Strategic Management

Introduction

The choice of a specific strategy means that of all the possible ways of development and

ways of action that open up to the company, it was decided to choose one direction in which it will

develop (Ansoff et al., 2018). Without a strategy, an organization does not have a well-thought-out

action plan, there is no guide in the business world, there is no single program to achieve the desired

results.

Well-planned strategic management prepares the organization for the future, establishes a

long-term direction of development and determines the intention of the organization to take specific

business positions. The better the strategy is thought out and the more skillfully it is executed, the

more chances the company has for a strong position.

The strategy of an organization, as a rule, consists of well-thought-out purposeful actions

and reactions to unforeseen developments and to increasing competition, the situation is constantly

changing, whether it is an important discovery in the field of technology, a successful launch of a

new product by a competitor, a new state regulation and policy, expanding the interests of buyers in

a particular area etc. In this work, a business strategy for the “Milk Mug” dairy company will be

presented.

Analysis of external environment

The PEST analysis matrix will allow us to assess the scale of the impact of external factors

on the activities of “Milk Mug”, as well as open up opportunities for determining further develop-

ment strategies within the current situation (Table 1).

The analysis made it possible to assess the degree of influence of certain factors on the sus-

tainable development of the “Milk Mug” company. The greatest impact on the activity of the enter-

prise is: among the positive factors is the state support of industrial enterprises, small and medium-

sized businesses, the development of IT technologies (Saloner, Shepard, and Podolny,

2005). Among the negative ones are an increase in mortality and a decrease in the birth rate, the in-
troduction of sanctions by Western and European countries, the appearance of substitute products

(soy milk, etc.)

Table 1. The matrix of the PEST analysis of “Milk Mug”

Group of Factor Result Solution

factors
Politics Tax policy of the state; The growth of tax bur- Participation in charity;
Support for small and dens on business; Increase in production vol-
medium-sized businesses; The emergence of new umes, expansion of sales
Introduction of sanctions; competitors; channels;
Political instability. Growing demand for Cooperation with domestic
domestic products; enterprises (on equipment,
Minimal opportunities packaging, etc.);
to enter the interna- Active cooperation with
tional market. trade networks of partner
countries.

Economics State support of industrial Reducing the cost of Purchase of new produc-
enterprises; industrial equipment; tion lines;
Rising inflation; Reduced purchasing Finding ways to reduce
Increase in the minimum power; cost;
wage. Increasing the income Focus on the product
level of socially unpro- range depending on the
tected segments of the purchasing power.
population.
Social The increase in mortality Decrease in the vol- Expansion of the com-
and the reduction in the birth ume of sales of prod- modity nomenclature in
rate; ucts; demand among the elderly
Mainstream for healthy life- Reduced demand for part of the population;
style. products. Place bets on the produc-
tion of products with the
addition of trace elements
necessary for the body;
Creating products for peo-
ple promoting vegetarian-
ism, expanding the range
of dairy products with 0%
fat content.
 Technologi- The emergence of substitute Decline in sales vol- Active promotion and ad-
cal products (soy milk, etc.); umes; vertising of the naturalness
Development of new tech- The need for financial of products;
nologies for processing and investments to keep up Thorough study of the
storing milk; with the times; positive and negative as-
Development of IT tech- A high level of aware- pects of the new technol-
nologies. ness about the state of ogy, expert economic as-
the market, the dynam- sessment of the effective-
ics of its development, ness of implementation;
the reaction of buyers. Active image enhance-
ment in social networks,
product promotion through
Internet channels, devel-
opment of Instagram.

Using the SWOT method, it is possible to establish communication lines between the

strength and weakness that are inherent in the organization; external threats and opportunities

(Fuertes et al., 2020).

The purpose of SWOT analysis is to develop a strategy for the development of “Milk Mug”,

considering all the strengths and weaknesses, as well as opportunities and threats that may be en-

countered in the market in the future (Table 2).

Table 2. Matrix of SWOT analysis of “Milk Mug”

Opportunities Threats
 • Expansion of sales markets; • Increased competition from
• Vertical integration (reverse – large producers from other
raw material base, direct – de- regions;
velopment of the distribution • Reduction of the raw mate-
network); rial base;
• Increasing the purchasing • Development of retail
power of the population; chains;
• Increased consumption of dairy • Increasing bargaining
products (market growth); power. Shifting the priority
• Withdrawal from the market of towards retail;
small producers; • Poor quality of retail opera-
• The priority of local authorities tion;
for the development of agricul- • Weak support of the enter-
ture; prise by the authorities
• Development of the “cult” of
Healthy Eating;
• Development of retail chains;
• Expansion of the assortment;
• Production modernization op-
portunities;
• Investments in personnel.

