are of child-bearing age is an important influence on the
potential demand for that product. In effect, cultural factors such as literacy levels serve to
stratify the total population into two different segments - those people who are likely to be
potential consumers and those who are not. An overall increase in population size is
therefore relevant to potential demand. Stratification of the overall market characteristics
also helps to identify significant changes in potential marketing opportunities.
Although Kenyas dairy sector has a significant contribution to the national economy,
household incomes and food security, the industry faces a number of technical, economic
and institutional problems in milk production, processing and marketing (Karanja, 2003).
These constraints affect the ability of the sector to participate and compete in the domestic
and regional markets.
Specifically, some of the main constraints to increased milk production in Kenya have
been identified as seasonality in production, inadequate quantity and quality of feed,
including limited use of manufactured cattle feeds, and lack of good quality animal
husbandry and farming practices. Poor access to breeding, animal health and credit
services and high cost of artificial insemination (AI) service are other constraining factors.
In some areas, dairy producers are faced with the problem of poor infrastructure (roads,
electricity), inadequate milk collection and marketing system, poor interaction and priority
setting between research, extension and training, and limited farmers involvement in the
output market, hence reducing the incentives to increase milk production (SDP, 2005).
per day; calculations in this report estimate that 15 liters per day is the required production
to bring a family over the poverty line.
3.0 Effectiveness of Brooksides response to cultural differences
Organizational effectiveness studies are necessary because of the close relationship
between effectiveness and managerial strategies. Organizational effectiveness studies are
especially needed for colleges and universities. Managerial strategies are shown to be
more important indicators of effectiveness than organizational structure, demographics, or
finances. Managerial strategies that are proactive, multi-faceted, and external in emphasis
are more likely to succeed than reactive, monolithic, and internally oriented strategies.
Existing research on organizational effectiveness has suffered from: inadequate
identification of the indicators of effectiveness; dependence on single indicators of
effectiveness; failure to recognize the relationships between indicators; under-specified
models; and a tendency to make generalizations that ignore dissimilarities among
organizations.
When Brookside saw the effectiveness of the New KCC, Brookside partnered with other
stakeholders in order to help develop the local and regional dairy and livestock sector to
world-class standards. They have continuously invested in world-class operations making
us the region's leading milk processor with fully-fledged operations in several countries.
Brookside Dairy is guided by the principle of Goodness for all through which they
commit themselves to a mutually beneficial partnership with their value chain
(farmers, suppliers, transporters, distributors, retailers and their employees),
the
community where they operate, their consumers and other players in the industry. Their
road map to success has always been defined by a commitment towards quality right
from the farm level, through milk processing to the delivery of their products to
consumers.
Brookside Dairy is the market leader in innovation and technology through partnerships
with various stakeholders in the dairy and livestock industry coupled with the input of a
dedicated and skilled staff with a constant desire to meet and exceed consumer needs.
Brookside Dairy invests heavily in product research and development
to ensure
we continuously improve on our products and provide the market with products that
meet the varying consumer tastes and preferences. We are confident to be continuously
supplying you with our quality range of dairy products from our wide range of over 200
different processed dairy products in the region.
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We are also focused on building the Brookside brand into a strong international brand by
being the benchmark dairy processor beyond the region.
Our products are available throughout Eastern Africa, the Common Market for
Eastern & Southern Africa (COMESA) bloc and as far afield as Egypt and the Middle
East. Other effectiveness for cultural responses includes;
3.1 Health promotion
Kenya experiences a huge unmet need for healthcare and training of healthcare workers.
Needs are unmet both in quantitative and qualitative terms. The shortage of sufficient
quality tertiary education in the medical field contributes significantly to the poor health of
most Kenyans and Africans in general. Healthcare services are unequally distributed; with
rural areas being underserved compared to urban areas.
In spite of the heavy investment in healthcare by local governments and donors, the health
statistics in Kenya remain grim, and particularly the maternal and child deaths: one child
out of nine children dies before reaching the fifth birthday; 488 out of 100,000 pregnancies
lead to maternal death versus less than ten in many developed countries (according to
Community Health Promotion Kenya).
Chances that Kenya will achieve the Millennium Development Goals (MDG) that pertain
to health are very slim, unless a concerted effort, by the government and all people of good
will, is put in place to address critical areas such as community empowerment and poverty
alleviation, among others.
