Diversification and acquisition program - Sample Essay
It is important to mention that even at the end of 90s imported products provoked astonishment of Russian citizens, since those products were nicely packaged and differed much from the ones existed on the market. Thus, Wimm Bill Dann started its differentiation from changing the packages of the products. It is also worth mentioning that the initial product of the company was juice, not milk. So, the first successful experiments of differentiation were carried out on the juice products. At that time juices in Russia were produced in 3 liters glass bottles and were very unattractive and inconvenient.
Wimm Bill Dann became the first company in Russia to produce juices in tetra-packs. Those packages were much more convenient and very attractive due to bright colors. They attracted attention of the customers very fast enabling the company to develop juice-drinking tradition in Russia and to ensure large market share for itself. Thus, having achieved good results in experiments with juices, the company continued to innovate the market with diary products that became later on its main specialization. Differentiation of product meant extending the product line, offering wider range of products.
For instance, Wimm Bill Dann started with traditional milk, kefir, sour cream and cottage cheese, which were popular among customers. Later on the company extended its product line adding youghurts and diary deserts. Yet, it is important to say that while cost leadership and differentiation were the generic strategies of the company that could change, the main strategic direction of Wimm Bill Dann had become diversification. It was already mentioned that the company started with juices, then it added diary products to its portfolio, later the company had bought several plants that produced mineral water, then beer.
In such a way, it is possible to say that every time Wimm Bill Dann adapted to the market situation introducing new products on the market. Diversification of business had become the main strategic direction of the company. Yet, on the first stages of own development, Wimm Bill Dann used cost leadership strategy in order to make its products affordable for customers and thus create a demand for them. When strong demand was created, the company changed its strategy to differentiation in attempt to form a brand loyalty and thus be able to target premium segment customers.
The latter strategy has been extremely successful, since Wimm Bill Dann still remains number one diary producer in the country. 1. How sensible was Wimm Bill Dann’s diversification and acquisition program? Diversification means the change of business direction or adding up new business direction. For Wimm Bill Dann, as it was already mentioned, diversification had become the main strategic direction. In fact, diversification was undertaken purposefully in order to ensure stable position on the existing market and defend the existing brands. Thus, the diversification wasn’t not just sensible, it was necessary to succeed.
For instance, when experiments with juices were completed successfully, the company took advantage of it and used existing technology with regard to diary products. When the wide distribution network of diary producers was established, it was smart to use this network and start producing mioneral water that became popular at that time. When the demand for beer increased, in order to enter new segments the company diversify its business including beer brands. Thus, diversification helped Wimm Bill Dann to ensure loyalty of existing segments and to saty aloft in changing market conditions.
As for acquisition, it was also the necessary step to achieve the ultimate goal of setting wide distribution network. Moreover, acquisition of plants made the company invulnerable to supply change and independent from suppliers. In fact, Wimm Bill Dann had become a vertical integrated company, which had a closed circle of production. It created additional competitive advantage for the company. Furthermore, wide acquisition program allowed Wimm Bill Dann to expand into all regions of such big country as Russia and made it really national producer # 1.