Heineken is the leading company manufacturing and distributing its branded bears in the global market. The company is also famous for its marketing activities and sponsors a mega event of the European Champions League and also partners with James Bond brand. The company desire to integrate its sustainability into its corporate strategy. The name assigned to the long-term approach is “Brewing a Better World”. The company had set its targets into six pillar areas to achieve its long-term sustainability approach. Water, carbon dioxide (CO2), responsible consumption, health and safety, sustainable sourcing, and inclusive growth are the targeted areas set by Heineken.
The case study discusses the efforts in terms of sustainable sourcing. It also discusses practice on farming standards along with the supplier code to enhance its long-term objective in the African market. The management of the company found that to marketing of each successful area would result in many challenges that have to be faced by the company in near future. Its “mass balance” sourcing will not effectively communicate on the existing bottle. The “mass balance” refers to the mixing of material (sustainable and traditional) in the supply chain.
The situation was critical for the decision makers to move on segregate sourcing for supply chain or to remain on the existing sustainable supply chain. The issue was also severe and critical for the marketing department regarding the sourcing of the various brands of the company. The decision makers were facing difficulties to decide whether there was a need to adopt segregate sourcing for all or to some of the brands of the company (Dahlen, Lange, and Smith).
Problem framing and Solving Capabilities
The problem of Heineken was critical as O’Neill (Chief Corporate Relations Officer) was aware that their sustainably sourced products were attractive for the marketers. The procurement team suggested analyzing each supply chains. The situation was more critical in the growing areas where there is a lack of sourcing raw materials.
The MBA program has provided an effective study for analyzing the problems related to supply chain. The program has also emphasized the means of solution for the selection of effective supply chain for the company. It will demonstrate all the elements and factors that will be used in analyzing the problem and its effective solutions. The solutions are also viable for the marketers to take a decision on the adoption of sourcing for the brands of the company.
The main problem the company was to focus on sustainable sourcing for making an effective decision related to the supply chain. The main factors or elements that were required to be analyzed prior making decision are.
1. Sustainable farming
The company had relied on farmers to achieve the demand of the raw material. The company had practiced to purchase raw materials from the farmers till 2015. The sourcing department of the company had allowed Dutch farmers to look at the possibilities of barley cultivation in their respective areas (Dahlen, Lange, and Smith).
2. Desire to Remain Stable at Farmer Supply Source
Heineken believed that their source of raw material contains sustainability that is not liked by the customers. The company joined the global food industry in 2002. The industry works for the improvement and protection of natural environment and economic conditions of the farmers, local communities, and its employees. It was suggested at the meeting that there was a need to raise farming standards and facilitate farmers to grow further sustainability. The suggestion was given on the basis that the company should increase the production of raw materials to derive benefits in future (Dahlen, Lange and Smith).
3. Supplier Code
The company suppliers were the backbone of the supply chain. They were the key to achieving its sourcing commitments. The effective suppliers of the company were crucial to avoid the reputational damage by practicing and values correctly. The company decided to implement supplier code that was to be signed by all the suppliers that were attached to the organization for last 1.5 years. The code emphasized all the suppliers expectation that how they are expected to perform in the areas of integrity, business conduct and human rights (Dahlen, Lange, and Smith).
4. Africa Local Sourcing
The company had its potential customers those belong to growing regions of Africa. The reason for the growth is population and its prosperity. Raw materials were imported from far away countries because of unavailability of large suppliers in the country. The small and poor farmers produced the agriculture products. The company made tremendous efforts for sourcing projects through infrastructure, new seed varieties, and farming equipment but did not succeed in avoiding the imports of raw materials from other countries (Dahlen, Lange, and Smith).
MBA Program has the Solution
The case of the company is critical but MBA program has the solution of the problem. The program demonstrates different factors to be analyzed and sort out the solution of the problem. The steps for solving the problems are also known as competencies to analyze the critical situation of the business. The initial step is to identify the functional areas of the business and its importance in the particular business. The other step will further identify the strategies and tactics to discuss the problem in different aspects. The seeking of the problem with different aspects will provide mean to solve the issue and derive benefits for the organization.
