Harvard Case - Desert Farms: Dromedary Dreams
"Desert Farms: Dromedary Dreams" Harvard business case study is written by Paul Orlando, Megan Strawther. It deals with the challenges in the field of Entrepreneurship. The case study is 13 page(s) long and it was first published on : Feb 10, 2017
At Fern Fort University, we recommend that Desert Farms pursue a strategic growth plan focused on expanding its camel milk production and distribution, both domestically and internationally. This involves a multi-pronged approach encompassing: * Building a strong brand identity: Establishing Desert Farms as a premium, sustainable, and ethical source of camel milk. * Investing in efficient production and processing: Optimizing current operations and exploring new technologies to increase production capacity and reduce costs. * Developing a robust distribution network: Securing strategic partnerships and expanding into new markets through online platforms and retail channels. * Leveraging financial strategies: Securing funding through a combination of debt, equity, and potentially an IPO to support growth initiatives. * Prioritizing environmental sustainability: Adopting eco-friendly practices throughout the supply chain to ensure long-term viability and brand reputation.
2. Background
Desert Farms is a family-owned business in the United Arab Emirates (UAE) that produces and distributes camel milk. The company is facing increasing demand for its product, driven by growing awareness of camel milk?s health benefits and its unique taste. However, Desert Farms is constrained by its limited production capacity and lack of a robust distribution network. The company?s founder, Sheikh Hamad, is exploring options for expansion, including attracting outside investment and potentially going public.
3. Analysis of the Case Study
Strategic Framework: The case study can be analyzed through the lens of Porter?s Five Forces framework:
- Threat of New Entrants: The barrier to entry in the camel milk industry is relatively high due to the specialized nature of production and the need for significant investment. However, the increasing demand for camel milk could attract new entrants, especially if Desert Farms fails to capitalize on its first-mover advantage.
- Bargaining Power of Buyers: Buyers have moderate bargaining power as they can choose from a limited number of camel milk producers. However, the growing demand for camel milk gives Desert Farms some leverage in pricing negotiations.
- Bargaining Power of Suppliers: Desert Farms relies on a limited number of camel breeders, giving them some bargaining power in terms of pricing and supply. However, the company can mitigate this risk by diversifying its sources of camel milk.
- Threat of Substitutes: While other dairy products like cow milk and goat milk are substitutes, camel milk offers unique health benefits and a distinct taste, reducing the threat of substitutes.
- Competitive Rivalry: Competition in the camel milk industry is currently limited, but it is expected to increase as demand grows. Desert Farms needs to differentiate itself through branding, product quality, and distribution channels.
Financial Analysis: Desert Farms needs to assess its financial position and determine the best way to finance its growth strategy.
- Financial Statements: A thorough analysis of the company?s financial statements, including the balance sheet, income statement, and cash flow statement, is crucial to understand its current financial health and identify areas for improvement.
- Capital Budgeting: Desert Farms needs to evaluate potential investment projects, such as expanding production facilities and developing new distribution channels, using techniques like net present value (NPV) and internal rate of return (IRR) to determine their profitability.
- Risk Assessment: Desert Farms needs to assess the risks associated with its growth strategy, including market volatility, competition, and regulatory changes. This can be done through scenario planning and sensitivity analysis.
Marketing and Operations: Desert Farms needs to develop a strong marketing strategy to build brand awareness and create customer loyalty.
- Brand Positioning: Desert Farms needs to position itself as a premium, sustainable, and ethical source of camel milk. This can be achieved through effective branding, packaging, and marketing campaigns.
- Distribution Strategy: Desert Farms needs to develop a robust distribution network to reach its target customers. This could involve partnering with retailers, online platforms, and distributors.
- Operations Optimization: Desert Farms needs to optimize its production and processing operations to increase efficiency and reduce costs. This could involve investing in new technologies and adopting lean manufacturing principles.
4. Recommendations
Develop a Strong Brand Identity: Desert Farms should invest in branding and marketing to establish itself as a premium, sustainable, and ethical source of camel milk. This includes developing a compelling brand story, creating high-quality packaging, and engaging in targeted marketing campaigns.
Invest in Efficient Production and Processing: Desert Farms should invest in new technologies and processes to increase production capacity and reduce costs. This could involve automating certain tasks, improving milk processing techniques, and implementing energy-efficient practices.
Expand Distribution Channels: Desert Farms should explore new distribution channels to reach a wider customer base. This could include partnering with online platforms, retailers, and distributors both domestically and internationally.
Secure Funding for Growth: Desert Farms should pursue a combination of debt and equity financing to support its growth initiatives. This could involve securing loans from banks or private equity firms, issuing bonds, or exploring an initial public offering (IPO).
Prioritize Environmental Sustainability: Desert Farms should adopt environmentally friendly practices throughout its supply chain. This includes reducing its carbon footprint, minimizing waste, and promoting sustainable camel farming practices.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: Desert Farms? core competency lies in producing high-quality camel milk. The proposed growth strategy aligns with its mission to provide healthy and sustainable food products.
- External Customers and Internal Clients: The recommendations address the needs of both external customers, who are seeking healthy and unique food options, and internal clients, including employees and camel breeders, who benefit from the company?s growth and sustainability initiatives.
- Competitors: The recommendations aim to differentiate Desert Farms from its competitors by focusing on branding, product quality, and distribution channels.
- Attractiveness ? Quantitative Measures: The recommendations are supported by quantitative measures such as NPV and ROI, which demonstrate the potential profitability of the proposed growth strategy.
6. Conclusion
Desert Farms has a significant opportunity to capitalize on the growing demand for camel milk. By implementing the recommended growth strategy, the company can establish itself as a leading player in the industry, expand its market share, and create long-term value for its stakeholders.
7. Discussion
Other Alternatives:
- Focus on Domestic Market: Desert Farms could choose to focus solely on the UAE market, which would require less investment in distribution and marketing. However, this would limit its growth potential.
- Strategic Partnerships: Desert Farms could explore strategic partnerships with other companies in the food and beverage industry, which could provide access to new markets and resources. However, this could involve relinquishing some control over the business.
Risks and Key Assumptions:
- Market Volatility: The demand for camel milk could fluctuate, impacting the company?s revenue and profitability.
- Competition: New entrants could emerge, increasing competition in the camel milk industry.
- Regulatory Changes: Government regulations could impact the production, processing, and distribution of camel milk.
- Financial Risks: Securing funding could be challenging, and the company may face debt repayment obligations.
8. Next Steps
- Develop a Detailed Business Plan: Desert Farms should develop a detailed business plan outlining its growth strategy, financial projections, and key milestones.
- Secure Funding: The company should actively pursue funding options, including debt financing, equity financing, and potentially an IPO.
- Implement Marketing and Distribution Strategies: Desert Farms should launch its branding and marketing campaigns and establish its distribution network.
- Optimize Production and Processing: The company should invest in new technologies and processes to improve efficiency and reduce costs.
- Monitor Progress and Adjust Strategy: Desert Farms should regularly monitor its progress and make adjustments to its strategy as needed.
By taking these steps, Desert Farms can position itself for sustainable growth and success in the global camel milk market.
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Case Description
Desert Farms was the first company in the United States to sell camel milk in retail markets. While highly sought after by parents of children with autoimmune disorders, the product had yet to catch on with mainstream consumers. The company's founder, Walid Abdul-Wahab, must figure out how to lower the price point of its beverage product (currently $18 per pint retail) to make it more accessible and desirable for the masses. He must also consider making investments to lower his dependence on a particularly important supplier.
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