3.2 Trainee programs
The program is a platform to learn more about the dairy market and how to stimulate
systemic market change over the long term. The program has worked hard to look at the
broad picture and explore the market influences (problems, symptoms and systemic
causes) including the approach that was adopted to address the constraints. Brookside
works with staff to: assess and provide feedback on their skills and interests; select
training and development activities that match their career development objectives and job
needs; use the Development & Training catalogue as a tool to tell employees about
training and development opportunities on campus and to create an annual development
plan; stay informed of current policies and practices that support employee development;
follow up with employees after a learning activity to integrate new skills and knowledge
into their responsibilities
4.0 What strategies did Brookside use to be more successful than New KCC?
Throughout the 1980's and the first half of the 2000's, KCC later rebranded to the New
KCC was the market leader and the dominant force behind Dairy Company in Kenya.
By the end of the 1990s, KCCs own directors had plundered the companys assets. KCC
became so inefficient that it was unable to service its loans with commercial banks. Debts
soared. In May 1999, farmers and suppliers sued it for unpaid deliveries. KCC collapsed,
unable to pay its outstanding debts to farmers. Public outcries led the government to arrest
and prosecute several of KCCs directors. Not long afterwards, the Kenya Commercial
Bank moved in to liquidate and sequester the companys property for an unpaid loan of
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KSh. 1.5 billion (USD $22 million). An official receiver was appointed, who issued a
tender for the sale of KCC.
4.1 Partnership with Farmers
Brookside Dairy is firmly committed to the development of the regional dairy and
livestock sector through partnerships with other stakeholders who include farmers,
government and non-governmental organizations. They empowered farmers to manage
their operations professionally so as to maximise their milk production and enjoy the
full benefits of dairy farming. To achieve this, the company has forged partnerships
with over 100,000 small scale dairy farmers distributed in more than lS0
cooperative societies and self help groups as well as individuals throughout Kenya
who benefit from a field extension programme. These programmes are designed to
enrich the farmer with knowledge that will eventually improve their business.
Other benefits of this winning partnership are.
A guaranteed market for their milk :Brookside Dairy boasts of the largest and most
modern milk processing facilities in the country and farmers can rest assured that
the company has the capacity to receive their milk.
Loan Facilities: We facilitate loans with several financial institutions that we have
partnered with including Equity Bank and the Kenya Commercial Bank where
farmers can borrow funds to expand their businesses at favourable interest rates.
Grassroots
milk collection
easier for farmers to deliver milk to the company at its freshest and with minirnal
wastage. The network also enables the company to control the quality of its products
right from the source. We collect milk from over 30 Counties Nakuru, Kiambu,
Nyeri, and Nairobi and have set up cooling plants in Ruiru, Kiganjo, Kinangop,
Nakuru, Eldoret, Nyahururu
and 01 Kalou.
These
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6.0 Conclusion
In this study, the relationship between culture and organizational performance were
examined across three ethno-geographical locations A general inclusive concept for
Brookside that fair trade that begins from home is an emerging issue that retailers and the
supermarkets need to address itself such that in order to remain competitive and also
compete with other retailers in the market and also to avoid government intervention,
although the recommendations for change seem to be logical but there implementation is
much more complicated. The largest barrier is the shareholder Brookside which is not
unreasonable to argue legally that due to the high competitiveness and the computation
within the industry, it is not in Brooksides or other the large dairy interest to put there
selfs at the potential competitiveness disadvantage in order to take a moral high ground in
dairy industry. Brooksides values, vision and loyalties are towards their share holders who
want growth. If Brookside wants to change them need investors who can take a financial
growth with the promise that adopting a true trading which begins at home and which will
approach and which would bring more long term growth sustainability. With the bases of
Kenyan government a labelling laws and greater transparency on the Dairy part. In the
present day scenario the consumers are more and it is eventually evident that consumers
needs and are more concerned about what they eat and from where the product has come
from and also they are concern about all the green issues such as Food.
The findings showed that there is a significant relationship between culture, on the one
hand, and organizational performance on the other. In addition, if all things remain equal,
organizations that are performing to the satisfaction of the owners, employees and
customers will be found in culture suitable for their operations. It is clear from the
empirical evidence generated in this study that organizational performance is a multifaceted and multidimensional criterion.
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the Kenyan Highlands: A Spatial and Dynamic Approach.
Brookside Dairy Limited Website:
http://www.brookside.co.ke/bc_about.html
Business Daily posted Friday, February 19, 2010.
Olok-Asobasi , Frank and Sserunjogi, Mohammed (2001). Survey of Dairy Markets in
Kenya and Rwanda and Opportunities for Ugandan Exports
Githunguri Dairy Farmers Cooperative website:http://www.fresha.co.ke/about-us/githunguridairy-farmers-cooperative/
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Asheghian, H.P. and P., Ebrahimi, 1990. International Business. Harper Collins, New
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