Harvard Case - Hijo Resources Corporation: Integrating Sustainability into Day-to-Day Operations
"Hijo Resources Corporation: Integrating Sustainability into Day-to-Day Operations" Harvard business case study is written by Maria Angela G. Zafra, Wilfred S. Manuela Jr., Manuel J. de Vera, Angelina G. Golamco. It deals with the challenges in the field of Strategy. The case study is 14 page(s) long and it was first published on : Nov 13, 2020
At Fern Fort University, we recommend Hijo Resources Corporation (HRC) embark on a comprehensive sustainability strategy to transform its operations and achieve a sustainable competitive advantage. This strategy involves integrating sustainability into its core competencies, business model, and corporate culture, while leveraging technology and analytics to drive efficiency and transparency.
2. Background
Hijo Resources Corporation (HRC) is a leading producer of palm oil in Southeast Asia. Facing increasing pressure from stakeholders regarding environmental and social practices, HRC recognizes the need to integrate sustainability into its day-to-day operations. This case study explores the challenges and opportunities HRC faces in achieving this goal.
The main protagonists of the case study are:
- Mr. Lim, CEO of HRC: He is a strong believer in sustainability but faces internal resistance and a lack of clarity on how to implement it effectively.
- Ms. Tan, Head of Sustainability: She is passionate about sustainability but lacks the resources and authority to drive significant change.
- The Board of Directors: They are concerned about the financial implications of sustainability initiatives and need to be convinced of their value.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong market position in Southeast Asia.
- Experienced workforce with expertise in palm oil production.
- Commitment to sustainability from the CEO.
- Potential for cost savings through efficiency improvements.
Weaknesses:
- Lack of a clear sustainability strategy.
- Resistance to change within the organization.
- Limited resources for sustainability initiatives.
- Dependence on unsustainable practices in the supply chain.
Opportunities:
- Growing demand for sustainable palm oil.
- Increasing investor interest in ESG (Environmental, Social, and Governance) factors.
- Technological advancements in sustainable agriculture.
- Potential for partnerships with NGOs and other stakeholders.
Threats:
- Competition from companies with more sustainable practices.
- Regulatory changes and stricter environmental standards.
- Negative media attention and reputational damage.
- Climate change and its impact on palm oil production.
Porter's Five Forces Analysis:
- Threat of New Entrants: High, due to the relatively low barriers to entry in the palm oil industry.
- Bargaining Power of Buyers: Moderate, as buyers have access to multiple suppliers, but sustainable palm oil offers a premium.
- Bargaining Power of Suppliers: Low, as HRC has established relationships with suppliers.
- Threat of Substitutes: Moderate, as alternative oils and biofuels are becoming more competitive.
- Rivalry Among Existing Competitors: High, as the palm oil industry is highly competitive.
Value Chain Analysis:
HRC's value chain can be analyzed to identify areas where sustainability can be integrated:
- Upstream: Sustainable sourcing of raw materials, reducing deforestation, and promoting responsible land use.
- Production: Implementing sustainable agricultural practices, reducing water and energy consumption, and minimizing waste.
- Downstream: Developing sustainable packaging, promoting responsible consumption, and ensuring transparency in the supply chain.
Business Model Innovation:
HRC can explore business model innovation to create a sustainable competitive advantage:
- Value Proposition: Shifting from a focus on cost leadership to a value proposition based on sustainable palm oil.
- Customer Relationships: Building strong relationships with environmentally conscious consumers and retailers.
- Channels: Utilizing digital platforms and social media to promote sustainable practices and engage with stakeholders.
- Revenue Streams: Exploring new revenue streams through carbon offsets, eco-tourism, and sustainable products.
Corporate Governance:
- Board of Directors: Appointing directors with expertise in sustainability and ESG factors.
- Transparency and Reporting: Implementing robust systems for reporting on sustainability performance.
- Stakeholder Engagement: Establishing a framework for engaging with stakeholders on sustainability issues.
Mergers and Acquisitions:
- Acquiring companies with strong sustainability track records to expand its reach and expertise.
Strategic Planning:
- Developing a comprehensive sustainability strategy aligned with HRC's overall business objectives.
- Setting clear targets and timelines for achieving sustainability goals.
- Allocating resources and establishing accountability for sustainability initiatives.
Market Segmentation:
- Targeting specific market segments that value sustainable products and practices.
Blue Ocean Strategy:
- Creating a new market space by offering sustainable palm oil as a unique value proposition.
Disruptive Innovation:
- Developing innovative technologies and practices that disrupt the traditional palm oil industry.
Balanced Scorecard:
- Implementing a balanced scorecard to track progress on sustainability performance across key areas, including environmental, social, and economic factors.
Core Competencies:
- Developing core competencies in sustainable agriculture, supply chain management, and stakeholder engagement.
Diversification:
- Exploring opportunities to diversify into related industries with strong sustainability potential.
