Bauhinia Case Study

Question 1.

Discuss the competitive forces in the dairy processing industry. Identify the other industry that Bauhinia has entered and highlight the key

differences in the competitive forces between the two industries. Comment on their

comparative attractiveness in Hong Kong.

Q1.Five Forces

AnalysisDifferencesComparative

Attractiveness

Q2.Trend 1Trend 2Trend 3

Q3. Mission

VisionBalanced

Scorecard

High Rivalry High Threat of Entry High Threat of Substitute Products

Moderate Bargaining Power of Suppliers Low Bargaining Power of Customers

• Keen competition• More & more foreign

brands enter China market

(2015中國的牛奶和乳製品市場, KPMG)

• Capital-intensive Operations

• Stricter regulation after 2008 Milk Scandal

• Other alternatives (e.g. soy milk, oat milk.)

• Lactose intolerance (~90% of Asian)

• Raw milk is irreplaceable ingredient

• Milk is perishable• Capitalization & intensification of

production

• Westernized life style• Demand for imported milk is high

after 2008 Milk Scandal

Q1.Five Forces

AnalysisDifferencesComparative

Attractiveness

Q2.Trend 1Trend 2Trend 3

Q3. Mission

VisionBalanced

Scorecard

Key Differences

Frozen Meat Industry:

1. The bargaining power of supplier is relatively highBauhinia is just a distributor, have no livestock farms and retail store.

2. The rivalry of frozen meat industry is mainly based on price-competition.Less differentiation is required.

3. Buyers has lower bargaining power.Antelope, ostrich and kangaroo, are high-value product.

Q1.Five Forces

AnalysisDifferencesComparative

Attractiveness

Q2.Trend 1Trend 2Trend 3

Q3. Mission

VisionBalanced

Scorecard

ProfitabilityAntelope, ostrich and kangaroo are high-value products which generates higher profit margins.

Market DemandSmaller size of customer demand.

Inventory ManagementDairy products are easily perishable while frozen meat can be kept for a longer period of time

Q1.Five Forces

AnalysisDifferencesComparative

Attractiveness

Q2.Trend 1Trend 2Trend 3

Q3. Mission

VisionBalanced

Scorecard

Trend 3:

Trend 2: Trend 1: Increasing Demand for

Health Food

• Aging population

• Demand for food without man-made

addictive and artificial flavors

• Less sugar, high calcium, skim milk, etc.

Q1.Five Forces

AnalysisDifferencesComparative

Attractiveness

Q2.Trend 1Trend 2Trend 3

Q3. Mission

VisionBalanced

Scorecard

Trend 3: Trend 2: Increasing Concern of Corporate Social Responsibility

• People concern about the issue of animal

welfare and environmental sustainability

• Promote green practices

• Positive brand image

Trend 1:

Q1.Five Forces

AnalysisDifferencesComparative

Attractiveness

Q2.Trend 1Trend 2Trend 3

Q3. Mission

VisionBalanced

Scorecard

Trend 3: Growing demand for high quality and imported products in China

• Public awareness of food safety in China

increases

• Willing to pay higher price for the

imported brands that have good

reputation

Trend 1:

Trend 2:

Vision

Q1.Five Forces

AnalysisDifferencesComparative

Attractiveness

Q2.Trend 1Trend 2Trend 3

Q3. Vision

MissionBalanced

Scorecard

Our vision is to bring best quality product into our customers’ daily lives, through constant product innovation, seamless collaboration with regional and international allies, and commitment to create dynamic and cohesive working environment that can inspire employees to implement innovation.

Mission

Q1.Five Forces

AnalysisDifferencesComparative

Attractiveness

Q2.Trend 1Trend 2Trend 3

Q3. Vision

MissionBalanced

Scorecard

• To maintain and constantly improve the quality of our products for the sake of customers’ health

Q1.Five Forces

AnalysisDifferencesComparative

Attractiveness

Q2.Trend 1Trend 2Trend 3

Q3. Mission

VisionBalanced

Scorecard

Learning & Growth Perspective

Balanced Scorecard

Business Process Perspective

Customer Perspective

Financial Perspective

• Upgrade of information system (ERP, CRM, SCM, etc.)

• Shorten production

lead time

• Higher Customer Satisfaction

• Higher sales volume or lower production costs

References

• http://www.foodbusinessnews.net/articles/news_home/Consumer_Trends/2015/04/Beyond_milk_Dairy_ingredient_t.aspx?ID=%7B3E3D7B2F-EBBF-43DE-88B6-D4AECE0687D5%7D&cck=1

• KPMG (2015). 2015中國的牛奶和乳製品市場，page 1, 3, 7, 11

• http://www.customs.gov.hk/en/whats_new/API/

• http://www.bloomberg.com/news/articles/2015-03-07/chinese-governor-asks-people-not-to-buy-milk-powder-in-hong-kong-i6ywg2sc

• http://www.foodnavigator-usa.com/Markets/What-are-the-hottest-dairy-trends-companies-to-watch-in-2015