Harvard Case - Shakti Plastics: Enabling A Circular Plastics Value Chain
"Shakti Plastics: Enabling A Circular Plastics Value Chain" Harvard business case study is written by Ahaana Mahanti, Sanjana Gorti. It deals with the challenges in the field of International Business. The case study is 17 page(s) long and it was first published on : Jun 20, 2022
At Fern Fort University, we recommend Shakti Plastics pursue a transnational strategy focused on global expansion through a combination of organic growth and strategic acquisitions. This strategy will leverage Shakti's core competencies in manufacturing processes, innovation, and environmental sustainability to establish a global presence in the circular plastics value chain. This approach will be driven by a strong commitment to corporate social responsibility and international business ethics, ensuring long-term sustainability and success.
2. Background
Shakti Plastics is a leading Indian manufacturer of plastic products, known for its commitment to environmental sustainability and innovative use of recycled plastics. The company faces a critical juncture as it seeks to expand its operations beyond the domestic market and capitalize on the growing global demand for sustainable plastic solutions. This case study explores the challenges and opportunities facing Shakti Plastics as it navigates the complexities of international business, including global market entry strategies, foreign direct investment (FDI), and cultural intelligence.
The main protagonists of the case study are:
- Mr. Sharma: The founder and CEO of Shakti Plastics, a visionary leader with a strong commitment to sustainability and a deep understanding of the Indian market.
- Ms. Kapoor: The company's marketing director, responsible for developing and implementing global marketing strategies to reach new markets.
- Mr. Singh: The head of operations, tasked with ensuring efficient manufacturing processes and supply chain management across international operations.
3. Analysis of the Case Study
Strategic Framework: The case study can be analyzed through the lens of Porter's Five Forces framework, which highlights the competitive landscape for Shakti Plastics.
- Threat of New Entrants: The entry barrier for new players in the plastic manufacturing industry is relatively low, particularly in emerging markets. However, Shakti's focus on sustainability and innovation provides a competitive advantage.
- Bargaining Power of Buyers: Buyers have moderate bargaining power, as they can choose from various suppliers. However, Shakti's commitment to quality and sustainability can attract customers willing to pay a premium.
- Bargaining Power of Suppliers: Suppliers of raw materials, primarily recycled plastics, have moderate bargaining power. Shakti can mitigate this through strategic sourcing and partnerships with recycling companies.
- Threat of Substitute Products: The threat of substitute products is moderate, as alternative materials like bioplastics are gaining popularity. However, Shakti's focus on innovation and product development can help it stay ahead of the curve.
- Competitive Rivalry: The plastic manufacturing industry is highly competitive, with both local and global players. Shakti's focus on sustainability and innovation provides a key differentiator.
Financial Analysis: Shakti's financial performance is strong, with consistent growth in revenue and profits. However, expanding into international markets requires significant investment in foreign direct investment (FDI), logistics, and marketing. The company needs to carefully analyze the financial implications of its expansion strategy, including exchange rate risk and international finance.
Marketing Analysis: Shakti's marketing strategy should focus on highlighting its commitment to sustainability and innovation. This can be achieved through global branding strategies, international marketing campaigns, and strategic alliances with environmental organizations.
Operational Analysis: Shakti's operational strategy should focus on establishing efficient global supply chain management and manufacturing processes. This requires careful consideration of logistics, quality control, and risk management.
4. Recommendations
- Develop a Transnational Strategy: Shakti should adopt a transnational strategy, balancing global integration with local responsiveness. This approach allows for leveraging economies of scale while adapting to the unique needs of different markets.
- Prioritize Emerging Markets: Focus on emerging markets with high growth potential and a strong demand for sustainable plastic solutions. These markets offer opportunities for business expansion and market share growth.
- Implement a Phased Global Entry Strategy: Start with a pilot project in a single emerging market, followed by gradual expansion to other regions. This allows for a controlled approach to learning and adapting to new markets.