• Comprehensive Knowledge of Functional Areas of Business
The issue of the organization has significance as it will affect the supply chain management of the company. The issue will directly have an impact on marketing department and management of the organization. Heineken wants to select the option from mass balance and segregated sourcing.
1. Mass balance
Mass balance refers to the purchase the raw materials from harvesters and increases its quantity over the period. The company has to maintain its sustainability by purchasing the raw materials from abroad suppliers. The problem was the estimation of sustainability of the product that could not be measured for every particular bottle of beer. The issue was affecting the marketing team plan. They were of the belief that marketing 70 percent sustainable barley will raise the question regarding the remaining 30 percent. The question would result in estranged customers of the product.
2. Segregate Sourcing
Another option was segregated sourcing that refers to the sustainable origin would keep throughout the supply chain. There will be separate storage, production and silos facilities. The company was well known about the fact that moving towards segregate sourcing will require many challenges that would be faced by the company. The main challenges that were faced by the company were Supplier cost, issues of control, and available volume. The marketing department team was supporting segregate sourcing for the new brands. They thought that the option would prove easier than the mass balance as it will demonstrate 100 percent information of the company’s strategy .
The problem will put direct influence on the supply chain of Heineken. The supply chain of the company is mentioned in the chart below.
The main elements that will be affected due to the problem faced by the organization are agriculture, malting, brewing and packaging material. It has a direct effect on the initial process of the supply chain. The agriculture products are purchased from the farmers and then they are malt in the water and heated at the required temperature to make it usable for the brewing process. If the company adopts any of the options of sourcing, it will disturb the half process of the supply chain. The company has a competitive advantage due to its supply chain in the market. It has to adopt reasonable strategies to improve its supply chain process and retain a position in the market.
Importance of Supply Chain for the Organization
The supply chain has significance role in the organization. The management of supply chain is essential to satisfying the customers and lead the company to the success. The only tool to achieve the long-term objectives of the organization is Supply Chain Management (SCM). Effective supply chain management could lead the following benefits to the company.
1. Reduces Cost of the Inventory
The effective supply chain management will reduce the cost of the inventory because the decision made by the management of the company to produce and distribute certain number of units with cost efficiency will improve the production process of the company. The tactics that will be used to minimize the cost with the potential number of units of production will result in the reduction of variable cost for the organization. Economies of scale could be utilized for the purpose of minimizing the cost. The organization could achieve production and cost efficiency at a time.
2. Help in making Effective Manufacturing Strategy
The supply chain reflects the process of manufacturing from raw materials to final product. The company could derive benefits by applying effective strategies to improve the manufacturing process. The organization applies the strategy of manufacturing and delivering the unfinished products to the next process for bringing efficiency in delivery. The raw materials are purchased by the organization from suppliers.
If the organization increases its production and try to reduce time in the manufacturing process, it would be able to get a potential number of units of finished goods in less time. Meanwhile, the company could further purchase raw material, and the process will again start to manufacture new products. The whole manufacturing process will be improved, and the number of units will increase in short time.
3. Improves Quality and Provides High-Quality Margin
The effectiveness will result in a better quality product. The control over supply chain will allow management to manufacturing a high-quality product that is preferable by the customers in local and international market. The supply chain is the key to success for the business. The profitability of the company is mainly dependent on the effective supply chain. The effective supply chain could achieve the quality margin expected by the organization .
Cost effectiveness and manufacturing a certain number of products at a given time are the ways to achieve the primary objective of the organization. The company could fulfill the needs of the customer by making improvements in the process of supply chain management. The profits of the company will boost up if it has potential control over its cost of production that is only possible when the management is effective in managing and controlling its overall supply chain process .
