Introduction
The case study under examination concerns Valio, Finland’s largest dairy products manufacturer, and its reconstruction following the country’s admission into the European Union (EU). Thus, the company was forced to undergo a profound organizational restructuring and adopt new strategies to continue functioning in a changed institutional and regulatory setting (Lamprinakis, 2012). This essay will consider the problem encountered by Valio and its cause and provide an evaluation of the response plan adopted by the business.
Problem and Cause
The major restructuring Valio underwent in 1995 occurred due to several external and internal problems. The external problems experienced by the company were primarily political, with Finland adopting new competition laws and the country joining the EU (Lamprinakis, 2012). Thus, the venture that previously operated in a closed market where it presented as the major player was forced to adapt to a market-driven economy with numerous new competitors. Meanwhile, the internal problems experienced by the company included an unsustainable amount of product lines and dairy factories that required additional maintenance costs (Lamprinakis, 2012). It should be noted that the root cause of the external problems was the economic recession in Finland which required the country to enter a new market (Ala-Fossi, 2020). Meanwhile, the internal issues were likely caused by Valio being the largest company in the dairy market and having few competitors.
Response Evaluation and Alternatives
It can be argued that the company efficiently responded to the problem and maintained its dominant position in the domestic market while gaining new ground in the international market. Valio applies an ambidextrous response, implementing both proactive strategies and retrenchment strategies (Lamprinakis, 2012). Thus, proactive strategies included research and development, product quality improvement, and customer satisfaction focus (Lamprinakis, 2012). Meanwhile, the retrenchment strategies consisted of substantial downsizing of personnel and closing inefficient and underutilized factories of the company (Lamprinakis, 2012). It can be argued that the selected response strategy addresses the problems the company was facing efficiently, with Valio cutting unnecessary costs and focusing on offering value to customers. Alternatively, the company could have opted to provide value by developing a new line of products or acquiring dairy companies in other EU countries to extend its market share and eliminate potential competition.
Plan of Action
Market extension acquisitions during a turbulent time for the company could have resulted in Valio entering new markets without competing with the existing companies offering similar products. It is a proactive strategy that would have required the company to approach target companies selling the same product in other markets. The next step would consist in drafting an acquisition or merger proposal and negotiations with the target ventures. Considerations of how the merger would be financed and objective evaluations of the companies considered for the acquisition would be required.
Conclusion
In summary, Valio’s restructuring in 1995 upon Finland’s accession to the EU presents an interesting case study that remains relevant. The company found itself in a difficult position, with the country imposing new competition laws and joining the union with new business regulations. These changes threatened the position of the company that relied on the centralized marketing that was being outlawed and was to compete with well-established foreign brands (Lamprinakis, 2012). Nevertheless, extensive research and acquisition of relevant information by Valio on the European markets and the needs of domestic and international customers allowed the company to prosper during a highly uncertain time. Thus, other companies can consider Valio’s approach to external and internal problems as an example, as modern markets are likely to experience a plethora of new challenges.
References
Ala-Fossi, M. (2020). Finland: Media welfare state in the digital era?. Journal of Digital Media & Policy, 11(2), 133–150. Web.
Lamprinakis, L. (2012). Organizational innovation and institutional change: The case of Valio in Finland. International Journal on Food System Dynamics, 3(2), 95–105. Web.