- Leverage Strategic Acquisitions: Identify and acquire promising companies in target markets, leveraging their local expertise and market access. This allows for faster market penetration and reduces the risk of starting from scratch.
- Invest in Research & Development: Continue investing in research and development to develop innovative and sustainable plastic solutions, further strengthening Shakti's competitive advantage.
- Build Strong Partnerships: Collaborate with local governments, NGOs, and recycling companies to build a robust circular plastics value chain. This fosters business and government relations and enhances sustainability efforts.
- Develop a Strong Corporate Social Responsibility Program: Integrate corporate social responsibility into all aspects of the business, focusing on environmental sustainability, ethical sourcing, and employee well-being.
- Invest in Talent Development: Build a diverse and skilled workforce capable of operating in a global environment. This includes investing in international human resource management and cross-cultural management training.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies: Shakti's core competencies in manufacturing processes, innovation, and environmental sustainability are key to its success in the global market.
- External Customers: The recommendations cater to the growing demand for sustainable plastic solutions in emerging markets.
- Internal Clients: The recommendations empower employees to contribute to the company's global expansion and promote a culture of innovation and sustainability.
- Competitors: The recommendations differentiate Shakti from competitors by focusing on sustainability and innovation, creating a unique value proposition.
- Attractiveness: The recommendations are financially attractive, offering potential for significant growth in revenue and profits.
6. Conclusion
By implementing these recommendations, Shakti Plastics can successfully navigate the complexities of international business and establish a strong presence in the global circular plastics value chain. This strategy will leverage the company's core strengths, enhance its competitive advantage, and contribute to a more sustainable future.
7. Discussion
Other alternatives not selected include:
- Joint Ventures: While joint ventures can provide access to local expertise and reduce risk, they can also lead to conflicts of interest and slow decision-making.
- Licensing Agreements: Licensing agreements can generate revenue without significant investment, but they also limit control over the brand and product quality.
Risks and Key Assumptions:
- Geopolitical Risk: Political instability and trade barriers in emerging markets can disrupt operations and impact profitability.
- Cultural Differences: Misunderstanding cultural nuances can lead to communication breakdowns and marketing failures.
- Competition: New entrants and existing players can pose a significant threat to Shakti's market share.
8. Next Steps
- Market Research: Conduct in-depth market research to identify potential target markets and assess their growth potential.
- Pilot Project: Implement a pilot project in a selected emerging market to test the feasibility of the expansion strategy.
- Acquisition Strategy: Develop a comprehensive acquisition strategy, identifying potential targets and evaluating their financial performance and strategic fit.
- Sustainability Program: Develop a comprehensive corporate social responsibility program that aligns with international standards and best practices.
- Talent Development: Invest in training programs to develop a skilled and culturally competent workforce.
By implementing these recommendations and addressing the potential risks, Shakti Plastics can successfully navigate the complexities of international business and achieve sustainable growth in the global circular plastics value chain.
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Case Description
In February 2021, the managing director of The Shakti Plastics Industries (Shakti) was facing challenges related to the Indian government's announcement of a complete ban by 2022 on single-use plastic-a key item that Shakti had been recycling through technological innovations over the previous few decades. The company was eager to support the government's vision of enabling a circular plastics economy. However, changes in the regulatory landscape were likely to impact millions of people who were directly or indirectly employed in the unorganized Indian plastic waste sector. The time frame for plastic waste processors and manufacturers to adapt to the changes was short, particularly during the pandemic-induced resurgence of single-use plastic in the form of medical waste. Moreover, there were several other challenges, including price volatility of plastic waste, influenced by disruptive intermediaries in the supply chain; low awareness levels among consumers about waste segregation at the source; and a lack of eco-friendly alternatives to single-use plastic. Shakti needed to make decisions to maintain and advance its competitiveness in the plastic waste recycling sector, in line with the government's proposed vision for a circular plastic economy.
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