Corporate development in the Agrifood sector

Cranfield School of Management

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[The following text is an English translation of a Dutch press release from ABN AMRO]

Amsterdam, 22 september 2010

Corporate development exerts positive influences in Agrifood

 ABN AMRO publishes report on corporate development in the Agrifood sector

The results of a research study on corporate development and its effect on company performance conducted by Cranfield School of Management (UK) for ABN AMRO are to be presented by the bank today. The most important conclusion: corporate development contributes to growth and success of companies, if executed prudently.

Corporate development includes all strategic actions that foster non-organic growth such as M&A, cooperations and joint ventures. In total 3.058 transactions in the Agrifood were examined. The study shows that corporate development first improves financial performance. After a specific point, more of similar corporate development activities start exerting negative effects on the competition.

Professor Patrick Reinmoeller, who led the study and is Director of Cranfield School of Management’s Breakthrough Strategic Thinking programme, said: "Corporate development has been key to securing profitable growth for large firms for a long time - now medium size firms need to think how to develop successfully. Our study clarifies the emergence of technology as a key driver of future growth in the Agrifood business.”

The optimal point is reached, as the study shows, when the growing company network is extended annually with about about 8 partners. If more new partners or elements are included in the company network, the influence on company performance does not only diminish but turn negative. The reasons for this turn include increasing costs related to managing multiple integration processes and to maintaining effective levels of communication within a growing network of diverse partners. With hubris being another insidious danger, ABN Amro cautions: networks are a tool, not a goal in itself.

Partners in product technology
Addressing the issue of how to manage corporate development the results show clearly: focus on product- or process technologies. Extending the network with technology-oriented partners contributes to the success of Agrifood companies, as technology increasingly turns into a distinktive source of competitiveness in the sector. The distance between Agrifood and more technologically oriented areas such as “life science”, petrochemicals and pharmaceuticals will continue to shrink in the future. Consider that Unilever most recently announced to start a cooperation with the US American company Ampere Life Sciences in order to develop innovative products that aleviate aging.

International acquisitions
The bank is also cautious in its advice when it comes to international acquisitions. Acquiring companies abroad is much more difficult and requires better preparation. In many cases is it more effective to start with a minority stake or another form of partnership that carries less immediate risk.

Changing markets calls for action
In the current economic climate Agrifood undergoes considerable pressures and important changes that will fundamentally alter the structure of the sector. In the future, consumers will demand more specifically tailored and customized products. The increasing influence of private label is becoming a powerful competition for the brand manufacturers. Proliferating legal requirements challenge the food industry in an playing field that becomes more international by the day. Economies of scale are thus bound to become even more important. We expect more intensive cooperation between different and within sectors. Deeper understanding of the successful moves in corporate development is therefore more valuable then ever and the “science of partnership” increasingly important.

The research project
From 59.977 corporate development actions worldwide between 1996 and 2005, the research team slected 3.058 related companies were selected. ABN Amro worked together in this research project with Cranfield School of Management (UK). The companies selected are listed companies, yet there is little doubt that the results provide valuable insights for mid size companies in the Netherlands and the UK.

The project report for Agrifood “Corporate development and the role of company networks” will be available free of charge and can be downloaded (in Dutch language) via www.abnamro.nl/agrifood



Ends

Notes to Editors

Cranfield School of Management is one of Europe’s leading university management schools renowned for its strong links with industry and business. It is committed to providing practical management solutions through a range of activities including postgraduate degree programmes, management development, research and consultancy. 
www.som.cranfield.ac.uk

Professor Patrick Reinmoeller is Director of the Breakthrough Strategic Thinking programme at Cranfield School of Management in the UK. By the end of the programme, participants will have a clear understanding of how to formulate and implement a breakthrough strategy.

For more information or to arrange an interview with Professor Patrick Reinmoeller, please contact: Emily Reed, Media Relations Office, Cranfield School of Management on:
T: +44 (0) 1234 754348 or E: emily.reed@cranfield.ac.uk


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