Case Study on Royal Numico

An entry and exit barrier analysis is a must according to Porter’s model. In their annual report they did not overlook the risks attached with the acquisition. “First of all, Numico focused on the production of specialized nutritional products. This policy involves certain risks regarding the vulnerability of these products and the target groups which there are aimed at, including babies, patients and people with specific nutritional needs. (Eppinks 730)

They evaluated their target markets and realized that there was some vulnerability to sell to the target markets. “The second risk was the increasing foreign exchange risk from the growth of the activities in the USA. Numico drew up its balance sheet in euros; a change in the rate of the dollar relative to the euro has a positive or negative impact on the sales reported. The same change would have the opposite effect on the value of debt if it was incurred in US dollar.” (Eppinks, 730) They knew that the environment consisted of incessant fluctuations in the currency rates and that sales would get affected. An environment analysis helped them understand that if the economy went up they result would be great but any threats to the economy would have a fatal consequence. “Finally, the board recognized that sales of nutritional supplements were more sensitive to economic fluctuations rather then their traditional products. However this effect was somewhat reduced because consumers were becoming increasingly conscious of their health and the importance of balanced nutrition.” (Eppink 730) They understood that although there were economic barriers their target market had become more health conscious and as long as there was a need for the product they would be successful. Royal Numico carried out a good environmental analysis although it might be questioned if it was good enough. Both the acquisitions were sold eventually either because they were failures or just not in line with Numico’s new strategies.

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