One exhibition and Two pages of writing are included in this case analysis project. Please carefully read the directions before making a decision. If you are unable to guarantee quality work that at

Date and time received

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ADMINISTRATIVE POLICY

GMGT 4010

TEAM NUMBER 8

Word Count (including Executive Summary) 

Page Count (including Executive Summary)

Dr. Parshotam Dass

Section A03, Wednesday 6:15 pm - 9 pm

FINAL TAKE-HOME EXAM 

FALL 2022

1. Executive Summary

1. External Assessment: Opportunities and Threats 

The company that we will be discussing throughout this paper is a part of the agribusiness industry. This industry has a few major business segments such as crop harvest,  food and beverage production, oil production, and many more. After this fact it comes to no surprise that this industry is geographically all around the world with some exceptions being in areas of the world that are too cold. 

Knowing it is such a big and diverse industry there are many different opportunities and threats that come with it. The first opportunity that companies in this industry can face is generating more profits by being sustainable. The reason for this is due to the fact that many people are willing to pay a higher price if they know that this means the environment was not harmed. Consumers are growing more and more environmentally conscious and many are now trying to protect the environment in different ways and the easiest for them is to buy sustainable products. 

A threat that we have found during our research is coming from the environment itself. The agribusiness industry is dependent on factors such as the weather and diseases as well as the demand of consumers. These specific factors are often not possible to be changed. If a crop is not able to grow properly due to the weather, the crop is lost and not usable anymore. 

While the threat mentioned earlier is always present, there is another opportunity in this industry which consists of the production of soybeans. These specific beans are necessary for many different products and food productions. Therefore, it is a desirable market to be in and a market that will consistently be necessary. It gives companies in this industry to have a big market reach and high amount of sales if they decide to enter this segment.

1. Internal Assessment: Resources and Capabilities 

For our research purposes, we are focusing on Bunge, which is a company in the agribusiness area. The company’s main production segment in the agribusiness is the processing of soybeans. With this product, they are able to produce and sell various kinds of oilseed, grains, fertilizers, sugar, and bioenergy. To get a better understanding of where the company is standing in this industry compared to its competitors, we will be taking a look at its value chain activities.

When taking a look at the company’s management, we can see that it consists of highly experienced individuals. The CEO of Bunge has been in the agribusiness for over 24 years and the rest of the management team has also been working in this industry for a long time. This surely gives the company a temporary competitive advantage due to the fact that it is quite rare to have this opportunity. However, while it is rare as well as valuable, this advantage is not inimitable because there are many professionals with experience in this industry and any company is able to hire them. 

Next we will be talking about their manufacturing segment. Bunge has a very good manufacturing area which is for a good reason. Bunge is focused on developing a good relationship with its farmers which helps them to ensure their manufacturing is as good as possible. Having a good relationship with its farmers is quite rare since not every company cares about that and it is also very valuable since it can ensure long run production. However, this is not inimitable either since other companies would only have to work on their relationships with their manufacturing teams and then they would have the same advantages as Bunge. Therefore, this is also a temporary competitive advantage.

The next activity that we will discuss is the company’s research and development. Bunge is always trying to find new and improved ways to use their products and their research and development team did great with that. The company has found four new growth platforms that can ensure an income for the long run. Those platforms consist of oilseeds, plant-based oils and fats, plant-based proteins, and renewable fuels. These are all valuable and rare and while it may be hard for companies to imitate it at the moment it will not be in the long run, which makes this activity a temporary competitive advantage as well. These new platforms can ensure the company will reach new clients that are more concerned with a healthy as well as sustainable lifestyle. A look into exhibit two can give a better understanding of Bunges value chain.

1. Internal Assessment: Financial Performance and Future Financial Capacity 

After we have researched the financials of Bunge, we are now able to take a closer look at them in exhibit 3 and understand how successful this company is. The first thing that is sticking out, is the return on assets that the company has over the past three years. In 2019, Bunge had a negative return on assets which shows us that they had no profit and when looking at the other numbers of this year, we can see that the company was not doing well overall. The return on equity had also been very low with a -22.10% which again tells us that the company has not been profitable in this year.

However, what is incredibly important to see, is that the company was quickly able to turn its financials and the profitability of the company around in the year 2020. Within just one year, Bunge was able to improve its return on assets as well as equity tremendously. They were no longer in the negative with these two ratios, however their free cash flow per share in this year was in the negative. This negative shareholder-return ratio shows us that in 2020 Bunge had a low ability to pay its debts which was a decrease compared to the previous year. Seeing this problem, in the 2021, Bunge was now in the green with all of its financials. The company was finally able to make a profit while still being able to pay back its debts. If the company is able to sustain their steady growth in profit in the next five years, our recommended strategy will surely be feasible.