Vertical Integration:
- Integrating upstream and downstream activities to control the supply chain and ensure sustainability throughout.
Strategic Alliances:
- Partnering with NGOs, research institutions, and other companies to share best practices and develop innovative solutions.
Outsourcing:
- Outsourcing non-core activities to companies with strong sustainability credentials.
Globalization Strategies:
- Expanding into new markets with a focus on sustainable practices and responsible sourcing.
Product Differentiation:
- Differentiating HRC's products through sustainable certifications and transparent labeling.
Cost Leadership:
- Achieving cost leadership through efficiency improvements and waste reduction.
Market Penetration:
- Increasing market share by promoting sustainable palm oil to existing customers.
Market Development:
- Expanding into new markets with a high demand for sustainable products.
Product Development:
- Developing new products and applications for sustainable palm oil.
Resource-Based View:
- Leveraging HRC's unique resources and capabilities to create a sustainable competitive advantage.
Dynamic Capabilities:
- Developing the ability to adapt and innovate in response to changing market conditions and sustainability challenges.
Scenario Planning:
- Developing scenarios for potential future scenarios related to sustainability and climate change.
Stakeholder Analysis:
- Identifying and engaging with key stakeholders, including consumers, investors, NGOs, and government agencies.
Strategic Positioning:
- Positioning HRC as a leader in sustainable palm oil production.
Business Ecosystem:
- Building a sustainable business ecosystem by collaborating with other players in the value chain.
Game Theory in Strategy:
- Analyzing the strategic interactions between HRC and its competitors in the context of sustainability.
Strategic Leadership:
- Providing strong leadership and commitment to sustainability at all levels of the organization.
Change Management:
- Implementing effective change management strategies to overcome resistance and build support for sustainability initiatives.
Organizational Culture:
- Cultivating a culture of sustainability that values environmental responsibility, social equity, and ethical business practices.
Strategic Implementation:
- Developing a detailed implementation plan with clear roles, responsibilities, and timelines.
Benchmarking:
- Benchmarking HRC's performance against industry best practices and sustainability leaders.
Strategic Control:
- Establishing systems for monitoring and evaluating progress on sustainability goals.
PESTEL Analysis:
- Analyzing the political, economic, social, technological, environmental, and legal factors that influence HRC's sustainability strategy.
Industry Lifecycle:
- Understanding the stage of the palm oil industry lifecycle and adapting the sustainability strategy accordingly.
Strategic Groups:
- Identifying strategic groups within the palm oil industry and analyzing their sustainability practices.
Value Proposition:
- Clearly defining HRC's value proposition based on sustainability, quality, and ethical sourcing.
Business Portfolio Analysis:
- Analyzing HRC's portfolio of products and services to identify opportunities for sustainability improvements.
BCG Matrix:
- Using the BCG Matrix to assess the sustainability potential of different products and businesses within HRC.
Ansoff Matrix:
- Applying the Ansoff Matrix to develop growth strategies for sustainable products and markets.
Strategic Intent:
- Establishing a clear strategic intent for sustainability that guides all decision-making.
Sustainable Competitive Advantage:
- Achieving a sustainable competitive advantage through differentiation based on sustainability.
Strategic Flexibility:
- Maintaining strategic flexibility to adapt to changing market conditions and sustainability challenges.
Corporate Social Responsibility:
- Integrating corporate social responsibility into all aspects of HRC's operations.
Digital Transformation Strategy:
- Leveraging digital technologies to enhance sustainability performance, improve transparency, and engage with stakeholders.
Strategic Foresight:
- Developing strategic foresight capabilities to anticipate future trends and challenges related to sustainability.
4. Recommendations
1. Develop a Comprehensive Sustainability Strategy:
- Define clear sustainability goals: Aligned with HRC's overall business objectives and stakeholder expectations.
- Establish a dedicated sustainability team: With expertise in environmental, social, and economic sustainability.
- Integrate sustainability into all business functions: From sourcing to production, marketing, and finance.
- Develop a roadmap for implementation: With specific targets, timelines, and accountability measures.
2. Implement Sustainable Practices across the Value Chain:
- Sustainable sourcing: Partner with suppliers committed to sustainable practices and responsible land use.
- Sustainable production: Implement sustainable agricultural practices, reduce water and energy consumption, and minimize waste.
- Sustainable packaging: Develop eco-friendly packaging options and reduce reliance on single-use plastics.
- Transparent supply chain: Ensure transparency in the supply chain through traceability systems and third-party audits.
3. Leverage Technology and Analytics:
- Data collection and monitoring: Implement systems for collecting and analyzing data on sustainability performance.
- Remote sensing and satellite imagery: Monitor deforestation and land use changes in real-time.
- AI and machine learning: Optimize resource allocation, predict crop yields, and improve efficiency.
- Blockchain technology: Enhance transparency and traceability in the supply chain.
4. Engage with Stakeholders:
- Transparent communication: Regularly communicate sustainability progress and challenges to stakeholders.
- Dialogue and collaboration: Engage with NGOs, government agencies, and other stakeholders to address concerns and develop solutions.
- Community outreach: Invest in community development programs and support local livelihoods.
- Employee engagement: Foster a culture of sustainability among employees through training, incentives, and recognition programs.
5. Build a Sustainable Business Model:
- Value proposition: Shift from a focus on cost leadership to a value proposition based on sustainable palm oil.
- Customer relationships: Build strong relationships with environmentally conscious consumers and retailers.
- Channels: Utilize digital platforms and social media to promote sustainable practices and engage with stakeholders.
- Revenue streams: Explore new revenue streams through carbon offsets, eco-tourism, and sustainable products.
6. Invest in Research and Development:
- Sustainable agriculture technologies: Invest in research and development of new technologies that enhance sustainability in palm oil production.
- Biofuel and biomaterials: Explore opportunities to develop sustainable biofuels and biomaterials from palm oil.
- Circular economy: Develop strategies for closing the loop and reducing waste in the palm oil industry.
5. Basis of Recommendations
The recommendations are based on a thorough analysis of HRC's current situation, industry trends, and stakeholder expectations. They consider:
- Core competencies and consistency with mission: The recommendations align with HRC's core competencies in palm oil production and its commitment to sustainability.
- External customers and internal clients: The recommendations address the needs of environmentally conscious consumers, investors, and employees.
- Competitors: The recommendations aim to differentiate HRC from competitors by establishing a strong leadership position in sustainability.
- Attractiveness ' quantitative measures if applicable: The recommendations are expected to generate long-term value for HRC by reducing costs, increasing revenue, and enhancing brand reputation.
Assumptions:
- The demand for sustainable palm oil will continue to grow.
- Technological advancements in sustainable agriculture will continue to improve.
- Investors will continue to prioritize ESG factors in their investment decisions.
- Stakeholders will recognize and reward HRC's commitment to sustainability.
6. Conclusion
By implementing a comprehensive sustainability strategy, HRC can transform its operations, achieve a sustainable competitive advantage, and contribute to a more sustainable future. This strategy requires a commitment from leadership, a collaborative approach, and a willingness to embrace innovation.
7. Discussion
Other Alternatives:
- Business as usual: Continuing with current practices without significant changes to sustainability. This option carries significant risks, including reputational damage, regulatory fines, and loss of market share.
- Minimalist approach: Implementing a few sustainability initiatives without a comprehensive strategy. This option may not be sufficient to address stakeholder concerns or achieve a sustainable competitive advantage.
Risks:
- Resistance to change: Internal resistance to change can hinder the implementation of sustainability initiatives.
- Financial implications: Sustainability initiatives can require significant investments, which may be perceived as a financial burden.
- Lack of expertise: HRC may lack the necessary expertise to effectively implement a sustainability strategy.
- Unforeseen challenges: The evolving nature of sustainability challenges may require adjustments to the strategy.
Key Assumptions:
- The demand for sustainable palm oil will continue to grow.
- Technological advancements in sustainable agriculture will continue to improve.
- Investors will continue to prioritize ESG factors in their investment decisions.
- Stakeholders will recognize and reward HRC's commitment to sustainability.
8. Next Steps
Timeline:
- Year 1: Develop a comprehensive sustainability strategy, implement key initiatives, and establish a dedicated sustainability team.
- Year 2: Expand sustainability initiatives across the value chain, leverage technology and analytics, and enhance stakeholder engagement.
- Year 3: Achieve significant progress towards sustainability goals, build a sustainable business model, and establish a leadership position in the industry.
Key Milestones:
- Develop a sustainability strategy and roadmap.
- Implement sustainable practices in sourcing, production, and packaging.
- Launch a sustainability reporting framework.
- Engage with key stakeholders on sustainability issues.
- Invest in research and development of sustainable technologies.
- Build a sustainable business model and explore new revenue streams.
By taking these steps, HRC can position itself as a leader in sustainable palm oil production, create long-term value for its stakeholders, and contribute to a more sustainable future.
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Case Description
Hijo Resources Corporation (Hijo) was a conglomerate based in Tagum, Davao del Norte, Philippines. Hijo began as an abaca plantation in the 1940s and ventured into the cultivation and exportation of Cavendish bananas in 1968. Alongside its agribusiness operations, Hijo had diversified into a conglomerate with business interests spanning a broad range of sectors. However, Hijo was no longer able to operate its business as usual due to changing economic, environmental, and societal challenges. The company's current initiatives were fragmented and existed in silos within each strategic business unit (SBU). In April 2018, Hijo's president and chief executive officer needed to determine how to holistically integrate sustainability practices into the company's value chain, cutting across different issues and encouraging collaboration across Hijo's different SBUs.
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