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Dakota Growers Pasta Company Full Case Analysis

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Dakota Growers Pasta Company Full Case Analysis

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Dakota Growers Pasta Company

Full Case Analysis

1. Situation Description

2. Strategic Analysis

3. Decision and Support

1. Situation Description

Pasta consumption has been on the rise, according to the US Department of Commerce 1998 report. Contributing drivers of industry change, which contributed to the annual increase of 2-3% in consumption, are changing lifestyles, increased availability of pasta sauces, healthy conscious consumers and the increased number of Italian restaurants. Pasta purchases for ingredient use in easy to prepare dishes, make up 43% of the market share. A contributing factor is the fact that couples, who both work, have less time for preparation in the kitchen.

The region in which Dakota Growers is situated is the idea climate for growing quality durum wheat. Production facilities are close to rail system where the products can be easily distributed.

Currently, DGP is using a vertical integration strategy that has worked well in the past. With the changing industry, DPG have responded to competition as well as other changes such as price changes within the past decade.

5 Competitive Forces

Rivalry is strong, especially in the private-brand segment because of larger margins and more choices in brands in which to market. It seems evident that consumer perceive an added value to Italian sounding brand names of pasta since imported pasta is regarded as having a higher value. Large producers have exited private-label production in order to focus on their own brands.

Well known companies have exited the process of durum milling and others have entered. Since production exceeded consumption in the late 1990's, the industry is not as attractive for new entrants.

Availability of substitute products, such as potatoes and rice, is moderate since consumer tastes may change. For example, consumers may prefer using rice in a recipe instead of pasta. Historically, pasta consumption had increased.

Supplier to seller is strong because competitors are competing for more market share by utilizing distributors such as Sysco.

Seller to buyer is weak because there is sufficient supply of durum wheat producers. In most years, the crops have not been affected by disease.

All forces being considered, this is an attractive market for Dakota Growers as long as demand grows and the capacity is fully utilized. Economies of scale depend upon meeting production capacity with demand.

Key Success factors

The following key success factors, which DGP possess, translates to having a sustained competitive advantage.

Manufacturing quality is very high as innovative new products are being developed. Capacity has been utilized in most years by an increase in demand and high-tech production facilities. Product distribution is a key factor, given the location of the plants to the rail system and to the supply of durum wheat. Bi-products are also easily distributed to the nearby farms. DGP responds well to change in consumer preferences and with consistency and quality.

Current Stategy

DGP's strategy is to increase its brand presence in the market, by expanding production facilities and continued relations with growers. DGP made a niche in the market as being one of the first successful new generation cooperatives in the 1990's. The price per bushel paid to the members as well as their share of the profits give DGP an edge to the competition.

2. Strategic Analysis

Strengths

&#61656;<Tab/>The knowledge and leadership of the general manager, Tim Dodd and sales manager, Gary Mackintosh

&#61656;<Tab/>High product quality, service and cost effectiveness

&#61656;<Tab/>Good working relationship with the suppliers

&#61656;<Tab/>Forward integration

&#61656;<Tab/>A good reputation

&#61656;<Tab/>State-of-the-art durum wheat mill

&#61656;<Tab/>Ability for members to sell shares between themselves

&#61656;<Tab/>First mover for vertical integration in this industry

&#61656;<Tab/>Flexibility, for example

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