1. Current Strategies and their Implementation

The current business strategy of Bunge is based on differentiation. They have many different products that they are offering to their customers and they are also very future oriented because they are constantly working on finding ways to grow. The company is using the standardization strategy to reach as many customers as they can and since they are in a market that is always needed, they succeeded with it so far. To further enhance the quality of the way that Bunge is doing business, they are using horizontal integration and related diversification. This specific decision helped them to work together with the farmers producing the necessary seeds and grains they need for their products while also helping them to have the ability of creating and manufacturing their own products. The strategies and functions that Bunge is using in their business helps them to be future oriented and be successful in the long run, however, the competition in this industry is quite big and therefore, they need to find more areas in which they can differentiate themselves from their competitors. Our goal is to discover an alternative based on the information that we have gathered in this case, to help Bunge stay successful in the long-run and not get lost in the cluster.

1. Key Issue(s) of the Case

Bunge is gravitating towards achieving the status of a complete environmentally aware company whose profits come not only from selling commodities but also the opportunities to capitalize on sustainability. It aims to strictly follow local regulations and laws to eliminate deforestation and has intentions to invest into the carbon index sector to provide sustainability services to farmers. However, it is facing the following key issues: their uncertainty to invest more into the carbon credit sector due to it currently being under-developed, prolonged hardships in balancing the speed of adopting local farmers to sustainable procedures, and

These issues if permeated will lead to the company being unable to meet its 2025 commitment to zero-deforestation which will induce reputational risks as it is already under scrutiny from the Brazilian government and NGOs. Moreover, many of its markets (especially in the EU region) are not willing to pay a premium for more sustainable goods including both consumers and business partners which will pose great challenges for the firm to introduce such practices. Along with the fear of alienating farmers who do not comply with their non-deforestation agreements, they risk losing potential suppliers to their competitors.

1. Implementable Strategic Alternatives 

In the first alternative, Bunge would want to invest into developing technologies and training programs that directly reduce carbon footprint in agricultural activities and enable further land re-use effectiveness for their farmers. The first stream of revenue comes from selling these services to farmers who need professional guidance to adopt new sustainable practices. Technological research such as those for agricultural machinery, monitoring applications and soil enablers that focus on re-deforestation and reducing carbon footprint are included within the scope of this alternative. In addition to that, Bunge will earn another stream of revenue through providing consultant services on how farmers can capitalize on their excess carbon credits either through selling final products with a premium or selling the credits to other businesses. The market is rather new and Bunge will act as the frontiers. Succeeding in capturing the market needs, Bunge will gain first-mover advantages that will yield profits for at least five years into the future. 

The second alternative focuses more on the end consumers. There has been a noticeable upward shift in consumer demand for products that are certified sustainable. Bunge can indeed capitalize on this opportunity by targeting its procedures and partnerships to become less impactful to the environment. Bunge has already established great effort in coordinating with local farmers to promote sustainable agribusiness, which is an extremely favorable foundation. In the next step, it needs to invest into R&D to create crops that have lower carbon intensity in order to respond to rising consumer needs. Educational campaigns targeted towards mainstream users and farmers will also yield significant results. The faster consumers become knowledgeable of sustainable products, the easier Bunge can gain revenue from selling them. Adding more sustainable products to its roster will not only benefit Bunge in terms of reputation but also help it penetrate into a niche market of highly environmentally aware demographic. 

1. Criteria and Evaluation of Alternative by Criteria 

[AFNAN, INCLUDE THE FIRST CRITERION HERE WHICH SHOULD BE THE NPV]

The next criterion is the impact that the alternatives have on individual consumers and Bunge’ primary business partners (farmers and businesses), the company’s employees, and the environment. Both alternatives would result in positive impacts for farmers and businesses. The first alternative allows them to gain more knowledge on sustainable practices and benefits that are associated with carbon credits. It also enables higher effectiveness and efficiency to their farming facilities. The second alternative is more catered towards attempting to educate the market to be aware of global environmental issues. More consumers who are willing to purchase sustainable products also brings more incentives for farmers and businesses to adopt zero-carbon practices. Both alternatives encourage employees greatly and help improve employee’s morale as well as promote their commitment to the firm. Bunge has already successfully identified itself as a strong supporter for green policies and environmentally aware business activities so further efforts will consolidate its employees’ likelihood to voluntarily stay and grow with the company. Since the case study emphasizes the environmental responsibilities of Bunge coming from their farmers, both alternatives address this aspect greatly. They have positive impacts towards the well-being of the environment since both promote the elimination of deforestation and gravitate the world towards sustainable production.

Stability and longevity is also a critical factor in deciding between two alternatives. Immediate profitability addresses the alternative’s present situation on the market and whether or not it is profitable during the upcoming five years. Longevity points to the possibility of putting advantages created through implementing the alternatives into good future use. With the ongoing trends of consumers wanting to purchase products that are certified sustainable, climate-friendly commodities will yield a faster visible increase in revenue. Thus, the second alternative gives better immediate profits compared to the first. Although the carbon credit sector has potential to become a very dominant revenue stream for Bunge as they are the market makers, the firm needs a safer and more predictable source of income especially after their recovery from reported financial losses in 2019. Bunge can nurture R&D projects for its intentions to invest in the sector after several more years of realized success.

