Corporate strategy fundamentals and implementation

Corporate Strategy

Tate & Lyle - Corporate Strategy

Tate and Lyle was founded in 1921 and it is currently headquartered in London, United Kingdom, to employ over 9,000 people and to register an annual income of 3,814 million GBP (Tate & Lyle 2007 Annual Report), the approximate equivalent of $7,468 million. The company activates at both national and international scale and it is only natural they are faced with local and global competition. In order to survive in the fierce international market, Tate & Lyle implemented numerous strategies, such as:

Participation to international forums of the food industry: such as the Vitafoods, the largest event on nutraceutical, cosmeceutical and functional food ingredients industry in Europe for 2008 (Vitafoods, 2008). During these international conferences, Tate & Lyle has the opportunity to present their products and set the basis for strategic partnerships with potential investors, suppliers, vendors and other intermediaries. Also, they are able to analyze the products and services presented by the competition.

International Research: Tate & Lyle has hired six experts in international industry to constantly analyze their products relative to the global market and provide insight as to how technologies could be used to improve the quality of the manufactured products.

Interactive Marketing: The company constantly communicates with their national and international customers in order to identify and serve their needs and wants as to ensure their leading position

Product Development: Tate & Lyle allocate significant financial resources to the research and development of newer and better products. They launch new products on yearly basis. In addition, their main strategy with regard to R&D is to add more value to their products. "We are committed to continuing to grow the contribution from our value added products. Value added ingredients utilize technology or intellectual property enabling our customers to produce distinctive products and Tate & Lyle to obtain a price premium and/or sustainable higher margins" (Official Website of Tate & Lyle, 2008).

Price Risk: Given the various currencies in the countries where they operate, the company implements numerous measures to protect itself from financial fluctuations. They do this by signing contracts such as futures, options and hedging contracts (Tate & Lyle 2007 Annual Report)

Comply with regulations: Tate & Lyle complies with all regulation imposed by the British government, international organizations, as well as the internal regulations imposed by the countries in which they are present

Mergers and acquisitions: The company's international expansion was primarily based on numerous purchases of foreign companies, such as the U.S. Staley Industries, the Australian Bundaberg or the German Heerman (Lynch, 1998). "We continually evaluate acquisition opportunities that would add strategic value by enabling us to enter new markets or add products, technologies and knowledge more efficiently than we could organically. We also aim to grow our business by forming joint ventures and partnerships to develop and distribute new products, and to enhance the capabilities of our existing ingredient portfolio. Using alliances and joint ventures can be an efficient way to lower our cost of investing in new areas and markets, and help secure access to new and complementary technology and expertise" (Official Website of Tate & Lyle, 2008)

International expansion: The company established two major purposes attached to this strategy. First, they needed to reduce the negative impact of local markets upon the corporate results. Secondly, they had to "balance the downturns in some markets with favorable movements in both prices and growth in other world markets" (Lynch, 1998)

Competitive prices: Given the nature of their activity and its high dependence on crops and agricultural commodities, the prices for which can rarely be negotiated and decreased, Tate & Lyle had to think of other ways to reduce costs. The solution was to reduce processing and manufacturing costs (Lynch, 1998)

Patents: Tate & Lyle got their products licensed and obtained patents for them; this strategy was highly useful when the demand for one of the company's sweeteners increased and the company was the only one with rights to produce it (Lynch, 1998)

Despite the expected beneficial results, the company's international expansion failed to deliver the foreseen growth as its profitability decreased after the entrance on global markets. A main reason for this is that the market for starch and sweeteners is a mature one and the registration of massive profits is rather difficult to achieve. Another reason for the company's limited success onto the international market is given by the nature of their activity. As such, since they operate and process agricultural products, they are directly dependent upon the crops; which are also dependent upon natural conditions, which are then out of Tate & Lyle's control; and floods and droughts massively impact the corporate results. Also, they are highly influenced by price and currency fluctuations and the general economic status within the countries where they operate.

It is a known fact that no strategy can be implemented exactly like another company did, but it should be further developed and adapted to fit the unique needs of each company, operating in a given industry segment, conducting a certain type of operations, addressing a certain type of customers an employing a certain number of employees. However, the strategies implemented by Tate and Lyle could be used as guidelines for other companies outside the food additive industry segment.

A first strategy to be implemented is the expansionist one through mergers and acquisitions. The best approach to this strategy is given by intense research of the market within the destination country and then the purchase of an undervalued company, but with great potential.