Activating on a growing market, as the one of the plastic packaging implies both opportunities and challenges. The history of Logoplaste consists of both opportunistic and challenging situations, and it indicates its potential of adjusting its management, its operations and supply chain on the various shifts and changes that reshaped the plastic packaging market throughout the years.
Porter Diamond
In analyzing a firm’s strategic management, Michael Porter identifies six factors for analyzing its competitiveness: factor condition, demand condition, related and supporting industries, firm strategy structure and rivalry, government and chance (Traill & Pitts 19). Each of these factors will be treated separately and applied on the context of Logoplaste, for analyzing its competitive strategic management.
- The factor conditions refer to human, physical, knowledge, capital resources and infrastructure and also to the specialized resources, which can constitute competitive advantages for the company who owns them on a given market and can compensate for factor disadvantage (Traill & Pitts 18).
The specialized resources that brought a competitive advantage to Logoplast on the market in which in activates was its Innovation Lab (ILAB), which offered both research and development services, but also more complex, integrated services for complete packaging, which included the company’s involvement in the packaging solutions for its customers from the conceptualization to implementation, including marketing, design, research, strategy, engineering and manufacturing the packaging solutions (“Logoplaste: Global Growing Challenges”). In addition to this special resource, the company also knew how to benefit of and optimize its human, physical, infrastructure and capital resources. As such, in terms of optimizing human resources, each country that the company pursued for expansion, it recruited managers who provided the insights of the local markets and placed the company as a serious competitor on those markets. In terms of physical and infrastructure resources, the company applied a strategic approach of locating its plants within or very close to their clients’ operational sites, in order to avoid any cost for transportation, which represents a burdensome for its competitors. Regarding the capital resources, Logoplaste benefited of local banks’ loans (from Portugal) and when this resource was saturated, it convinced the local banks from the international markets to loan it.
- Demand condition is the factor that can stimulate a company to grow and innovate by having sophisticated requests from clients and this determines the supplier company to keep up with its customers’ demands and innovate faster, developing more advanced products, and gaining like this competitive advantage (Traill & Pitts 18).
Therefore, the innovation is driven and requested by customers and so it was in Logoplaste’s case. One of its main clients, Procter & Gamble is itself a trendsetter in its industry and it only provides the latest technology, for which it required Logoplaste’s support to produce innovative and sophisticated packaging solutions, which were permanently changing in terms of design and quality standards and it had to be adjusted to P&G’s diverse markets. This challenged Logoplaste, but in the end, one of the purposes for which P&G and other companies chose this packaging firm for their packaging supply needs was because of its ILab that included integrated support through all the stages of the packaging. Therefore, there is a first direct relation between two of the factors that constitute Porter’s diamond, as applied to the examined company.
- Just like the demand conditions, the related and supporting industries factor also contributes to determining a company to produce significant innovation, as they participate in the upgrading process, stimulating other companies from their chain to innovate (Traill & Pitts 18). As such, the shifts and innovation that occurred in FMCG industry in terms of packaging solutions, determined the packaging suppliers to innovate, making plastic containers valuable in their strategy of attracting more customers, as the FMCG companies focused on the safety and quality assured by this packaging solution, requiring for development for meeting the design and price goals of the customers (“Logoplaste: Global Growing Challenges”). Similarly, when most industries shifted their focus to sustainability, Logoplaste was also forced to do this, providing qualitative sustainable products and services for its clients, developing eco-friendly packages, by reducing their carbon footprint and by employing biopolymer for developing its products (“Logoplaste: Global Growing Challenges”).
This is connected with the demand condition, because Logoplaste’s clients demand innovative products, and also with the factor conditions, as Logoplaste had the required resources to provide its customers with the desired products.
- Another factor that contributes to the companies’ competitiveness is their strategy, structure and existent rivalry, which represent significant determinants for innovating, under the pressure of continuous competitive upgrades, which needs to be matching the company’s goals and managerial style (Traill & Pitts 18-19).
