Álvaro de la Garza Musi

MKTG018 Managing Business Marketing and Branding

Case: OSI in China

1. What do you think of OSI’s expansion strategy in China?

I believe OSI took a huge risk by not partnering with a Chinese company when tackling this new country. It certainly would’ve been easier to find and approach the right people in the supply side to acquire the quality and quantity of raw materials needed.

Nevertheless, I think OSI did a good job tropicalizing its business model to fit China. The company’s motto “In China, for China” is extremely smart, as a foreigner coming from the western hemisphere I can perceive how radically different is China to the rest of the world. Not only is the country different in the way the people do business, but the way people consume and many other aspects. Therefore, I believe OSI has a significant advantage over other international companies by hiring mostly Chinese employees and even supervisors and training them in the company’s policies and regulations by taking them to the US or bringing US people to China.

Regarding the supply of raw materials, I really liked how they worked closely with the suppliers. It seems that at the time food processing facilities in China were not even remotely close to the world standards and OSI strived to maintain the same hygiene and safety regulations as the rest of its facilities.

Finally, the company’s reaction towards the 2008 Olympic strong enforcement of food safety of vertically integrating the supply of poultry and ensuring both minimal chicken meat contamination and timely delivered product to meet customers’ demand. I do think by vertically integrating the company acquired a whole lot of costs and risks that might not outweigh the benefits attained. For example, the case mentions how China mostly likes brown meat and a chicken has also white meat; by vertically integrating OSI has to define what to do with all this excess meat when before they need not worry about that.

Overall, I really liked how OSI approached China, I think even though it decided to do it all on its own they did a good job implementing it and bringing US standards to China.

2. OSI is good at marketing only 20% of the birds, but the vertical integration produces every part of a bird. Who will consume the remaining 80%?

According to the case that the 20% OSI is selling is the dark meat of the chicken and that is the only meat which is popular with consumers, not regarding the channel in China. Therefore, it seems to me that the easiest way for OSI to get a potential market for this extra 80% is to export the product to other countries where the demand for this white-meat poultry exists.

Another solution would be to approach OSI’s past suppliers to investigate what they have been doing with this 80% which currently has no demand in China. The answers could then be used to restructure the business model of OSI and integrate this extra meat.

3. What are OSI’s strengths and weaknesses?

STRENGHTS

- Tropicalization to adapt to China’s needs- Strong and long term relationships with clients- Above Chinese average hygiene and food safety regulations - Huge QSR client accounts with reliable demand- Connections with Chinese government officials and international business people

WEAKNESSES

- New to the poultry supply business- No partnership with a local Chinese company- Does not have any Chinese client account

4. What should OSI do?

I think OSI should go for the export market, this is the only way the company can leverage on its strengths. Any other way OSI may stumble upon many obstacles do to not having any previous experience on the matter. Say, if OSI tried to sell direct to retailers and smaller restaurant chains or develop a retail brand the company would have to deal will Chinese customers which the company has not done yet. Furthermore, the other two options which are expanding sales to current customers or get higher prices from wholesalers are unfeasible because both China does not want anything else but 20% of the chicken and poultry is a commodity business where competition is driven by price.

For the above reasons I believe that exports is the only market where OSI is currently capable of tackling without changing its business model radically or having to adapt again to different business conditions. Finally, I believe in the export market OSI will also leverage on its current strengths and capabilities to produce the best outcome.