Case ID: 506036     Solution ID: 37104     Words: 1597 Price $ 45

Bunge: Poised for Growth Case Solution


Bunge manages the matter of agribusiness and sustenance related items concentrating on the slogan of homestead to shop. There are four distinct portions of the organization, managing freely with four divisions, for example, rural business, bio vitality, composts and fixings. Agribusiness involves the acquiring and transportation of oilseeds and nourishment grains. Bunge offers the oilseeds to the nearby and universal market through the procedure of exportation. The organization likewise forms the oilseeds and arrangements in the oil created from them. Bunge began its sugar business in 2006 and fabricated 8 processes in the nation till then. Furthermore, the organization likewise supplies power to the nation's power matrix with a specific end goal to build its incomes. It additionally creates cooking oils and consumable fats and oils alongside processing items like corn, wheat and so on. In conclusion, the fourth section of the organization manages the generation and advancement of particular manure (NPK) in the market of Southern America.

Advantages to the company include a large amount of land in Brazil for the growth of sugarcane as well as relatively cheap labor; however, there is a substantial investment of $200 million. Second, they could produce more palm oil in Asia, which also requires significant investment in production facilities.

 Both methods result in a new position for the company consisting of the actual management of farming the commodity rather than just purchasing and processing. While removing the extra middleman from these methods could result in extraneous savings, Bunge currently is lacking in this area and has no material experts on staff. 

Opportunities involved in biofuels:

* Significant subsidies for production of biofuels

* Increased demand for biofuels due to governmental mandates * The company already does business in Brazil and could take advantage of synergies by producing sugarcane-based ethanol there

Threats involved in biofuels:

* Subsidies can be eliminated at any time by the respective governments * Volatility in the price of the inputs

* Concerns of overcapacity in the global market

* Uncertainty who will control biofuels and value created in the chain * New technological developments such as cellulosic ethanol

Rather than pursuing developments in India where infrastructure and government

pose a serious threat to their success, Bunge should work on advancements in Brazil. While the cost of entering this market may be high, there is likely a good reason for this; it's lucrative. Bunge will then be able to work with a stronger infrastructure and cooperative government than India, a larger area of unused arable land, and leverage their current presence in the area. Having a decentralized organizational structure potentially gives Bunge the ability to react quickly to the changing global market. However, a decentralized structure could also have limitations, such as managers at the product line level that are not consistent with the corporate core values and business strategies. In addition, since the company is very integrated a significant change in the operations or production in one area of the company will greatly affect the operations of another business of the company. BGA recognizes there is difficulty managing the balance between integration and decentralization. They also state on page 6 that they are willing to accept a certain level of inefficiency to maintain the entrepreneurial spirit. Given all of this, Bunge's corporate structure is well suited to facilitate their entrance into biofuels in Brazil by way of giving them added diversification, along with the ability to leverage relationships worldwide in their pursuit. While they may face difficulty in convincing other operational locations of the merits of this approach, this is something Bunge has already acknowledged and is prepared to address. Mr. Darboard's suggestions to the CEO should be to leverage their current business in Brazil and pursue sugar-ethanol in the region. While the expense of entering the market is high, their current standing in the region, along with the favorable government presence and robust infrastructure will give them the best opportunity to succeed.

Also, Brazil may be a more ideal location if cellulosic ethanol becomes more economical in the future. Of course, the reaction of the two business units (Brazil and China) will be vastly different. As far as the corporation as a whole is concerned, the overall risk to Bunge seems to be less prevalent in South America; a position that the Chinese business unit will have to come to terms with. Realistically, if Brazil becomes successful that position will be hedged by expansions into palm oil in Asia.  

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Excel Calculations

Questions Covered

1- What business is Bunge in? (support your assertions) 

2- How would you describe Bunge’s unique business model? (provide a detailed analysis of their business model) 

3- What are some of the fundamental trends and structural changes in the international agribusiness market? 

4- Which countries are the leading soybean producers? 

5- Is Alberto Weisser’s view of the future, as expressed at the very end of the case, correct? 

6- Are partnerships a temporary measure for Bunge as their transform themselves, or should they be a permanent part of their strategic approach? 

7- Is Bunge moving too quickly or too slowly (pick one) in developing marketing in Asia? 

8- Can Bunge apply its focused approach to soybeans to other crops? If so, which ones? 

9- How do you perceive Bunge’s corporate culture? 

10- Where should Bunge’s headquarters be located next?