Logoplaste’s case provides information about its competitors and about their approaches to business. Logoplaste analyzed its market and some strategic managerial approaches of its competitors, such as expanding globally or acquiring existing rival companies (such as the intent of acquiring Graham) represented one of its business strategies (“Logoplaste: Global Growing Challenges”).
- Government is yet another competitiveness determinant, which can influence all the others mentioned so far, and can impact the supply and demand conditions in the domestic market, as well as it can influence the competition between firms and its intervention can be applied at “local, regional, national or supranational level” (Traill & Pitts 19).
Logoplaste’s business was influenced upon the government’s decisions to rise the sustainable environmental concerns, which implied issuing legislation for recycling plastic and introduced dispositions for discouraging the production of plastic bags, which determined Logoplaste to innovate and to apply a more eco-friendly strategy (“Logoplaste: Global Growing Challenges”).
- Finally, chance determinant, refers to things that are outside the control of a company, which can generate discontinuities that can influence some firms to gain competitive advantages and others to lose (Traill & Pitts 19).
For Logoplaste, its chance was to enter Asian market, following its client P&G, opening a plant there to support its client’s packaging needs. This chance represented an advantageous positioning for Logoplaste, entering a market without having to find customers there, but being called in that new market by one of its customers, which also meant gaining market share over its competitors.
This competitiveness determinant can be connected with or determine the firm’s strategy, the factor conditions, the demand conditions and the related or supporting industries, just like the others influence each other (Traill & Pitts 19). Therefore, as Reiner (235) explains, Porter’s diamond theory shows a strengthening model, in which a positive innovation or development in one factor generates improvements and developments in the other competitive determinants.
Figure 1 - Porter Diamond
Logoplaste’s SWOT Analysis
Strengths, weaknesses, opportunities and threats (SWOT) represent the four factors of analyzing the internal and external environment of a company, which makes it a relevant decision making tool for understanding the relation between the company’s internal situation and its environment (Pahl & Richter 27).
- Strengths
Studying Logoplaste’s business strategies, the firm can be considered a best practice model, having considerable strengths for being considered so, such as its supply strategy of developing each of its plants near or within the clients’ production sites, for saving the transportation budgets. Similarly, part of its collaborative managerial model, Logoplaste’s contractual agreements represent another strength, which allowed the firm to invest in new plants for all of its clients, as it assured through contractual arrangements a standard demand of its products, otherwise the client-company was to be fined and it also stipulated a five years contract, in order to cover its investment expenses. Yet, another strength of Logoplaste was the fact that it pursued international and global presence, having a constant growth of 15% annually due to this strategic positioning on new markets for 15 years (“Logoplaste: Global Growing Challenges”). Its Innovation Laboratory, offering relevant and valuable packaging solution for its clients from conception to implementation stages (supporting the clients’ also with their design and marketing needs) represents another strength for the company, one which constitutes a competitive advantage for Logoplaste. The fact that it secured strong partnerships, with reliable and globally valued companies from various industries (soft drinks Coca Cola, cosmetics and FMCG P&G, Heinz, Danone, Walmart, etc) secured Logoplaste a competitive position and determined the company to innovate and improve, following the increasing sophisticated needs of its top customers and this represent a strategic strength for the examined firm.
- Weaknesses
Although it does possess significant strengths, Logoplaste has nevertheless also weaknesses. Therefore, in its plans to continue growing and to be everywhere its main clients were (in order to offer its clients integrated services throughout their operations and to impede other competitors to take its customers, although on new markets), Logoplaste faced a challenge specific to its expansion objectives, as it was not financially prepared to support its expansion investments. In addition, although standing next to strong companies brought significant improvements and developments, it also generated losses. As such, Logoplaste dedicated one plant to P&G’s Sunny Delight soft drink brand, which initially knew tremendous growth, becoming number 3 on UK soft drinks market, just after Coke and Pepsi, until one girl turned orange after consuming too much Sunny Delight, which severely affected Sunny Delight’s sales and implicitly negatively impacted Logoplaste’s plant dedicated to this brand (Logoplaste: Global Growing Challenges). Therefore, this constituted a weakness for Logoplaste, which was, nevertheless determined not by its managerial strategies, but by chance. Another weakness that the company faced along its expanding dynamics was the fact that it did not know the specificities of the new markets and hand no clue about what the customers needed and required in terms of plastic packaging. And although this weakness was covered by a strategic recruiting of country managers that could provide insights about the market and establish connections with potential client-companies, entering new market without knowing its business potential is nevertheless risky and it represents a weakness, as compared to the existent rivals on the market, which already know the market and are aware of their competitive positioning.
