Raisio - Study Case

1. Chicheportiche Raphael

2. Rasio’s Strategic Diamond Model
before Stanol Ester
Arena
Staging
&
Pacing
Vehicles
Differentiators
ECONOMIC
LOGIC
Q1

3. Diamond Model - ARENA
Q1
Product Category:
- Grain milling company
(cereals, vegetable oil)
- Animal feeds
- Malt production
- Potato starch
Geographic Area:
- Finland
- Sweden
- Soviet Union
- Estonia.
Core Technologies:
- Considerable entrepreneurial initiative technical ingenuity.
- Plan construction with innovative improvisation.
- Active program of R&D
Arena

4. Diamond Model - VEHICLES
Q1
Vehicles
Internal development:
- Expand to animal feeds
- Malt production
- Potato starch
- Margarine
- Paper Industry (1960). Joint Ventures:
In 1987 Raisio group (Vehna oy)
merged with oil factor
Oy Kasxioljy-Vaxtoljhe Ab.

5. Diamond Model - DIFFERENTIATORS:
Q1
Differentiators
Market Leader in flour, pasta and Musli in all area of Russia and Estonia.

6. Diamond Model - STAGING & PACING:
Q1
Staging
&
Pacing
Speed of expansion:
- From 1987-1991 increase income average 10%.
- R&D extensive research on fat metabolism and plant sterol.

7. Diamond Model - Conclusion:
Q1
Before the Stanol Ester, Raisio was a company with
good food products and a great potential but it
missed a real differentiation which could help
avoiding threats, its extension, international
exportation and make it a leading branch of its kind.

8. Financial performance of the Raisio group
in the period 1987-1996
Q2

9. DuPont Analysis - ROE
1987-1996
Years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
ROE (%) 15.5 15.3 5.4 0.1 6.9 10.3 10.3 9.4 6.8 5.8
Q2
0
2
4
6
8
10
12
14
16
18
1986 1988 1990 1992 1994 1996 1998
ROE(%)
ROE(%)

10. DuPont Analysis - Detailed ROE
1987-1996
Q2
ROE =
Net _Profit
Equity
=
Net _Profit
PreTax_Profit
*
PreTax_Profit
EBIT
*
EBIT
Sales
*
Sales
Assets
*
Assets
Equity
YEAR 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
SALES 2011 2184 2487 2557 2315 3070 3549 3518 3224 3928
TOTAL ASSETS 1831 2257 2493 2872 2702 3268 3302 3071 3175 3678
NET INCOME 103.85 152.082 60.642 12.24 85.974 128.338 156.251 147.016 112.064 114.434
EBIT 214 247 232 213 316 431 492 428 383 420
PRETAX PROFIT 97 98 91 64 63 114 185 35 140 162
PRETAX/EBIT 0.453 0.396 0.392 0.30 0.2 0.27 0.37 0.081 0.365 0.385
NET
INCOME/PRETAX
1.07 1.55 0.66 0.19 1.36 1.12 0.84 4.2 0.8 0.7
EBIT/ASSET 0.12 0.11 0.093 0.074 0.12 0.13 0.15 0.14 0.12 0.11
ASSET/EQUITY 2.73 2.27 2.21 2.34 2.16 2.62 2.17 1.96 1.92 1.86
ROE 15.5 15.3 5.4 0.1 6.9 10.3 10.3 9.4 6.8 5.8

11. Years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Net income**
103.85 152.082 60.642 12.24 85.974 128.338 156.251 147.016 112.064 114.434
ROA(%) * 5.67 6.73 2.43 0.42 3.18 3.92 4.73 4.78 3.52 3.11
* In order to calculate ROA we used balance sheet total as total Asset.
** In order to calculate Net income. We did ROE x Shareholders Equity.
Q2
DuPont Analysis - ROA
1987-1996
0
1
2
3
4
5
6
7
8
1986 1988 1990 1992 1994 1996 1998
ROA(%)

12. Q2
Dupont Analysis - Net Margin
1987-1996
Years 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Net Margin (%) 5.1 6.9 2.4 0.4 3.7 4.1 4.4 4.2 3.5 2.9
0
1
2
3
4
5
6
7
8
1986 1988 1990 1992 1994 1996 1998
Net Margin

13. Value chain of the Benecol Business
Unit in years 1997-2000
Q3

14. Poter’s Value Chain: Support activities
Firm Infrastructure
Separate department for Benecol unit
headed by Jukka Kaitaranta.
Human ressource Management
Scientists employees for the lab.
Technology Development
R&D, laboratories, Patents for protect its
product.
Procurement
Purchasing and construction of new plants
and laboratories
Conducting research
Q3

15. Poter’s Value chain: Primary activities
Inbound logistics Cooperation with UPM-Kymmene for extraction and
productions of plant sterols.
Operation • Production of stanol ester from plant sterols to
Benecol margarine.
• Conducting Researches in metabolism fat and
cholesterol.
Outbound logistics Special own-label packaging, delivery to countries.
Marketing and sales Marketing cooperation with Johnson & Johnson for
USA. Strategies for different markets.
Services Regular services with distributors costumers.
Q3