4. Marketing the Brands
Although it has not a direct link to the supply chain, the marketing department needs clear information of the supply chain for promotion and advertising of Brands. The marketing department has to build a message that indicates the production process of the company. They want to know the source of purchasing raw materials and build an effective message for the public to recognize and attract towards the brand. The supply chain will help the marketing team to develop marketing message and strategies to be applied accordingly and achieve the objective of increasing customers (Peng).
• Global Perspective
The problem of the company is also related to the global world. There are various global factors that need to be analyzed before decision making of the improvement in supply chain management (Peng). These factors are discussed below:
1. Collaboration with Global Standards
The company has to make a decision in reviewing the global standards that are prepared by the leading companies. The strategy adopted by the company should be in accordance with the global standards. The leading companies those deal in the same nature business and handle the individual firms’ actions set the rules and regulations. The companies have to follow the principles and rules of the global standard if it is adopting some new strategy to improve its performance in the global market. If the companies start to adopt their individual strategies, they would not be able to gain a competitive edge in the global market. It is the implied duty of the organizations to remain with the mutually agreed standards and try to adopt the strategies that do not contradict with it (Peng).
2. Other Uses of Demanded Raw Materials
It is the corporate social responsibility (CSR) of the company that it realizes other uses of the raw materials. The company has to focus on other demands of the required raw material to make effective strategy and do not disturb the use of raw materials. The company has to secure its sourcing while making most of its uses. The company should have a sustainable strategy to overcome the problem of security in the global world.
The case of Heineken is also required to analyze in a global perspective. The company has to maintain its sustainability and ensures that its raw material is available for a long time. The global management of the company must emphasize on the availability of raw material as the demand for grain is high in the international market. The grain is also used fir food consumption, and its demand is increasing due to the increase in population. The company has to secure its raw material sourcing to fulfill the future demand for the product. The management has to look forward to segregate sourcing as their objective is to make growth by utilizing available resources for the supply chain (Peng).
3. Global Competitors Strategies
Any organization that has business in more than two countries has to make competitive strategies to beat the competition prevailing in the market. There are many substitutes for the products in international market. The organization has to practice consistent efforts to counter the strategies of the competitors. The global competitors practice effective strategies to encourage a large number of customers towards the product.
The company has to analyze the existing strategies of competitors and develop strategies to beat its competitors in the global market. Heineken also has strong competitors in the international and global market. The competitors of the company include ABInBev, SABMiller, and Carlsberg. The company has to take competitive advantage and focus on the strategies adopted by the supplier in making their supply chain effective. Heineken will be able to develop counter strategies through identifying the competitors’ strategy and will give a potential competition to its strong competitors (Peng).
4. Global Marketing of the Product
Global marketing refers to the advertisement and promotion of the product in the global market. The organization needs to focus on the globalization strategies to adopt for spreading its business in different countries. Heineken is also a global company that needs to focus on the global marketing strategies to attract global customers to its existing products. The company has high potential to expand its business via effective marketing, but there is a need to analyze the standards of Global marketing strategies. The company would be able to gather a large number of customers towards the product if it acknowledges the global perspective with relation to marketing of various brands (Peng).
Interactive and suitable interaction can be achieved by communicating which is required to reach the goals of the organizations. Communication competency is the communication ability through which people in the organization interact with each other so that they can achieve the goals of the organization. Effective communication plays a vital role in explaining and understanding the current issues that an organization might face, and it also helps in overcoming such issues .
The Human Resource department must focus on training and developing the skills of the employees so that they can communicate with each other in the market. It is believed that communication competency can be achieved when six factors meet each other. The six factors are flexibility, involvement, management, empathy, effectiveness and appropriateness. All these factors are essential for in an organization to attain competency in communication (Dahlen, Lange, and Smith).
All the six factors must be present as all of them play an important role and missing of any of these factors will abstain the organization from achieving competency in communication. Flexibility is a vital factor as it allows a person to adapt to different situations. A person must be able to work and communicate well under all the conditions so that they can make their way towards the goals easily. Involvement is also important because it develops confidence in the employees, and they feel that their contribution is worthy of the organization.
Everyone working in a team to achieve a certain goal must make their contribution by involving himself or herself. The involvement of every individual allows other to look at a situation from a different perspective and solve the issues effectively. The communication mu8st also be well managed, and the way of interaction must be regulated by the communicator to develop good communication within the organization. Communication must be well directed and managed so that it can reach a conclusion. To attain competency in communication empathy is also required because it is important to understand the shared emotions of the communicator. To reach the goals of the organization effectiveness in communication is very important. One of the primary measures of communication competency is the appropriateness in the conversation.
Appropriateness is necessary to control the situation as from every communication there is an expectation by all the parties involved in it. The highest level of communication competency is achieved when all these factors meet (Peng). From a global perspective it is observed that all the successful organizations in the world are focused towards achieving the competency in the market so that the higher performance from the employees can be achieved which will result in achieving the goals of the organization.
On the other hand, the marketing team is responsible to market what they are told to market, and they should have come up with such an idea that they can gain more attention of the customers. The marketing team must now how to market the product even when there are several changes made in the process of making the product. High level of communication competency could have resolved this issue within a limited period. The management team should have played their role in communicating the reasons for the changes so that the marketing team can work better in promoting the changes made in the alcoholic beverages (Dahlen, Lange, and Smith).
Ability to Manage Information
Information is in two forms electronic and physical, and both the sources of information are equally important in every organization. The organizations must have an efficient system to share information from one department to another. Information management requires a proper organizational structure to complete transfer knowledge, which will help others in making their contribution towards the goals of the organization. The organization structure must manage the information throughout the lifecycle of the information irrelevant to the source of information .
As there are several sources of information, therefore, the management must control the information and make sure that it reaches the right person on time. At least till the completion of the task or goal the information must be well managed in the organization and afterward it must be saved so that the organization can benefit from it. Information Management is closely attached to the important concepts of management includes planning, organizing, structuring and processing. In addition to it, information management embraces other concepts of management like controlling, evaluation and reporting. All these activities of management require swift flow information to complete (Peng).
Technology plays a vital role in managing information in an organization. If the organizations are equipped with technology, then it is easier for the management of the organizations to transfer knowledge from one department to other. Proper managing and transferring of information makes significant changes in the organizations and helps the employees to attain the goals easily . Many organizations have acquired intranet facility to communicate and share information within the organization to reduce the issues and solve the problems as soon as possible. With the help of intranet, it is easier to retain the information and provide it to another department when needed. These practices of sharing the information are adopted by many organizations and have made significant improvements in their course of work. Organizations strive hard to attain high information management to achieve the better flow of information from one department to another that helps in achieving the main goals of the organization (Peng).
The management of Heineken has a better system to control, monitor and manage the information that is passed from one department to another. The information is rightly transferred, but the responses are not dealt in the way they are supposed to be dealt. Though the company has a proper system to transfer and manage the information still, some essential information was not provided to particular departments. The organization should make quick and proper responses if some departments require additional information. If the management fails to do so, the organization will never be able to achieve the set goals.
The marketing team had issues with the management because sufficient information was not transferred. To manage the information cycle, the information must be shared on both sides. If only one party is sharing and managing the information, then the organization will not be able to transfer the information properly, which will limit the chances of the organization to achieve its objectives. The information at Heineken was transferred from management to the marketing department, but additional information that was required by the marketing department was not provided which was the reason for conflict between the departments. The organization was not able to achieve their goals because of this issue between the management and marketing department (Dahlen, Lange, and Smith).
Social behavior is very important in every organization and the organization especially the human resource department of the organization must develop an environment through which ethical and effective communication is done. Communication is an important part of the organization, which allows the members of the organization to achieve their goals by participating. Employees have smaller tasks, which if completed efficiently helps in attaining the larger goals of the organization.
The goals of the organization can only be achieved if the social behavior of the employees is ethical. The employees of every organization must communicate in an ethical manner to avoid differences between them and create a relation with each other to work in a friendly environment. The environment of an organization has a direct impact on the performance of the employees. If a better environment is provided, the employees will perform better and will be helpful in achieving the goals of the organization. The people in the organization must have a positive social behavior with each other as it opens room for effective communication, which results in high performance and in attaining the goals of the organization (Peng).
The human resource department of every organization must train all of its employees to create a proper environment at the working place and must develop a culture to share information and ideas. Every employee must be given a fair chance to participate and share their ideas so that the employee can feel their worth in the organization. The higher-level management must cooperate and provide assistance to their subordinates in case of any query. The judgment provided by the higher management is very informative for the subordinates, and it motivates them to work efficiently and further participate in the effective communication. All the successful organizations have a set of rules, which addresses their social behavior. The behavior of the employees in organizations is monitored and controlled to avoid conflicts between them (Peng).
The management and the marketing department at Heineken had a conflict with each other, and, no proper responses from both the sides led to an unethical social behavior in the organization. Both the parties were not properly responding to each other, which caused a delay in achieving the objectives of the organization. It was the responsibility of the human resource department to work on this matter and provide a solution to it. Both the marketing department and management must have worked together to help each other and provide relevant information to each other to complete the objectives they were assigned (Dahlen, Lange, and, Smith).
Contemplation is one of the important constructs of the behavior theory that focuses on thinking about the change in the behavior. New policies must be adopted to keep the behavior of the employees healthy so that ethical, social behavior is achieved in the organization. At Heineken, the management was looking towards sustainable behavior, which has been a part of their history. Heineken were also the first to join Sustainable Agriculture Initiative (SAI Platform) to support safe and good quality of the agricultural product.
They considered it their social responsibility to participate in it as it will give the people a better chance to avail better products of all kinds. Heineken has also made several investments for the betterment of the society and one of which was an investment in Ethiopia. The investment was very big and for a longer period because of which the local workers and their economy can gain a lot of benefits (Dahlen, Lange, and Smith).
People in every organization need to have some behavioral skills, which help in making their way to complete their working process. The behavioral skills are important to achieving the goals of the organization. Avoiding trouble with others is a special skill, which must be judged by the human resource department at the time of hiring the employees. Every employee of the organization must have a skill of avoiding trouble with others and to develop it they must be trained properly to deal with accusations, anger, and difficult conversations. The employees must try to avoid such conversations or acts that give rise to the conflict between each other. If such conflict does not arise at a smaller level, then conflicts will rarely arise at a higher level. The skills must also include the skills of helping others, negotiating and keeping out of fighting (Peng).
The organizations must develop a culture in its employees to help each other so that a bond is created between them. The people in the organizations must be introduced to each other so that it is easier for them to communicate with each other and build a relationship. The work of the sub- ordinates must be checked, and necessary help must be provided to them if something is wrong with their work. If the help is provided at all levels a proper environment is created and all the individuals create a mindset of helping each other. The employees must also keep away from the fights and must use a proper channel to communicate their issues with other employees.
If an employee has an issue with another employee then they must make a complaint to the sub- ordinate. A proper action must be taken on immediate basis to avoid poor working environment. The employees must be ready for negotiations with each other. In the organizations it is very difficult to do what one feels right until it is followed by the policies of the organization. The employees must negotiate with each other while working together as a team which allows them achieve the goals of the organization at a faster pace (Dahlen, Lange and Smith).
The employees at Heineken had behavioral skills, and the work has always been conducted in an ethical manner. At this certain issue, lack of behavioral skills was one of the reasons to develop it. The employees should have negotiated with each other to avoid differences between themselves. The conflict between management and marketing department could have been easily resolved if the teams at both the sides have showed behavioral skills.
Higher management must have played its role in resolving the conflict by training its employees and raising this issue through a proper channel. If the issue went through a proper channel, then the conflict between both the parties have resolved easily, and the organization would have been able to reach their goals easily. The issue is not being addressed properly made delay in achieving the goals of the organization (Dahlen, Lange, and Smith).
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