Assessment of Bunge Limited

AIM AND OBJECTIVE

The aim of this project is to identify the goals of BUNGE LIMITED and to describe the corporate and business strategies adopted towards achieving the goals.

BACKGROUND OF BUNGE LIMITED

Bunge limited is a global agribusiness and food company that operates globally but primarily in North and South America. Bunge limited processes soy beans, produces fertilizer, manufactures vegetable oil and wheat - based food products

Founded in 1818 by Johann Peter Bunge in Amsterdam, it moved to Antewerp in 1859. In 1884, the company moved to Argentina where it expanded its business to become the biggest private company. In 1970, the company moved to Brazil and in 1980, it diversified its business to include, insurance manufacturing of textiles, paints, chemicals, cement, banking and real estate. In 2001, Bunge Limited was quoted on the New York Stock exchange and in 2002, it acquired a global oil seed processor in France Cereol.

The company created Bunge Global Markets, an international marketing unit which contributed significantly to the volume of business in the international arena.

Bunge, through the acquisition and integration of Cereol , a Soy Proccesor Company in US, was able to increase its sale and ingredient port folio.

The decentralized structure of Bunge enabled decisions to be made at regional level s which is quicker, and sustained entrepreneurial spirit.

THE GOAL AND STRATEGIES

The goal of Bunge limited was to be the largest grain merchandising company and gain pre-eminence in International marketing.

In order to achieve its goals, Bunge Limited came up with corporate strategies such as acquisitions and mergers, rewarding shareholders and enforcing ethical standards which was further broken down to business strategies in terms of cost, market niche and differentiation. According to Souza, L (2011), business strategies supports the corporate strategies by creating a competitive advantage in the business.

Strategy can be defined as broad objectives set to direct an enterprise with a plan path to achieve set goals and long term objective with the big picture in mind and minimal distractions. Slack, N & Lewis, M (2008)p29. Below are some of the strategies employed by the company;

* Strategic acquisition, divesting non core businesses and restoring financial stability.

Stahl, M & Zimmerer, T (1984) assumed that there are two major decisions to make in an acquisition strategy; to actually choose acquisition as its strategy and which nominee firm to be acquired. Cereol acquisition was strategic. It is the largest oil seed processor in Canada, to expand grain and protein production; export to European markets and produced locally with Cereol assets in Europe; increased sale, reduce logistics expenses, economies of scale and efficiency. One main reason for acquisition is to have access to the technical knowledge of the candidate firm (which Bunge Limited was able to get from Cereol in improving complexity and finding solution to issues) and increasing the NPD capabilities of the company. Grimpe, C (2007)

* Decentralized management structure with aligned global mission that benefited regional offices as there was no bureaucracy and no delay in decision-making. To achieve alignment, the firm can either look at the market requirements and organize its operations resource capabilities to match them or examine its operation resource capabilities and seek only requirements that well align with it. Slack, N & Lewis, M (2008) pp229-230. The decentralized offices were efficient with good entrepreneurial spirit having strong values like Integrity, Openness, teamwork and trust.

* Having a professional management consisting of a 10-man executive committee and 35-person head quarter for faster decision making and attention to the plebs. Professionalism was ensured by introducing discipline and hiring bright and intelligent people that take initiatives. Professional employee set is achievable when leaders are made accountable for attracting key talents and making them stay, Lawler, E (2008)p46. Such employees are able to stay when all they need to succeed on their job is available e.g tools and resources and top-down managerial support .p51

* The company acquired Ceval Alimentos (Brazil's largest Soybean processor) hence becoming the leader in Brazil and had a strong competitive position in Argentina. One key issue that bothers managers is firm growth. When firms' growth is dependent on increased demand of their existing product and services and such growth is not forthcoming, an alternative growth strategy like acquisition is employed to achieve the growth level their stakeholders want. Kim, J, & Haleblian, J (2011)p26. With acquisition, a firm maximizes growth opportunities by entering into new product or geographic markets. p28

* Bunge limited later went public to have better access to capital markets and to provide liquidity for shareholders as seen in Exhibit 9, Slack, N & Lewis, M (2008)

* Underwent integration driven by 'logistics'(lean technique) -in transport, facilities and good management to capture and analyze information-giving cost advantage and better customer service.

* Established BGM to be outstanding in international marketing with decentralized offices and facilities as seen in exhibit 12, Slack, N & Lewis, M (2008)

* Integrated fertilizer sales with grain origination which gave a significant cost advantage in logistics, back hauling, financing and credit risk in fertilizer business. This integration requires co-ordination of the processes that produced fertilizer and grains. It is necessary to develop co-ordination of goods and information flows to increase quality and flexibility, reduce cost and lead times in the supply network. Farn, C, Fan, Y and Chenc , C (2009),p.191

* The company re-focused its effort in food product business to compensate for cyclicality in fertilizer and agribusiness division and achieve synergies in risk management and procurement.

* New Product development -creating a new industrial model and hence the need to hire people from other competing companies. New product development can help modern business strategy by maximizing fit between customer requirements and product characteristics and Minimizing time-to-market. Schilling, M & Hill (1998). In modern markets of today, New Product Development is the driver of competition in many industries and is now seen as a competitive dimension (because of intensified competition where any little added advantage matters to the customer) for the company to be able to