Harvard Case - Cresud and Argentina
"Cresud and Argentina" Harvard business case study is written by David E. Bell, Mary Shelman. It deals with the challenges in the field of Strategy. The case study is 29 page(s) long and it was first published on : Jan 5, 2015
At Fern Fort University, we recommend that Cresud adopt a diversified growth strategy focused on leveraging its core competencies in agriculture and real estate, while strategically navigating the volatile Argentinean market. This strategy should prioritize organic growth through market penetration and product development within existing segments, while also exploring strategic acquisitions and partnerships to expand into new markets and enhance its competitive advantage.
2. Background
Cresud is an Argentinean conglomerate with a diverse portfolio of businesses spanning agriculture, real estate, and financial services. The company has a strong track record of success, but faces significant challenges due to Argentina's volatile economic and political environment. The case study highlights Cresud's need to navigate these challenges and develop a sustainable growth strategy for the future.
The main protagonists of the case are:
- Cresud's Management: They are responsible for navigating the company through the complex Argentinean landscape and making strategic decisions for its future.
- The Argentinean Economy: The volatile and unpredictable nature of the Argentinean economy presents both opportunities and risks for Cresud.
- Global Market Trends: Cresud needs to consider global trends in agriculture, real estate, and finance to ensure its long-term competitiveness.
3. Analysis of the Case Study
Strategic Analysis:
- SWOT Analysis:
- Strengths: Strong brand reputation, diversified portfolio, experienced management team, established infrastructure, access to local resources.
- Weaknesses: Dependence on the Argentinean market, exposure to currency fluctuations, potential for regulatory uncertainty, limited international presence.
- Opportunities: Growing global demand for agricultural products, potential for real estate development, expansion into new markets, technological advancements in agriculture.
- Threats: Political instability in Argentina, economic volatility, competition from international players, climate change, rising input costs.
- Porter's Five Forces:
- Threat of New Entrants: Moderate, due to high capital requirements and existing player dominance.
- Bargaining Power of Buyers: Moderate, as buyers have options but are limited by local market conditions.
- Bargaining Power of Suppliers: Moderate, influenced by global commodity prices and local supply chains.
- Threat of Substitutes: Moderate, with potential for alternative agricultural products and real estate investments.
- Competitive Rivalry: High, with numerous local and international competitors vying for market share.
- Value Chain Analysis: Cresud's value chain is complex, encompassing production, processing, marketing, and distribution of agricultural products, development and management of real estate assets, and provision of financial services.
- Business Model Innovation: Cresud can leverage technology and analytics to optimize its operations, improve efficiency, and develop new products and services. This could include precision agriculture, smart farming, and digital real estate platforms.
Financial Analysis:
- Financial Performance: Cresud has a strong track record of profitability, but its performance is subject to the volatility of the Argentinean economy.
- Capital Structure: The company has a conservative capital structure, but may need to explore alternative financing options to support future growth.
- Investment Opportunities: Cresud can invest in expanding its agricultural operations, developing new real estate projects, and acquiring strategic businesses.
Marketing Analysis:
- Market Segmentation: Cresud can target different customer segments within its existing markets and explore new markets with specific needs and preferences.
- Product Differentiation: The company can differentiate its products and services through quality, innovation, and sustainability.
- Brand Management: Cresud needs to maintain its strong brand reputation and build brand loyalty through consistent messaging and customer-centric strategies.
4. Recommendations
- Diversified Growth Strategy: Cresud should focus on a diversified growth strategy that leverages its core competencies in agriculture and real estate, while also exploring new opportunities in related sectors like renewable energy and food processing.
- Organic Growth Through Market Penetration and Product Development: Cresud should prioritize organic growth within its existing markets by expanding its agricultural operations, developing new real estate projects, and introducing innovative products and services.
- Strategic Acquisitions and Partnerships: Cresud should strategically explore acquisitions and partnerships to expand into new markets, acquire new technologies, and enhance its competitive advantage. This could include acquiring smaller agricultural businesses, partnering with technology companies, or investing in renewable energy projects.
- Enhanced Risk Management: Cresud needs to strengthen its risk management framework to mitigate the impact of economic and political volatility in Argentina. This could involve hedging against currency fluctuations, diversifying its revenue streams, and building strategic reserves.
- Digital Transformation: Cresud should embrace digital transformation to improve its efficiency, enhance customer experience, and unlock new growth opportunities. This could include implementing advanced analytics, adopting cloud-based solutions, and developing digital platforms for its businesses.
- Corporate Social Responsibility: Cresud should prioritize corporate social responsibility by focusing on sustainable practices, ethical sourcing, and community engagement. This will enhance its brand reputation and attract investors who value sustainability.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations leverage Cresud's core competencies in agriculture and real estate, while aligning with its mission of sustainable growth and value creation.
- External Customers and Internal Clients: The recommendations consider the needs of external customers, such as farmers, real estate buyers, and financial service users, as well as the needs of internal clients, such as employees and shareholders.
- Competitors: The recommendations address the competitive landscape by focusing on differentiation, innovation, and strategic alliances.
- Attractiveness ' Quantitative Measures: The recommendations are expected to generate positive returns on investment, improve profitability, and enhance shareholder value.
- Explicit Assumptions: The recommendations are based on assumptions regarding the future of the Argentinean economy, global market trends, and technological advancements.
6. Conclusion
By implementing these recommendations, Cresud can navigate the challenges of the Argentinean market, achieve sustainable growth, and enhance its competitive advantage. The company's diversified growth strategy, focus on innovation, and commitment to corporate social responsibility will position it for success in the long term.
7. Discussion
Alternatives:
- Focusing solely on Argentina: This would limit Cresud's growth potential and expose it to the risks of a volatile market.
- Exiting the Argentinean market: This would be a drastic measure with significant implications for the company and its stakeholders.
Risks:
- Political and economic instability in Argentina: This could disrupt operations, impact profitability, and create uncertainties for future investments.
- Competition from international players: Cresud needs to stay ahead of the competition by continuously innovating and expanding its reach.
- Technological disruption: The company needs to adapt to rapid technological advancements in agriculture, real estate, and finance.
Key Assumptions:
- The Argentinean economy will eventually stabilize and provide a more predictable environment for business.
- Global demand for agricultural products will continue to grow.
- Technological advancements will continue to drive innovation and efficiency in Cresud's businesses.
8. Next Steps
- Develop a detailed strategic plan: This plan should outline specific goals, strategies, and timelines for implementing the recommendations.
- Allocate resources: Cresud should allocate sufficient resources to support the implementation of the strategic plan.
- Monitor progress and make adjustments: The company should regularly monitor the progress of its initiatives and make adjustments as needed.
- Communicate effectively: Cresud should communicate its strategic vision and progress to its stakeholders to ensure alignment and support.
By taking these steps, Cresud can successfully navigate the challenges of the Argentinean market and achieve sustainable growth in the years to come.
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Case Description
Argentina-based Cresud managed 1 million hectares (2.5 million acres) of land in South America. For 20 years, the publicly traded company's strategy had been to acquire underutilized properties and turn them into productive farmland for cattle and crops. In 2014, Cresud's CEO wondered if the strategy was still correct in the face of falling commodity prices, more powerful input companies, and potentially positive changes in Argentina's political environment.
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