Question

Explore the opportunity of starting a new multinational corporation (big or small, and which does not yet exist), in an industry of your choice in Switzerland. Outline what forces impact your newly established company in Switzerland. Those forces could be cultural, social, political, economics, legal and technological among other global issues which could be related to Switzerland and/ or to the industry chosen.

Also include the following details

Ø The chosen industry, product and/or service details and the vision, mission and goals of the organization.

Ø How would the new organization you are developing contribute to Switzerland economically and socially?

Ø What strategies should the organization choose to incorporate to succeed in Switzerland and expand to others?

Ø Major economic activities, government and its influence, FDI level, imports/exports, unique competitive advantages.

Ø Economic flows in the country (trade, outsourcing, consumer changes in taste, behavior, etc.), Political structure and processes in the country (form of government, relations with other countries),

Ø Technology flows (Internet access, availability of social media and traditional media, level of technology available in the country impacting industry in general, educational infrastructure), Cultural flows (customs, traditions, languages spoken locally, other cultural traits).

Answer 1

INDUSTRY - Poultry Farming

The percentage of home-produced poultry meat and eggs sold on the Swiss market has gradually risen over the past two decades as the country's consumers increasingly express a preference for locally produced food.

Switzerland’s poultry sector benefiting from changing consumer demand

Switzerland continues to import much of its poultry meat, but a growing preference for local production is seeing the local industry expand.

Switzerland’s poultry meat production rose by 4.9 percent last year to stand at 80 million kg, while per capita consumption also grew slightly. The sector is predicting continued expansion as consumers increasingly express a preference for locally produced chicken meat and eggs rather than imported produce, which still accounts for approximately half of the market.

This increase is the continuation of a trend that has occurred year over year for the past two decades. Last year, the national flock passed 10 million head, with two-thirds being broilers and one-quarter laying and breeding birds.

Growth across meat and eggs

Switzerland's broiler and layer flocks have been growing, with latest figures indicating that there are 6.36 million broilers in the country and 2.42 million layers. However, the same pattern has not been in evidence for the breeding flock, which in 2013 stood at 11,982, a significant contraction from the 136,985 recorded a little less than two decades ago.

The two main poultry production areas in the country are the cantons of Bern and Fribourg, which each are home to some 1.7 million birds. Bern has the greater layer population, while Fribourg the bigger broiler flock.

Livestock production is the largest source of income for the country’s agricultural sector and, in 2013, poultry production represented 5.64 percent of Switzerland’s total agricultural economy, an increase of 0.33 percent compared with 2012. Of this total, 3.1 percent can be attributed to broiler production and 2.5 percent for egg production.

Consumers, retailers favor home production

Although per capita poultry meat consumption rose by 0.1 percent last year to stand

at 17.9 kg, the figure is significantly below that of the neighboring European Union of 23 kg, meaning there is certainly room for expansion.

Comparatively low consumption levels, however, are not the only factor that suggest there is room for the Swiss poultry industry to grow. The country has traditionally been an importer of poultry meat and eggs but there is strong and growing demand for more home-produced food.

This growing preference among Swiss consumers for locally produced poultry meat and eggs has resulted in several producers expanding production. Over the past 20 years, Swiss production of poultry meat has more than doubled, while egg production increased by 20 percent.

Moreover, Swiss consumers have a strong preference for poultry over other meats, with 22.4 percent of households in the country saying that it is their meat of choice.

“What is particularly gratifying is that poultry meat is the preferred meat for Swiss households,” comments Andreas Gloor, editor of Swiss poultry publication Aviforum.

This preference is not, however, uniform across the country. French-speaking Switzerland is where the meat is most preferred, with 22.9 percent saying it is their meat of choice.

“While in French-speaking Switzerland, poultry meat is the most popular at home; in German-speaking Switzerland, sausages, pork and other meat products are preferred, followed by poultry at only 17.8 percent,” he adds.

Costs and differentiation

In the short term, the industry is expected to expand moderately, while prices for poultry meat and eggs are expected to remain relatively stable.

Stability in the sector is fostered through close cooperation between producers and buyers through a contract system, and only what the market needs is imported.

However, the share of imported products remains high -- 45.4 percent of the poultry meat consumed in Switzerland is imported. The primary source is Brazil, accounting for 44 percent of total imports, followed by Germany and France.

