OSI in China
OSI in China: Pre-assignment
If I were Stefan, I would choose to export the parts of the chicken that is not sold to OSI's customers in China. I will go through each of the proposed options and share my thoughts on why it may or may not be a good choice.
1. Expand sales to current customers The only way to expand sales to the current customer base is to successfully come up with new processed items that QSRs' customers will want to buy. Although it is stated that OSI is in the process of coming up with new flavorful coatings and processing techniques, the chances of success in these new techniques are unknown. After OSI has developed the new processes, it will need to entice the QSRs to invest in these new products and observe how customers react to the new items. QSRs will have an incentive on their part to address their issues on high turnover rates and wages. However the drawbacks are that this option is not going to help OSI drive towards its goal on going away from being mainly a supplier to Western QSRs to an integrated food company and has a huge unknown factor on whether consumers will buy the new items.
2. Get a higher price from wholesalers
If internally OSI had encountered problems with its further-processing plants to buy its chickens, the likelihood that it is able to have wholesalers, external customers, buy its chickens is even smaller. OSI's products command a higher price compared to its competition and at this point in time it is unwilling to cut back on its price to sell at commodity prices. Unless OSI finds a way to make their process less capital intensive, it will be operating at a loss. Therefore, this option is not viable.
3. Sell direct to retailers or to smaller restaurant chains
The aspect OSI really differentiates itself from its competitors is the quality in its products. There are two downfalls to this option that have a good chance of wiping away this differentiation. First is the unreliable cold chain
If I were Stefan, I would choose to export the parts of the chicken that is not sold to OSI's customers in China. I will go through each of the proposed options and share my thoughts on why it may or may not be a good choice.
1. Expand sales to current customers The only way to expand sales to the current customer base is to successfully come up with new processed items that QSRs' customers will want to buy. Although it is stated that OSI is in the process of coming up with new flavorful coatings and processing techniques, the chances of success in these new techniques are unknown. After OSI has developed the new processes, it will need to entice the QSRs to invest in these new products and observe how customers react to the new items. QSRs will have an incentive on their part to address their issues on high turnover rates and wages. However the drawbacks are that this option is not going to help OSI drive towards its goal on going away from being mainly a supplier to Western QSRs to an integrated food company and has a huge unknown factor on whether consumers will buy the new items.
2. Get a higher price from wholesalers
If internally OSI had encountered problems with its further-processing plants to buy its chickens, the likelihood that it is able to have wholesalers, external customers, buy its chickens is even smaller. OSI's products command a higher price compared to its competition and at this point in time it is unwilling to cut back on its price to sell at commodity prices. Unless OSI finds a way to make their process less capital intensive, it will be operating at a loss. Therefore, this option is not viable.
3. Sell direct to retailers or to smaller restaurant chains
The aspect OSI really differentiates itself from its competitors is the quality in its products. There are two downfalls to this option that have a good chance of wiping away this differentiation. First is the unreliable cold chain