16. * In order to calculate ROA we used balance sheet total as total Asset.
** In order to calculate Net income. We did ROE x Shareholders Equity.
Q4
DuPont Analysis - ROA
1996-2000
Years 1996 1997 1998 1999 2000
ROA(%) 2.11 3.6 4.2 0.16 -5.1
Net Income 13.095 23.244 29.167 1.216 - 38.74
-6
-4
-2
0
2
4
6
1995 1996 1997 1998 1999 2000 2001
ROA(%)

17. Q4
Dupont Analysis - Net Margin
1996-2000
Years 1996 1997 1998 1999 2000
Margin profit 1.98 2.7 3.5 0.15 - 4,8
-6
-5
-4
-3
-2
-1
0
1
2
3
4
1995 1996 1997 1998 1999 2000 2001
Margin profit

18. DuPont Analysis - ROE
1996-2000
Q4
-20
-15
-10
-5
0
5
10
15
1995 1996 1997 1998 1999 2000 2001 ROE(%)
Years 1996 1997 1998 1999 2000
ROE(%) 4.5 7.8 9.2 0.4 - 14.90

19. DuPont Analysis - Detailed ROE
1996 - 2000 (inEm)
ROE =
Net _Profit
Equity
=
Net _Profit
PreTax_Profit
*
PreTax_Profit
EBIT
*
EBIT
Sales
*
Sales
Assets
*
Assets
Equity
YEAR 1996 1997 1998 1999 2000
SALES 661 858 833 763 800
TOTAL ASSETS 619 643 690 744 750
NET INCOME 13.095 23.244 29.167 1.216 - 38.74
EBIT 33 41 52 16 -32
PRETAX PROFIT 27 20 39 -2 -47
PRETAX/EBIT 0.818 0.487 0.75 -0.125 1.468
NET
INCOME/PRETAX
0.485 1.162 0.747 -0.608 -0.824
EBIT/ASSET 0.053 0.063 0.075 0.021 -0.0426
ASSET/EQUITY 2.127 2.157 2.17 2.44 2.88
ROE(%) 4.5 7.8 9.2 0.4 (-14.90)
Q4

20. Q5
Resources Importance Relative Strength
R1 8 8
R2 8 7
R3 8 5
R4 8 3
R5 9 9
R6 8 8
R7 7 7
CAPABILITIES Importance Relative Strength
C1 9 8
C2 6 7
C3 8 7
C4 8 9
C5 9 8
C6 8 9
C7 9 4
Benecol’s resources and capabilities
1997-2001

21. Q5
RelativeStrength
Strategic Importance
Superfluous Strengths Key Strengths
Zone of Irrelevance Key Weaknesses
1
1
5
5
10
R1
R2
R3
R4
R5
C1
C2 C3
C4
C5 C6
C7
R6
10
Map of
strategic importance vs. relative strength

22. Q6
Dynamic capabilities Raisio’s Capabilities
Sensing
• being aware of new developments in
technology
• identifying customers needs
• Organizational learning
• Raisio Group aimed at studying the effect of rapeseed
oil on blood cholesterol level and came up with the
new cholesterol lowering margarine.
Seizing
• determining your business model
• understanding resource needs
• making decisions
• pertaining to investing in technology and other
resources
• leading others to make the appropriate changes
• Signing partnership contracts with the leading firm-
J&J
• An agreement for achieving a major increase in its
sterol production supply, with a French company
• Joint venture
• Following the J& J deal, Raisio began construction of
a Stanol Ester plant at Charleston, South Carolina.
• Benecol was introduced as a dietary supplement,
which was rejected.
Reconfiguration:
• Maintain competitiveness
• reconfiguring the business enterprise’s
intangible and tangible assets
• J&J shifted the emphasis of its marketing strategy
from consumer advertising
• Raisio made safeguarding long term availability of
sterol.
• Replacing CEOs
• Making a new contract of new relationship with J&J
• Benecol acquired global rights to sell and market
sterol ester
Dynamic capabilities:

23. Q6
• Although having timing advantage compared to the other companies, the
opportunity wasn’t seized as expected.
• Making the agreement with J&J was Raisio’s main problem
• Replacing the CEO and a new contractual relationship with J&J helped
Raisio to re enter the market.
• Benecol acquiring of global rights helped them with saving the potential of
the firm
Raisio’s Groups dynamic capabilities we’re not enough to manage its
innovative products at first when they had the opportunity, but after the year of
2000, they had better chances to succeed world wide.
Conclusion:

24. Q7Q7
Reasons for Raisio’s failure after the year 2000:
Dynamic capabilities of the Raisio’s group:
• Making the wrong contractual deals with inexperienced companies.
• Inability to adapt fast to changes and reconfigure competencies.
• Inability to get ahead of competition although the advantages.
• Difficulty to move fast due to delay of supply and problems of
coordination.
• Inability to sense the market:
limited themselves to a unique product- margarine and ineffective
partnership with J&J.

25. Q7Q7
• The unavoidable competition
• The communication was minor about the future of their key
ingredient, the sterol and what to do about it in the market.
• The limited resource of its ingredient and the poorness of
the brand equity
Additional Reasons to Raisio’s failure: