Strategy can be defined as “a method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem” (Business Dictionary, 2013, online). Selection of an appropriate business strategy and its effective execution plays a critical role on long-term growth prospects of any business regardless of the industry and geographical location.

This first part of the article represents an assessment of strategic options for Eurofreeze, a global manufacturer of frozen food. The article starts with specifying the current strategic position of Eurofreeze. This is followed by development and application of scoring criteria for Eurofreeze. The first part of the article is completed by formulation of strategic statement for specific strategic option that has been selected for Eurofreeze.

The current strategic position of Eurofreeze involves market leadership in branded meat and fish dishes. This position has been achieved through effective utilisation of a range of company core competencies such as sophisticated freezer technology, regular development of new frozen dishes recipes, effective organisation of distribution channels and focus on own branded products. Moreover, compared to its main rival – Refrigor, Eurofreeze possesses additional competitive advantages such as leadership in European market and stronger brand name.

Today massive changes are taking place in frozen food industry fuelled by further increasing bargaining power of large supermarkets, extension of supermarket own brand ranges of frozen food, and the desire of supermarkets to sell only one leading frozen food brand along with supermarket own brand products.

In order to address these changes in an appropriate manner Eurofreeze has to select a strategy option from the following five broad options available:

The first option for Eurofreeze involves stop selling branded frozen food, as well as, own label vegetables and fruit, but this is going to result in reduction in the volume of sales for the amount of USD 400 million and USD 200 in the first and second years respectively.

The second strategy option requires Eurofreeze to continue producing own label frozen food, but the sale of branded vegetables need to be ceased. The implications of following this strategy decline in the sales volume for USD 400 million for the first year.

According to the third strategy option Eurofreeze product range needs to be extended to include specialist branded frozen foods such as pizza and gateaux. According to estimations, following this strategy is going to contribute USD 50 million to the level of revenues annually.

The fourth strategy option advocates the reduction of product range during the first two years, in order for the specialist areas to be rebuilt starting from fourth year. If Eurofreeze management follow this strategy the sales will decline for the first three years to make a positive contribution starting only from the fourth year.

According to the last, fifth strategy option Eurofreeze needs to become the lowest cost-producer and this strategy is going to boost sales by at least USD 100 million annually.

 

Scoring Criteria for Eurofreeze

Scoring criteria used to assess each individual strategy option available to Eurofreeze comprise a set of criteria as discussed below:

Suitability is one of the most basic scoring criteria and it relates to the level of sustainability of competitive advantage to be gained by adopting a specific strategic option. Inclusion of this criterion is important in a way that unless a competitive advantage can be sustained in long-term prospects its practical value would be highly compromised.

Feasibility represents another important scoring criterion. It has been stated that “the question of feasibility is really about whether a project can be done without violating certain accepted rules, principles, or constraints” (Mann, 1992, p.92). Feasibility has been included as a scoring criterion because it is closely associated with the possibility of executing the strategy in practical levels.

Acceptability scoring criterion relates to the likely level of acceptance of strategy option by organisational stakeholders in general, and the Board of Directors and shareholders in particular. The importance of acceptability criterion is simple in a way that strategy option needs to be accepted by key stakeholders in order to be implemented.

Positive impact on current competitive advantage can be specified as another important criterion used to select strategy option for Eurofreeze. Ideally, the strategic option to be adopted by Eurofreeze management should not compromise the current competitive advantage of the company at all.

Contribution to revenues for next 10 years has been adopted as an additional scoring criterion to assess strategy options. The rationale behind the inclusion of this specific criterion relates to the importance of cash-flow for business in short-term and medium-term perspectives in various levels. Specifically, cash-flow and financial resources are important to ensure the introduction of new products to the market in a regular manner, and to serve as a cushion to address unforeseen problems of various types.

Protection from changes in external environment is also an important criterion due to the fact that constant changes in various aspects of the marketplace have become an important characteristic of the modern marketplace.