- Opportunities
Discussing about Logoplaste’s opportunities, three major aspects need to be specified: the company’s ILab, its environmental sustainability approach and its reliable partnership with big clients (Prezi, “Copy of Logoplaste”). Referring to its ILab, Logoplaste has the potential to create new market by developing innovative solutions for its clients or for new clients, proposing original solutions for their packaging needs, aligned to the clients design marketing and distribution needs, as well as in conformity with the stipulated regulations regarding the environmental concerns. Therefore, its Innovation Lab can constitute an opportunity for Logoplaste to (1) increase the demand from its current customers; (2) attract new clients due to its integrated and innovative services;
The company is committed to environmental sustainability and through its “Green Dot Society” initiative, the company states its purpose of supporting the society through sustainable activities, such as reducing weight in rigid plastic, for conserving as much as possible the raw materials, recycling plastic, or reducing carbon emissions (having developed in this purpose a fully autonomous energy generation source in its Cascais facility) (Logoplaste, official website). This environmental approach attracts the niche companies, highly oriented towards environmental sustainability, as part of their business strategy and mission (Ferrell, Fraedrich & Ferrell A8).
Its partnership with top companies always assured Logoplaste a top position on its market and it represents one major opportunity to continue to innovate and improve, in line with its clients’ innovation plans in terms of managerial strategies, technology or sustainable environment approaches.
- Threats
Logoplaste’s threats include its expansion risks, its competitors as well as the instability of the economy. Logoplaste’s expansion represent a threat for the company, giving the fact that it needs to find financial resources in the host countries, which are becoming more and more reluctant at giving loans, giving the instability of the economy (Bart, Lin & Wihlborg 135). This introduces the discussion about the instability of economy, which may impact the productivity of some of its main clients, which implicitly might negatively affect Logoplaste’s operations as well. Nevertheless, a constant threat that the company must be permanently aware of is its competitors, existent and new entry rivals, as well as potential substitute products, such as fabric for instance, for replacing the plastic bags with other materials for reducing the environmental impact.
Figure 2 - SWOT Analysis
Works Cited
Barth, James, R., Lin Chen & Wihlborg, Clas. Research Handbook on International Banking and Governance. Cheltenham, Edward Elgar Publishing Limited. 2012. Print.
Logoplaste official website. Environmental Responsibility. Accessed on November 20 2013, retrieved from http://www.logoplaste.com/content_art.php?id=bGFuZz1FTiZwPTYx. N.d. Web.
Logoplaste: Global Growing Challenges. Course material. N.d. Print.
Ferrell, Odies, C., Fraedrich, Johm, Ferrell, Linda. Business Ethics. 9th edition. Mason, Cengage Learning. 2011. Print.
Pahl, Nadine & Richter, Anne. SWOT Analysis-Idea, Methodology and a Practical Approach. Norderstedt, Grin Verlag. 2007. Print.
Prezi. Copy Logoplaste.. Accessed on November 20 2013, retrieved from http://prezi.com/bz1dr7v_quje/copy-of-logoplaste/. N.d. Web.
Reiner, Gerald. Rapid Modelling for Increasing Competitiveness: Tools and Mindset. Newchatel, Universite de Neuchatel. 2009. Print.
Traill, Bruce & Pitts, Eamon. Competitiveness Food Industry. London, Blackie Academic & Professional. 1998. Print.
