Introduction
Tetra Pak is the largest manufacturer of the aseptic materials for purchasing. However, current market challenges come from the high threat from new industry entrants around the world. Risk includes being mired in antitrust cases. Greatview Aseptic Packaging Company Limited, as well as other contenders, became a significant contender, eventually eating into the market share of Tetra Pak in the industry. Outside China, other contenders gained considerable influence over the market and the industry in general. Since Greatview benefited from the political environment of China, it easy to assume that its success comes from government support. Ensuring that the company gains a competitive position again in the market needs to be based on correct organizational leadership, a competitive position in the industry, and focusing on profitable products.
a) Analysis of Tetra Pak’s situation and current position in the sector.
Porter’s five forces.
Supplier bargaining power.
From the analysis, the market for packaging materials has a significant degree of differentiation according to segments. These include plastics, glass metals, paper, and metal cans. The aseptic packaging, on the other hand, has very few suppliers, which were large international companies that vary depending on the raw materials they produce. Ghadge et al., (2017 p.262) states that such a situation makes the distinguishing suppliers quite a little hard. Due to the lack of differentiation of the raw materials, low switching costs between the suppliers, it is quite common that different packaging materials meet the needs of the customers. Many suppliers also possess quite an array of niches, thusly seeking to meet specific consumer demands. For this reason, the bargaining power of suppliers is moderate.
Bargaining power of buyers.
The buyer landscape has changed quite significantly. Buyers can differ in sizes quickly, and this includes large multinational companies, food, beverages, cosmetics, and healthcare companies. Such companies are quite significant and demand a large volume of packaging materials. The loss of such big buyers significantly impacts revenues negatively. The current retailing trend in the retailing industry has led to the consolidation of many dairy products, which put pressure on dairies. The production, at large, has put pressure on Tetra Pak when it comes to prices due to the inherent buyer power. The packaging industry is highly fragmented, and this puts the buyers in a strong position. For this reason, the buyers have several options to choose from, especially when it comes to the combination of factors of price and quality. This puts buyers in a profoundly dominant position.
The threat of new entry.
Before entering the tetra pack and packaging product manufacturing industry, there is a need for industry knowledge and technical know-how. This acts as an entry barrier. Since the industry products are highly undifferentiated, the economies of scale become quite advantageous, not mentioning the fact that the capital requirement for entering into this industry is high. With the increase in demand for environmentally friendly products, there is a significant increase in the chances that small companies may serve the specific niches. Together with the risks coming from the economic environment, operating in this industry as an entrance is made hard. The number of suppliers is also few, and this means that entry would be feasibly impossible for small enterprises. In such markets, the entrance would need market development, which requires significant investments.
The threat of substitutes.
The threat of substitutes is moderate. The market share of plastic is rising while the market share of both the aseptic and chilled packaging is decreasing, thereby favoring the plastic industry. Trends for the coming years also point towards the same direction as per the findings of Komla (2018). From the perspective of the consumer, plastic packaging offers a safe and smart choice as compared to the aseptic packaging materials sold by Tetra Pak. Even though the market is moderately low, it is cheaper and more attractive as compared to the consumer perspective.
The intensity of rivalry.
The global containers and packaging industry is quite fragmented, but generally, there is growth in the Chinese and South American markets. Since the growth of the sector in Europe is flat, Tetra Pak faces a slightly high competition due to the flat growth. In the aseptic carton packaging, Tetra Pak has about 80% market share. The use of Tetra Pak patent production in some materials and machines has been due to Greatview aseptic from China. This has allowed Greatview to use Tetra Pak technology without worrying about suits. Even though the competitive rivalry is low, it is critical to note that competition will be growing in the future.
b) Recommendation for the Tetra Pak board for business model change.
McKinsey 7-S framework
Using McKinsey 7-S framework to explain the company’s seven internal elements that the firm needs to align to align itself to strategic goals successfully. The model categorizes both soft and hard elements. The hard elements pack strategy, structure, and systems. On the other hand, the soft elements pack the shared values, skills, style, and staff. The hard elements can be identified as relatively easy, and the management of the Tetra Pak can influence them directly. The other four soft elements, on the other hand, can be quite hard to describe since they are less tangible and are easily influenced by the culture of the company. Soft elements are as essential as the hard elements for Tetra Pak to confront the global competition from the Greatview successfully.
Strategy: The key strategic goals for Tetra Pak include partnerships that can be implemented to optimize economies of scale. Alliances will also reduce risks and uncertainty concerning manufacturing. The strategic approach of Tetra Pak at this stage should also seek to enhance customer relationships by offering them personal assistance. To increase its sales, the Tetra Pak needs to form a sales team which can be achieved by partnering with e-commerce and physical stores such as Walmart.
