Analyzing KDcow Dairy Company of Kuwait

Posted: January 4th, 2023

Analyzing KDcow Dairy Company of Kuwait

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Executive Summary

KDcow is one of the best companies in Kuwait’s food and beverage sector. The company must take into account the impact of the external and internal environment to come up with suitable plans on how to compete with rival companies. Using the PESTEL analysis shows that KDcow has to consider how political, economic, social, technological, environmental, and legal factors influence the business operations, including production, selling, and relationship with stakeholders. Equally, the company has to ensure that its internal features and capabilities increase value to the business while ensuring that the adopted approaches are rare and not easy to imitate. Also noteworthy, the firm makes sure that internal structures fit into the organization’s framework. KDcow uses cost-differentiation as its corporate-level strategy, where it attempts to embrace practices that competitors may find it hard to imitate and lowers its product and service costs. The company considers growth and stability as its corporate-level strategy and hopes to strengthen its operations using the approaches. The study elaborates on how KDcow may improve its services and impact by entering new markets while applying the correct foreign market entry strategy and by diversifying its workforce. 

Analyzing KDcow Dairy Company of Kuwait

Company Introduction

The Kuwait Dairy Company (KDcow) was started in 1960, through collaboration among the farmers in Kuwait seeking to form an intricate production and supply channel that strengthens food security in the country. KDcow has since developed into one of the biggest and highly established industrial corporations, thanks to the ambition the partners put towards the venture (KDcow, 2020). The company takes advantage of its strengths to compete with other producers in the food and beverage sector. One of the company’s strengths is its reputation has become synonymous with fresh and high-quality products generated from fresh milk sourced daily in local farms (KDcow, 2020). The other strengths are that the group owns several intricate production lines focused in processing and producing fresh milk products, provides a wide range of products such as low-fat long-life milk, banana flavored milk, chocolate flavored milk, full cream long-life milk, yogurt prolite low fat, skimmed fresh yogurt, and processed cheese (KDcow, 2020). The company produces other products such as ghee, frozen yogurt, juices, ice cream, sour cream, and Laban drinks of various sizes and flavors (KDcow, 2020). The third strength is KDcow operates both locally and on the level of the Gulf Cooperation Council, which exposes it to a broader market. The weakness at KDcow is that it is yet to explore other markets in the Western world, Asia, and Africa. Also, the company mostly employs Arabic workers and brands its products in Arabic, which may restrict its consumer base. The evident opportunities for KDcow are growth in online retail, which could create new distribution channels, and development in technology, which increases the rate and quality of production. The threat the company faces include stiff competition from local manufacturers such as Universal Food Company, Kuwait Indo Trading Company, and Arabian Beverage, as well as from operators within the GCC such as Coca-Cola Company and General Mills (KDcow, 2020). The other threats include increasing suspicion of prepackages drinks and foods as unhealthy and unnatural and enhanced government regulations and oversight (KDcow, 2020). KDcow is committed to getting the best out of its operations despite the hurdles it could experience in the internal and external environments. 

Strengths	Weaknesses	Opportunities	Threats
High-quality products.Advanced production lines.Operates both locally and on the international level.	Yet to enter other markets in the West, Asia, and Africa.Hires Arabic employees and brands its products in Arabic.	Growth in online retail.Advanced technology.	Stiff competition.Mistrust of prepackages drinks and foods.Improved state regulations and supervision

External Environment

The macro or external business environment plays a fundamental function in determining how the company performs. The macro-environment comprises of all the external components or influences that influence the operation of businesses. The PESTLE model offers a suitable framework for knowing how alterations in the macro-environment impact on the five forces analysis. KDcow considers the political factors by relying on the Political Instability Index (PII) to understand how the possibility of political unrest in a target market could influence its operations (KDcow, 2020). Fortunately, Kuwait is a politically stable country where the rule of law dominates, which creates an environment conducive to business (U.S. Department of State, 2009). The company also considers some of the political regulations enacted by the government to regulate business operations. For instance, the company adheres to the taxation laws set by the national government to contribute to the state’s revenue. The political regulations usually regulate the threat of new entrants, which could increase competition, thereby lowering the firm’s revenues (Hoovers). KDcow pays particular attention to the economic factors that impact the national economy, which directly influences the firm’s operations and profitability. The firm is lucky to be operating in a country where the economic freedom score is above 63, placing Kuwait among the top 80 freest economies based on the 2020 Index (The Heritage Foundation, 2020). The unemployment rate is also low, which gives buyers considerable purchase and bargaining power. The company and the suppliers also get to improve their bargaining power when the national and individual economies are strong. KDcow considers the possible effects of social factors on its operations by considering factors such as cultural trends, transforming family demographics, education levels, and transformations in lifestyles (KDcow, 2020). Knowing how the social factors influence the business operations helps the firm to come up with suitable operational methods that would put up with the rivalry that exists among the competitors. KDcow, however, must consider other factors in the external environment that affect the five forces and create opportunities and threats for the company.  

