Lipman: Vertical Integration in Fresh Tomatoes
Lipman is a company that deals with the growing and packaging if tomatoes that are later distributed to different parts of the country. The company has been successful in acquiring different parts of the world for extension of the tomato business which makes it competitive in the market. The fact that the price of tomatoes in the market remains constant makes Lipman company the best as well as its assets that allows it to ship fresh produce every day in a year.
The strategic issues identified in the case include increased margin pressure after the consolidation of the United States food retail yet the margins for the company were already thin. The company faced challenges when attracting and developing new talents which were assumed to be essential for a developing company. Another issue was water scarcity experienced in California, and there was a projection of water scarcity in Florida in a decades time. This affected the operations of the tomato farms in the country. Another issue was labor scarcity within the farms because the people who were previously employees of the company retired, and it became hard to get replacement employees. The increased rise in land prices in California and Florida became a strategic issue for the company as it could not increase land for cultivation of tomatoes.
The strategic scope of Lipman is that the company plans to extend its business internationally where it will grow tomatoes in other countries such as Mexico, Guatemala, and El Salvador. The challenges the company will have in these countries include labor issues, social responsibility as well as political unrest which will hinder the success of the company. Lipman Company is at an advantage since the growing of tomatoes in California gives an assurance of processed tomatoes from the company. This is because California owns 96% of processed tomatoes which will be an added advantage to the company. Going global is another strategy the company plans which can be useful if it will get solutions to labor issues, political unrest, and social responsibility. This will make the company increase production and sales of its tomatoes. The current company strategy is to use Lipman name in all its division so that the company can be well known globally. The company has website that is used in marketing and reassuring customers of the same values and products despite changing the name. The company plans to use its brand name on the marketing after achieving global market which will be an added advantage. The company has a vision that one day it will operate in a global market which will make it more successful.
The changes that Lipman’s current strategy requires include looking for other regions that have plenty of water for farming of the tomatoes. This should be changed as the company has majored in growing its tomatoes in California and Florida which might not be promising areas in the near future due to the scarcity of water. The strategy that should remain for the company is a change of name for all divisions so that they can use a similar name. This will be an indication of a change of power and to enhance the brand name of the company. The company should attract new talents by training them and hiring from other countries to ensure that the farms are taken care of including packaging.
For Lipman to implement the new strategies, it should understand labor issues and social responsibilities of working in another country. The legal and regulatory measures of working in the planned countries should be well understood so that it is easy to operate in those countries. The Company also require drilling boreholes that will be used in the countries that have a scarcity of water. This will ensure that all selected countries will be in a position to run normally despite the water scarcity.