Structure: A lean organizational structure is one that is designed to create customer value while using fewer resources as compared to the traditional corporate structure. Tetra Pak can achieve this by using fewer job classifications and striping some of the ranks to create skills-based teams. Organizational members are broadly classified; they are flexible and are empowered to solve problems to create value for the customers. The teams need to be self-managed so that they can quickly look for ways to improve and increase efficiency as per Worley, and Doolen, (2015).
Systems: The design of the systems needs to be passed on performance innovation. The focus is on customization to provide creative solutions to the firm. Apart from this, the production systems need to be highly customizable so that they can fit into the customer needs. Tetra Pak factories need to be focused on quality and mutual trust, with the focus being accessibility and geographic expansion. The ultimate goal is to provide the customer with convenience.
Shared values: Tetra Pak needs to focus on multicultural hiring. The focus needs to be polycentric hiring, which essentially means giving more positions to the workers of the host country. A mix of methods of approach to global recruitment will also allow for innovation. The shared values, in this case, include customer satisfaction and multiculturalism aimed at getting more in-depth into industry trends and the needs of the customers.
Style: The leadership style that Tetra Pak needs to adopt is strategic leadership. This type of guidance will make the managers and other leaders behave towards the strategic objectives of the firm proactively. With such an approach, the management will accept the burden of interests of the executive while ensuring that the firm’s working conditions are stable for all the members.
Staff: Employees that the firm must increasingly hire are the Packaging Material designers, engineers, E-commerce specialists, and marketing managers. To compete favorably, it is necessary to hire the groups as mentioned earlier so that they can all work innovatively to meet customer demands.
Skills: The employees of Tetra Pak must have expertise in designing, making, and the delivery of both materials and machines as well as the services that are related to packaging. The employees must also possess interpersonal relationships enabling them to strike a positive correlation between the firm and the customers. Such skills will allow them to create a strong sales force that can deliver packaging materials, machines, and spare parts while also building long term relationships with the customers.
c) Tetra Pak BCG matrix for sustain overseas growth.
BCG matrix was created by the Boston Consulting Group and was used to evaluate the firm’s strategic position of the business brand as well as its potential. To use this tool in the approach to growth overseas, Tetra Pak will classify its business portfolio into four categories based on their industry attractiveness and the growth rate of the industry to identify its leverage against Greatview as per Bowonder, et al., (2010 p.19). The strategy will also be applied in determining the relative market share and competitive position of Tetra Pak when assessed under the performance of that specific product or service.
Aseptic processing technology Sale
Stars Packaging material | Cash Cows Machines Spare parts |
Question marks Lending/Renting/Leasing of Machines
| Dogs Usage fee After-sale services |
Dogs. Tetra Pak dogs are made up of both the usage fee and the after-sales services. This is because, as compared to the Greatview, they are not worth investing since they generate low returns. However, these products can be profitable in the long term since they may provide synergies for other brands (Torquati et al., 2018 p.255). After-sales services for Tetra Park can be used to enable customers to make their own packaging materials in the future, with Tetra Pak being the leading supplier of the raw materials. Tetra Pak needs to focus on achieving high sales currently, and usage fees and after-sales services in the future could be high.
Cash cows. The cash cows segment is made up of Machines and spares. Tetra Pak needs to focus on differentiation to make them competitive and unique in the market. The sale of packaging machines and spares is quite lucrative because of their low cost of production. Tetra Pak needs to make more investment in stars with the revenue gained from the sale of machines and spare. This will allow the company to induce growth in the demand for packaging materials in the future. Since most of the food packaging customers will be needing packaging materials after they have purchased machines, Tetra Pak needs to focus on increasing sales in cash cows to drive future growth.
Stars: the stars are made up of packaging materials. They are both cash generators and cash users. A significant amount of cash from the firm comes from the sale of packaging materials, while also a substantial amount of cost goes to the making of packaging materials. Investments need to be made into packaging materials to make them unique and better. Such an approach will make them cash cows in the future.
Question marks. Tetra Pak question marks are made up of Lending/Renting/Leasing of Machine services. They require a broader consideration. These revenue generators hold low market share even when the demand for machines is growing. However, a focus on maintaining it speculatively just in case they increase their market share and become stars in the future. Tetra Pak needs just to keep its investment in question marks as it has a high potential to bring in losses.
Conclusion
In light of the growing competitive rivalry from Greatview both within and without China, Tetra Pak needs to focus on specific countermeasures geared towards beating the competition. From the analysis, the Tetra Pack needs to focus on organization strategies that seek both rationalization and efficiency. This can be through the use of new technologies in creating a positive brand image and entering into strategic alliances to increase scale. Strategic partnerships can be geared towards limiting competition and increasing the market share. To survive the industry forces, Tetra Pak needs to diversity, and then head over to protect its supply of raw materials and bar Greatview from accessing it (Andreason, and Wind, 2015). Tetra Pak needs to find alternative sales channels. So that Tetra Pak can exhibit a sustained growth, it would be critical to focus on providing an enhanced customer service nationally and internationally. Tetra Pak can further heighten its global growth by engaging different distribution channels.