 

Application of Scoring Criteria

The following table illustrates the application of scoring criteria to Eurofreeze:

Criteria	Options
	1	2	3	4	5
Suitability	6   Cost reduction is fairly sustainable	7   Cost reduction is fairly sustainable	5 Lack of experience in specialist branded ranges	5 Great range of uncertain factors	6 Cost advantage possible to be sustained
Feasibility	8   Cost benefits are obvious	7 Expected benefits are realistic	6 Great range of uncertain factors	5 Strategy difficult to implement	5 Difficult to execute the strategy
Acceptability	4   Rapid decline in sales	5   Low due to loss of revenues	8 Stakeholder interest in profit projections	6   High level of risks	7 Simplicity of strategy and high profit projections
Positive impact on current competitive advantage	2 Loss of competitive advantage	3 Compromise of competitive advantage	7 Competitive advantage can be extended to specialist branded ranges	6 Compromise of competitive advantage to a great extent	6 Competitive advantage to be compromised due to cost-saving
Contribution to revenues for next 10 years	3   Revenues to decline	3 Revenues to decline	5 Annual sales to rise to reach $1.6 billion in 2013	4 Revenues to decline to reach current level only by 2013	7 Consistently increasing sales to reach $3 billion in 2013
Protection from changes in external environment	8 Minimum impact of external environment	7 Low impact of external environment	6 Vulnerability to new competition in specialist branded ranges	5 High level of vulnerability	5 Vulnerability to the emergence of new cost leaders
Total	31	32	37	31	36

 

Strategic Statement for Eurofreeze

The application of scoring criteria towards a range of strategic options available to Eurofreeze has identified the third option that involves extending specialist branded food ranges to include pizza, gateaux and similar products as the most suitable choice. The following represent the details of strategic statement associated with the implementation of this particular strategic option.

 

Statement of Major Goal

The major goal for Eurofreeze in accordance to the selected strategic option can be specified as follows:

To become the most profitable seller of frozen food with the widest product range in frozen food industry

Statement of Overall Direction

Overall future direction for Eurofreeze according to its chosen business strategy involves organic growth through product diversification and market expansion.

 

Statement of Competitive Basis

The main points of competitive basis for Eurofreeze according to its business strategy is going to comprise its traditional core competencies such as sophisticated freezer technology, regular development of new frozen dishes recipes, effective organisation of distribution channels and focus on own branded products. Moreover, these core competencies are going to be enriched by a high level of product variety.

 

Statement of Principal Means

Principal means relate to the ways in which a firm’s competitive advantage is going to be generated. Eurofreeze competitive advantages specified above are going to be generated through a set of measures that include effective facilitation of extensive organisational knowledge, benefits to be obtained from the economies of scale, and transfer the current effective supply-chain practices to new products being added to portfolio.

 

Statement of Resourcing Basis

The implementation of selected business that involves extending specialist branded food ranges to include pizza, gateaux and similar products as the most suitable choice is going to require the investment of financial resources. These resources are going to be generated through applying to mid-term bank loans to be re-paid within 5-year period

 

 Part 2

A non-prescriptive approach to strategy formulation involves avoiding formulating a rigid strategy for long-term perspective. The main advantage of adopting a non-prescriptive approach is that a company would be able to adjust its strategy to the tendencies in macroeconomic environment in general, and changes in the industry in particular.

The application of scoring criteria in selecting appropriate strategy for Eurofreeze provided in the first part of this report has found the third strategy option that involves extending specialist branded food ranges to be the most appropriate option to be adopted. However, this strategy needs to be followed by Eurofreeze management needs to adopt a non-prescriptive approach to a significant approach when pursuing this particular strategy.

Strategy implementation needs to be perceived as a continuous process rather than a one-time event. This is because constant changes in the industry such as social tendencies, technological breakthroughs, and changes in economic environment need to be addressed by management through adjusting the business strategy.

At the same time, Eurofreeze management should not underestimate the value of formulating a clear business strategy and communicating the strategy to organisational stakeholders effectively using various marketing communication channels in an integrated way. Because this practice contributes to the level of focus on competitive advantage.

To summarise, Eurofreeze management need to adopt a non-prescriptive approach to strategy formulation to a great extent, however, the management needs to ensure that the strategy is effectively communicated to all organisational stakeholders.

References

Campbell, D., Stonehouse, G. & Houston, B. (2012) “Business Strategy: an introduction” 2^nd edition, Routledge

Mann, T. (1992) “Building Economics for Architects” John Wiley & Sons

Strategy (2013) Business Dictionary, Available at: http://www.businessdictionary.com/definition/strategy.html