KDcow considers how technological, environmental, and legal factors in the macro-environment impact on its activities. The group pays attention to technical factors such as transformations and developments in mobile and digital technology, research and development (R&D), and automation. The firm pays attention to technological advancements because the changes offer the chance to improve vital operations such as logistics, manufacturing, and distribution (Jay & Hesterly, 2018). Applying superior technology provides the opportunity to deal with the threat of new entrants and more competitors because the firm gains the ability to produce more goods of better quality and health value. KDcow must use the latest technology because Hopp, Antons, Kaminski, and Salge (2018) feel that the second wave of digitisation is set to impact nearly all areas of economic life. KDcow adheres to the environmental factors that relate to the effects of the surrounding environment and the influence of ecological aspects (Jay & Hesterly, 2018). The issue of corporate sustainability responsibility (CSR) is increasingly becoming famous among business operators, and KDcow joins other companies in enacting measures that enhance recycling practices, regulate carbon footprint, safeguard the climate, improve sustainability, and facilitate waste disposal. Also important is the company pays particular attention to the legal factors that could impact on its operations, especially in the regions where it operates. For example, KDcow adheres to the employment legislation, international laws, trade regulations, and consumer law (KDcow, 2020). Adherence to such legal requirements benefits KDcow it the way the level of new entrants and rivalry between companies go down. KDcow is committed to adhering to the factors in the external environment that influence its operations, knowing that these elements create new opportunities and threats, and impact on Porter’s five forces analysis. 

Political	Economic	Social	Technological	Legal	Environmental
Political stability.Political regulations	Economic freedom score.Employment rate.	Cultural trends, transforming.Family demographics.Education levels.Transformations in lifestyles.	Changes and growth in mobile and digital technology.Advancement in research and development (R&D).Growth in automation.	Employment legislation.International laws, trade regulations.Consumer law.	Recycling.Regulating carbon footprint.Protecting the climate.CSR.Proper waste disposal

Internal Analysis

KDcow takes advantage of its internal capabilities to achieve a competitive, sustainable advantage. The internal analysis is an equally important process because it informs about the company’s strengths and weaknesses, and shows how the gaps compare to the competitors (Jay & Hesterly, 2018). The company considers the four categories of resources that form the internal environment, such as financial aspects, including retained earnings and cash, because financial stability enables the firm to finance its projects and pay workers, and physical elements such as the availability of the right equipment and geographical location. The group strives to ensure that it has a skillful and qualified workforce. Also, the company strengthens the organizational factors as part of the internal business environment, and here the business leaders ensure that the relationship among workers is stable and the reporting structures are compelling enough (KDcow, 2020). The corporation seems to rely on the VRIO framework while developing the internal factors to gain competitive advantage. KDcow focuses on value by ensuring that the internal factor enables the organization to exploit the external opportunities and neutralize the external threats. The group ensures that the internal resources contribute towards increased revenues and a decrease in costs or a combination of the two (KDcow, 2020). For example, the company accumulates funds that would enable it to acquire more machines to increase the rate of production. The group also strives to achieve the rarity of its internal resources to achieve sustainable competitive advantage. For example, KDcow acquires unique machines and employs advanced technology to be ahead to other operators in the sector. Also, the corporation tries to equip its workers with rare information to enhance their operations and productivity. 

KDcow tries to develop an internal work environment that is not imitable and follows a suitable organization. Jay and Hesterly (2018) argue that the temporary competitive advantage of rare and valuable resources can be managed only if rivals have a cost disadvantage in copying the resource. For example, the company tries to create an organization that is difficult to imitate by ensuring that each worker relates to each other in a way that promotes growth and development. Also, the group tries to train its workers in a unique way to equip them with the latest techniques. More fundamentally, the group strives to form a structure and control mechanism that is aligned to enable people to exploit the company’s resources (KDcow, 2020). The adopted structures and control mechanisms complement the other internal resources, and they can help the business attain sustained competitive advantage. 

	V Valuable	R Rare	I Inimitable	O Organized
Financial aspects, such as earnings and cash.	Yes
Physical factors such as plant, equipment and location.	Yes	Yes	Yes	Yes
Human factors such as skills and abilities.	Yes	Yes	Yes
Organizational structures and relationships.	Yes	No	No	Yes

Business Strategy

KDcow understands that a business’s core competencies should focus on meeting the consumers’ needs or desires to record above-average profits. The leaders know that it can achieve the desired outcome by embracing the suitable business-level strategies that detail actions used to offer value to buyers and attain a competitive advantage by using core competencies in certain products or target markets (KDcow, 2020). The group uses cost leadership as its business-level strategy, and using the approach; the firm competes for a broader consumer base on price. The manufacturer calculates its rates based on internal efficiencies to have a margin that will maintain above-average profits and costs to the buyer so that consumers will buy the products (KDcow, 2020). KDcowworks towards implementing the business-level strategy developing state of the art plants that may make it hard for competitors to copy and tries to maintain strict control over the cost of production (KDcow, 2020). Furthermore, the corporation seeks to lower its cost of sales to attract more purchasers. The cost leadership approach helps KDcow to become increasingly competitive and offers the chance to create an internal work environment that fosters business operations.