Strengths Opportunities and strengths Threats and strengths

• The leader of the dairy in- • Increase the share of the milk • The development of the
dustry in the region; company to 45%; trademark will increase
• Reputation of the company; • Increase the total volume of competitiveness;
• High-quality, natural prod- milk sales by 30%; • Development of its own re-
ucts; • Increase the brand awareness tail network due to the repu-
• A wide range of; of the company to 80%; tation of the company, a
• Highly qualified production • Development of retail chains at wide range and high quality
personnel; the expense of the company’s of products.
• Good production capabili- image;
ties (high-tech equipment, • Expand the range by develop-
reserve of production capac- ing the “cult” of Healthy eat-
ities, warehouses for reserv- ing.
ing raw materials);
• Well-established sales ser-
vice (applications,
• delivery, document manage-
ment).

Weaknesses Opportunities and weaknesses Threats and weaknesses

 • Lack of measures to pro- • Improvement of packaging due • Search for new possible
mote products, advertising; to modernization of produc- suppliers of raw materials;
• Lack of sales staff; tion; • Training and training of
• Disadvantages of packag- • Reduce costs by increasing sales personnel;
ing; production capacity; • Search for new markets.
• A short period of product • Staff development and training.
sales;
• High costs;
• Insufficient management
qualifications;
• Dependence in raw materi-
als on the supplier.

Thus, based on the SWOT analysis, the following conclusions can be drawn:

1. The company “Milk Mug” has a pronounced competitive advantage – the production of

products from natural raw materials. Availability of high-tech production facilities, which provides

a wide range of products. Also, the strength of the company is the presence of its own network of

retail outlets in which products are sold.

2. Significant disadvantages include the high price of products and a relatively small range

of products. The last drawback can be eliminated as the company’s development strategy is deter-

mined.

3. Among the opportunities, it is possible to note the entry into the international market and

an increase in market share in the region and neighboring regions. Development of its own retail

network. With a loyal pricing policy, the selection of competent sales staff, increasing the assort-

ment and expanding the distribution network, it is quite possible to do this.

Porter’s 5 forces analysis

Table 3. Porter’s 5 forces analysis

Force Value Description

Threat from substitute High The dairy market is under pressure from substitute
products products, as key market producers are able to offer
various solutions for project tasks

Threats to intra-indus- High The dairy market is rather poorly concentrated, since
 try competition there are a large number of producers on the market.
Thus, the strength of dairy producers determines intra-
industry competition

Threat from new play- High Despite the existing threat of the emergence of new
ers players in the market, the probability that they will be
able to take a significant share of it is extremely small

Threat of loss of cur- Average The existence of more economical options creates the
rent customers risk of key customers leaving, which can lead to a sig-
nificant drop in sales

Threat of supplier in- Average Suppliers of raw materials of the dairy market are
stability quite stable

Based on the analysis, it is possible to draw conclusions about the presence of a level of

competition in the dairy market above the average in the whole market. The main factors that in-

crease the level of competition include the fact that the products of this company are not unique,

therefore there is a threat of the emergence and strengthening of the positions of similar products

produced by competitors, as well as a high probability of aggravation of competition within the in-

dustry.

Mission and Vision of the Company

Before starting the analysis of strategic planning at “Milk Mug”, it is necessary to study its

mission and goals.

The mission of the “Milk Mug” company is to promote the fullest satisfaction of the con-

sumer market in the goods of this enterprise; as well as a more complete effective use of local raw

materials and labor resources; profit-making by the founders of the enterprise and fair treatment of

the company’s employees.

Mission of the company: The company “Milk Mug” is one of the main suppliers of dairy

products in the city. In its activities, the company focuses on the quality of its products, especially

with regard to its naturalness. The enterprise is designed to meet the needs of the population of the

region in a sufficient amount of high-quality dairy products.

 Mission for society as a whole: “We strive to become the first in the country to produce

dairy products. And having achieved this ambitious goal, our company will bring not only the re-

gion, but also the entire domestic economy to a new level”.

The mission of the “Milk Mug” company defines the long-term and short-term goals of the

enterprise in its various fields of activity. The company focuses on the development and training of

personnel, as well as strengthening its position in the regional and state market.