Imported products tend to be cheaper than those produced domestically, and the industry notes that its higher costs are due to it having to work to more stringent legal requirements than its foreign competition, particularly where animal welfare and environmental protection are concerned.

The country has a higher percentage of barn and free-range production systems, and Swiss farms tend to be smaller than in many other countries both in terms of sheds and the number of birds kept on farm. Flock size per farm is limited by the ordinance on the maximum numbers.

Individual flock size is dependent on the circumstances of the farm, including size, capacity and resources, but usually stands at 8,000 to 12,000 laying, breeding or broilers animals on conventional farms. Numbers are further limited for organic production. For example, organic egg farms can have no more than 2,000 laying hens.

Furthermore, sustainable production and proximity to market are also considered important. And due to import policies, input costs – particularly those for feed – tend to be higher.

However, the factors that lead to higher costs also help Swiss producers to differentiate their product in the market and animal welfare, for example, is an important factor in the purchasing decisions of many Swiss consumers.

At retail level, the share of locally produced poultry meat and eggs stands at 70-80 percent, above the worldwide average. In the catering and food service sectors, however, inclusion of locally produced chicken meat and eggs is much lower.

In addition to growing demand for local produce from Switzerland’s consumers, the industry is also expected to benefit from new government measures in the short term.

The Swiss Federal Council’s 2014-2017 agricultural policy is aiming to strengthen innovation in agriculture and the food chain and raise agriculture’s competitiveness. A total of CHF13.670 billion (US$14.675 billion) is being set aside to support general agricultural production over the period.

Temporary relief will be made available if needed to support meat and egg prices, and the egg-processing sector will also be supported in times of oversupply. There will also be financial support for record keeping and testing.

Strategies to succeed and expand

Branches

Branches are the more straightforward way to expand to another country. Simply take some cash, get the pertinent business licenses, hire a localization team, and set up a branch in a foreign country. You obviously want to set up your branch in a busy, international area - for example, if you company is attempting to expand into China, you should set up in cosmopolitan Shanghai, and not the nether regions of Urumqi. You'll obviously pay more rent and taxes in Shanghai, but you have to make sure your company is highly exposed to other businesses that matter, paving the way to future local partnerships.

Subsidiaries

If you company is cash rich, then acquisitions may be a better strategy than establishing branches. Acquiring a local company for the purpose of vertical or horizontal integration is fast and comparatively easy, provided that you plan to leave the original business (branch management, infrastructure) intact. By making the acquired company your subsidiary, you have the advantages of instant localization, name recognition and an experienced team at the helm. However, do your homework before acquiring a subsidiary, lest your company experience acquisition indigestion.

Joint Venture

Perhaps you don't want to purchase local companies due to the hefty price tag. Maybe a local competitor, which cannot be acquired, is already dominating the market. In this case, the old adage "if you can't beat 'em, join 'em" comes into play. Establishing a joint venture - or a partnership with a foreign company in the same industry - is an attractive option. Both companies set aside capital, resources and technology in a new, shared company which is separate from the main operations at both companies. This is a popular option in countries, such as China, where the law is extremely strict with foreign businesses. Joint ventures have all the advantages of foreign acquisitions - such as localization and brand recognition - at a fraction of the cost. Most joint ventures split expenditures and profits 50/50.

Franchises

Franchises in foreign countries operate similarly to those in the United States. A foreign affiliate will purchase a license from your company to use your brand in a foreign country. While the foreign affiliate retains ownership of your branded business, your company will receive royalties from each franchise. Franchising is the cheapest option, and the fastest way to build an established presence in a foreign country with minimal risk. The higher risks (sales, profitablity) are all absorbed by the foreign affiliate. However, foreign franchises have to be monitored closely, since the geographic and cultural divide can mask brewing problems.

Turn Key Projects

Turn key projects are more common in businesses requiring precise technological expertise - such as power plants, factories or oil drilling platforms. In this setup, your business sells its technological know-how to a foreign firm, which pays your company to build a modified copy of your plant to their specifications, from scratch to the operational stage. This includes all of your technologies and trade secrets. Once the plant is completed, you hand over the keys to the fully working plant to the foreign firm. All they have to do is "turn the key" to get started. While selling factories is extremely profitable, you also forfeit your own direct expansion plans in the country, due to another firm already holding the license to your technology. This is the trickiest of the five criteria and the one you're least likely to encounter, unless your company specializes in mass production or resource exploration plants focused on developing markets.