The business-level strategy fits with the company’s internal capabilities and environmental opportunities in the way it helps to contribute towards financial security. Jay and Hesterly (2018) write that attracting more consumers when the firm offers affordable products or services of good quality is high, which increases the chances of achieving financial stability. The financial gain that KDcow realizes from its cost-leadership strategy helps to develop a work environment that is appealing to all workers and contributes towards a stable relationship among the staff members. 

Corporate Strategy

The corporate-level strategy is at the topmost of the planning structure and serves as the primary purpose of the firm. The corporate level strategy acts as the path or destination towards which the company is heading. KDcow seeks to grow its operations by expanding to other markets. The firm aspires to be stable in all the markets where it operates, to be in an excellent position to attract more purchasers (KDcow, 2020). The corporate level strategy fits with KDcow’s internal capacities and environmental opportunities as it provides the chance to use the firm’s financial strength and employee skills and competence to spread to new markets. 

Recommendations

KDcow is likely to improve its activities by adopting some changes or new ways of operating. The firm should consider expanding its operations to markets beyond the GCC countries to increase its market base and strengthen the brand. Expanding to new markets will benefit the firm in many ways, with KDcow likely to diversify its markets and reach talented workers. Widening to new markets will offer KDcow the chance to invest in foreign markets, which may present new avenues for revenue. The other benefits KDcow is likely to encounter by entering new markets are increased product life cycle, a boost in the business value, and diversification of the consumer base. The firm must utilize the appropriate foreign market entry strategies to achieve a smooth transition. The manufacturer may choose to franchise its brand, which entails offering permits or licenses to other operators to produce, market, and sell its products (Shen, Puig & Paul, 2017). Alternatively, KDcow may enter new markets in Asia, Africa, and the Western countries by practicing direct exporting, partnering with potential manufacturers, and buying other already established companies (Shen, Puig & Paul, 2017). However, KDcow should assess the merits and demerits of each approach to avoid any inconvenience. The company should consider more strategies that would help it overcome its current hurdles. 

Diversifying the workforce may yield a better result for KDcow that presently hires employees of Arabic background. Cletus, Mahmood, Umar, and Ibrahim (2018) describe workplace diversity as a holistic view that tells the variations that exist between individuals working within a company. KDcow, while considering expanding to foreign markets, should consider diversifying its workforce based on psychological, sociological, and physical features such as political or religious beliefs, sexual orientation, ethnicity, and gender to present a global view. 

Recommendation 1	Recommendation 2
Entering new markets.Using market entry strategies such as franchising, partnering, acquisition, and direct export.	Diversifying the workforce based on following factors; Political or religious beliefs.Sexual orientation.Ethnicity.Gender

Conclusion

 KDcow is one of the leading operators in the GCC food and beverage sector. The company must utilize its strengths and opportunities and find ways of overcoming potential weaknesses and threats. The manufacturer must consider the influence of its internal and macro environments and build on its cost-leadership business-level strategy. KDcow’s corporate-level strategy is to grow and stabilize in new markets, which makes it essential to consider applying a suitable foreign market entry strategy. The firm should also diversify its workforce to create a global view. 

References

Cletus, H., Mahmood, N., Umar, A., & Ibrahim, A. (2018). Prospects and challenges of workplace diversity in modern day organizations: A critical review. Holistica, 9(2), 35-52.

Hoovers. The three R’s to business strategy: Research, relevance, and reliability. Hoovers, White Paper.

Hopp, C., Antons, D., Kaminski, J., & Salge, T. (2018). What 40 years of research reveals about the difference between disruptive and radical innovation. Retrieved from https://hbr.org/2018/04/what-40-years-of-research-reveals-about-the-difference-between-disruptive-and-radical-innovation

Jay, B., & Hesterly, W. (2018). Strategic management and competitive advantage: Concepts and cases. London: Pearson.

KDcow. (2020). KDcow. Retrieved from https://kdcow.com/

Shen, Z., Puig, F., & Paul, J. (2017). Foreign market entry mode research: A review and research agenda. The International Trade Journal, doi: 10.1080/08853908.2017.1361368

The Heritage Foundation. (2020). 2020 index of economic freedom – Kuwait. Retrieved from https://www.heritage.org/index/country/kuwait

U.S. Department of State. (2009). Kuwait: Key Economic indicators. Retrieved from https://1997-2001.state.gov/issues/economic/trade_reports/neareast96/kuwait96.html