Stakeholder Analysis

Table 4. Stakeholder Analysis of the “Milk Mug” company

Name of the stakeholder The main interests of stakeholders

Internal stakeholders of the project
Company Manager Project execution;
Achieving the company’s targets;
Career growth
Company Management Team Achieving the company’s targets;
Career growth
Company team members The future security of their jobs;
Wage growth;
Career growth
Company Management Office Maintaining the balance of the project portfolio;
Achieving target KPIs
Company Investors Obtaining the planned profitability of the company
Suppliers of the company Fulfillment of the obligations assumed;
Clear statement of the technical task
Internal corporate stakeholders of the project
Creditors of the company Timely payment of obligations;
Maintaining the current level of risk expressed in the target
indicators
Shareholders of the company Company profitability growth;
Growth of dividend payments;
Company value growth
Company management Achievement of KPI targets by the company;
Increase in the amount of compensation;
Saving the current position;
Company development
Business partners of the company Maintaining a long-term relationship with the company
Other employees of the company Wage growth;
 Saving jobs;
Career growth
Future generations Building the potential for the company’s development in the
future
External stakeholders of the project
External consumers Satisfaction of needs
Local community Conservation of the environment;
Modernization of the surrounding space
Media Creating informational occasions
Competitors Growth of their market share;
Growth of their capitalization
Civil society Protecting the interests of citizens;
Development of the institution of civil society
State authorities Compliance with the requirements of public authorities;
Increase in the amount of deductions to the budget;
Support of the implemented development strategy

Suggested activities

Due to the decrease in revenue, cost and profit, a growth strategy is proposed as a priority

strategy for the development of “Milk Mug”, which is characterized by high rates of increasing pro-

duction volumes.

Within the framework of this strategy, two directions of development can be distinguished

in relation to the “Milk Mug” company:

1. Market development strategy, which consists in finding new markets for services already

provided (old goods – new market) (Sadler, 2003);

2. A product development strategy that assumes solving the problem of growth through the

production of a new product and its implementation in the market it has already mastered (a new

product is an old market) (Lynch, 2018).

In relation to the company “Milk Mug” recommendations on the use of the results of the

analysis of the external and internal environment of the enterprise will look as follows:

1. Strategy for using the capabilities of the external environment:

 To develop production taking into account the demand for products in the current region, as

well as to use the geographical location, which makes it possible to use the sales market in neigh -

boring regions.

One of the strategic directions is considered to enter the international market.

2. Strategy for eliminating environmental threats:

Obtaining financial guarantees and eliminating the risk of seasonality of activity by con-

tracts with suppliers of raw materials and long-term contracts for the sale and storage of products.

3. Strategy of preserving, strengthening and using the strengths of the enterprise:

To keep customers from switching to a competitor by means of developing and conducting

promotions (Grunig, and Repper, 2013).

Thus, the main activities of the company “Milk Mug” for the implementation of this strategy

should be:

• Gaining the best positions in the regional market.

• More effective use of marketing tools.

• Search for new market segments.

• Search for new markets outside the region.

In accordance with the main functional strategies of the company’s activities, the directions

of the “Milk Mug” company’s activities are determined by production, marketing, financial, person-

nel, socio-cultural goals. The goals and objectives of the company “Milk Mug” are presented in Ta-

ble 5.

To implement the chosen strategy, we will develop a tree of goals of the “Milk Mug”

company using a targeted approach:

• the main goal is formulated;

• the main goal is divided into lower-level goals.

Figure 1. The tree of “Milk Mug’s” strategic development goals

Table 5. The system of development goals of the company “Milk Mug”

Type of Goal Responsible for execu-
goal tion
Production Expand the range by launching a line for the production Deputy General Director
of cottage cheese and soft cheeses with additives. for Production
Reconstruction and system reorganization of the produc- Deputy General Director
tion process. for Production
Marketing Develop a commercial for broadcast on regional televi- Head of Marketing De-
sion. partment
Determine the attitude of consumers to the changes that Head of Marketing De-
occurred during the year to adjust the marketing strategy partment
of the next year.
Personnel To conclude a contract with the Swiss milk processing Lead HR Manager
company Anchor for the internship of technologists of
the company “Milk Mug”
To improve the qualifications of senior managers at the Lead HR Manager
courses at the Canadian International Business School
under the program “Financial and tax policy of the enter-
prise”
Finance Increase the amount of net profit by 15% Deputy General Director
for Financial and Eco-
nomic Activities
Social To hold a concert dedicated to the Family Day with a Head of Marketing De-
lottery, a drawing contest, a trampoline in a children’s partment
park
 Conclusion

Based on the use of the methodology of the degree of readiness of the enterprise to imple-

ment strategic approaches in management by indicators such as the certainty of the mission, the cer-

tainty of the goals and strategy of the enterprise; the availability of a well-established mechanism

for collecting, analyzing and processing marketing information, work to improve the competitive-

ness of the enterprise, the adaptability of the enterprise to the opportunities, it is established that the

company “Milk Mug” is ready to implement strategic approaches in enterprise management.

Based on the results of the conducted research, it is recommended for “Milk Mug” to use a

concentrated growth strategy (market development strategy and product development strategy),

which involves the expansion of production.

The implementation of the proposed measures in the company will lead to an increase in the

efficiency of economic activity and competitiveness, and as a result will strengthen the company’s

position in the market. Entering new markets will provide an increase in the financial results of en -

terprises and will make it possible to bring the indicators of the processing industry of the region to

a new level.
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