1. Recommendation and its Implementation

1. Limitations and Critique of Recommendation

1. Exhibits

Exhibit 1: External Analysis

• Opportunity by creating profit through sustainability

• • People are becoming more environmentally aware and many are willing to pay more if they know that means the environment is protected

• • New options of product creation through new research such as biofuels which means the company can always research new options

• Threat through factors that cannot be influenced or changed

• • Agribusiness is often dependent on weather, diseases and other environmental factors that cannot be changed

• • Bad weather means low product values and in turn income goes down 

• • Wildfires could completely destroy crops which would create a loss 

• Opportunity in soybean production

• • Soybeans are used in a lot of different products that are used by everyone

• • Cooking supplies and other oils as well as food products

• • Can reach a very high amount of customers 

This industry has a lot of segments and a high amount of competitors, therefore a company that wants to be successful needs to excel at, at least one, segment.

Exhibit 2: VRIO Analysis of the Company 

The VRIO framework shows us that the company has a lot of competitive advantage but none of them are sustainable and they may want to consider doing some research and improvements to reach sustainable advantages.

Exhibit 3: Financial Analysis

From the financial analysis we are able to see that it seems like the company has been improving their financials over the last 3 years and has further increased their assets.

Exhibit 4: Current Strategies and their Implementation

Name(s) of the Business Strategy(ies): Differentiation

Customer Needs: Food and Drinks, Oils of various kinds, Bioenergy 

Customer Groups: Globally suppliers of oil, retailers, and the direct consumer

Basis for Competition: Superior Quality and innovation in various areas such as sustainability

Corporate Strategies: Horizontal Integration, related diversification, 

Placement in the Value System: Manufacturer

Global Strategies: Standardization

Major Functional Strategies: Operation Strategy 

Implementation: Structure, Process, Controls, and Culture

Centralization, flat hierarchies, functional structure, informal integrating mechanisms, output controls, 

Exhibit 5: Strategic Alternative Descriptions

Name of the Alternative or Strategic Goal Identifier: Carbon Credit and Sustainable Practices

Customer Needs: professional guidance services for adoption of sustainable practices, buy or sell carbon credits from and to others, purchase of technology to implement sustainability in production 

Customer Groups: farmers, manufacturing businesses

Basis for Competition: Focus differentiation: first-movers

Corporate Strategies: Related diversification

Placement in the Value System: Service provider, technology forwarder

Other: more revenue from an emerging market

Key Issue(s) Addressed by this Alternative: uncertainty to invest in carbon-reducing technologies

FEASIBILITY JUSTIFICATION FOR THIS STRATEGIC ALTERNATIVE

Environmental Opportunity(ies): the market although is developing, there has already transactional activities; some farmers would like to adopt new technologies that can help them reduce carbon and would like to gain knowledge on carbon credits

Environmental Threats, Risks: carbon credits being illegalized to be sold, farmers are fearful of upfront costs, farmers refuse to share data

Present Corporate Attributes relevant and sufficient to this alternative (Strengths, Distinctive Competencies, or Sustainable Distinctive Competencies): financial and human capital power in R&D, relationship with local farmers

Missing and/or insufficient Corporate Attributes (Weaknesses):

Exhibit 6: Strategic Alternative Descriptions

Name of the Alternative or Strategic Goal Identifier: Lower Carbon Intensity products and Educational campaigns

Customer Needs: purchase of products that are certified sustainable, willing to pay a premium for the larger cause

Customer Groups: individual consumers

Basis for Competition: Broad differentiation: superior quality

Corporate Strategies: Related Diversification

Placement in the Value System: product reseller, distributor

Other: 

Key Issue(s) Addressed by this Alternative: customers who are unwilling to pay a premium for sustainable products, respond to trends of customer needs for climate-friendly products

FEASIBILITY JUSTIFICATION FOR THIS STRATEGIC ALTERNATIVE

Environmental Opportunity(ies): customer needs on the rise, policies and subsidies that governments provide to environmentally aware firms

Environmental Threats, Risks: customers shift interest, high upfront costs to implement sustainable practices, unfavorable laws and regulations in the future

Present Corporate Attributes relevant and sufficient to this alternative (Strengths, Distinctive Competencies, or Sustainable Distinctive Competencies): strong R&D, great relationship with farmers and direct partners

Missing and/or insufficient Corporate Attributes (Weaknesses):

Exhibit 7: Assumptions and Justifications

Exhibit 8: Strategic Alternative Net Present Values

Exhibit 9: Strategic Alternative Net Present Value

Exhibit 10: Evaluation of Alternatives by Criteria

1. Exhibit 11: Implementation Schedule/ Action Plan

Bibliography:

Bunge Current Ratio 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/current-ratio

Bunge Debt to Equity Ratio 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/debt-equity-ratio

Bunge Financial Ratios for Analysis 2009-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/financial-ratios

‌Bunge PE Ratio 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/pe-ratio

‌‌Bunge Quick Ratio 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/quick-ratio

Bunge Return on Investment 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/roi

Bunge ROA 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/roa

‌‌Bunge ROE 2010-2022 | BG. (n.d.). Www.macrotrends.net. Retrieved December 11, 2022, from https://www.macrotrends.net/stocks/charts/BG/bunge/roe

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