Danone
Danone Company is a French food company operating worldwide. It deals in dairy products such as yogurt, fresh milk, among other dairy products (Finance.yahoo.com, 2016). It also produces baby foods and other nutritional products. It is based in Paris, France.
Operations
The company operates globally with stores in many countries. The overall management of the company is the duty of the board of directors. To effectively manage the affairs of the company in the global sphere, the company applies a multinational matrix organization structure. The global products are blended with area structures. The responsibility is delegated to product and geographical managers. It also applies a polycentric strategy in which it tailors its products and operations through semi-autonomous subsidiaries and partners to meet the local needs of consumers as well as to adapt to the local cultures.
Each geographical region/segment employs and manages its human resource. The company strives to attract, retain and develop competent employees. It supports employee development programs as a way of achieving sustainable growth. It trains employees on its culture, leadership and group values across all its subsidiaries.
Pricing
Danone uses a comprehensive pricing strategy to help it achieve its corporate objectives. It ensures that the price set covers its operating costs plus an additional profit margin. Therefore, it determines the cost of production and uses it to determine the price. Its core raw material is milk hence it bases its price on the cost of milk. When the prices of milk from dairy farmers rise, the company increases the price of its products to cover the additional costs. For instance, in 2014, the company was forced to raise its prices to offset the high cost of milk. This did not go well as its earnings declined by 20% (Bloomberg.com, 2014). An increase in price, even when there is an increase in the cost of production, causes a fall in the demand for the company’s products as shown in the graph below.
Price S
P2
P1
D
Q2 Q1 Quantity
The pricing also depends on the market and Danone’s objectives. It uses a low-cost strategy to enter international markets. In emerging markets, the company sets lower prices to penetrate such markets. This strategy has enabled it to achieve considerable growth in emerging markets such as Argentina, Russia, Mexico, among other markets.
Supply chain
The company uses a complex global supply chain. The company sources its products from milk farmers and milk cooperatives. Danone has invested in farmers and households to help them increase the quality of milk produced. In Ukraine, it has invested more than €1 million euros on milk farmers. It works with farmers to establish win-win partnerships. All its subsidiaries work closely with milk farmers to help them produce high-quality milk. They offer dairy farmers access to technical and development resources (Dannone, 2013). Besides, it helps farmers through the pricing model that adjusts milk prices paid to farmers when there are changes in the cost of raw materials such as corn. Projects that are undertaken by Danone Ecosystem Fund also supports farmers (Dannone, 2013).
The company uses several methods to distribute its products to customers throughout the world. It licenses local stores in foreign countries to sell its products. This strategy is commonly applied in China. It has also established more than 100 factories to package its products locally. It also employs foreign direct investment where it establishes plants in host countries. The plants collect milk from local producers and processes it into several products.
In selecting suppliers, Danone places more emphasis on the quality of milk. It conducts thorough audits to assess the quality of milk received from farmers as well as its production system (Danone, 2016). All suppliers must comply with the supplier code of conduct, a document that is publicly available.
References
Finance.yahoo.com. (2016). BN.PA Profile | DANONE Stock - Yahoo! Finance. [online]
Available at: http://finance.yahoo.com/q/pr?s=BN.PA+Profile [Accessed 5 Jun. 2016].
Bloomberg.com. (2014). Danone First-Half Earnings Decline 20% on Milk Cost Surge.
[online] Available at: http://www.bloomberg.com/news/articles/2014-07-25/danone-revenue-advances-less-than-analysts-had-expected [Accessed 5 Jun. 2016].
Dannone. (2013). How Danone makes milk producers part of its development strategy in
emerging countries. [online] Available at: http://downtoearth.danone.com/2013/07/22/how-danone-makes-milk-producers-part-of-its-development-strategy-in-emerging-countries/ [Accessed 5 Jun. 2016].
Danone. (2016). Production. [online] Available at:
http://danone.ua/en/company/production/id/9/ [Accessed 5 Jun. 2016].
