Introduction
This paper is intended to aid in the successful implementation of Amadeo’s business strategy in the global marketplace. Key sections of this document will analyze current growth strategies adopted by the organization and their relationship with existing market dynamics. The aim is to identify relevant risks and classify them in order of importance, based on their impact and severity on the company’s operations. Each risk category will also be assessed to examine its interconnectedness and associations with others. In the end, a risk response plan is developed to help Amadeo implement its internationalization plan effectively.
Situation Overview
It is important to undertake a situation analysis of Amadeo’s business context to understand factors that may affect its risk environment (Shakeel, Yaokuang and Gohar, 2020). For purposes of this analysis, Amadeo’s situation overview is done through internal and external audits of the business’s operational processes. A detailed profile of the company’s operations that are relevant to this critique is provided below.
Company Profile
Amadeo operates in the food and beverage industry with a regional presence in Argentina and Brazil. The company is associated with the Mate product, which is an organic drink with South American roots. The company’s current plan involves selling this product to the European market using France as the gateway market. An evaluation of the firm’s internal and external environments will be crucial in analyzing this plan.
Internal and External Audit (SWOT Analysis)
For purposes of this review, the internal audit assessment of Amadeo Company will be completed by assessing its strengths and weaknesses, as shown below.
- Strengths and Weaknesses: Organizations have unique strengths they can use to outwit their competitors (Hernaus, Juras and Matic, 2021). Amadeo’s ability to produce Mate, which is made with ingredients from Argentina and France, is an inimitable trait that differentiates the company from its rivals. Amadeo’s product strategy also appeals to consumers with varied characteristics, meaning that there is potential for growth (Recep, 2019). This profile lessens risk intensity by increasing the likelihood of product acceptance (Kumar, Rahman and Kazmi, 2016). Therefore, features of the Mate brand increase its appeal across different customer groups. The notoriety of Mate in France is another weakness of the brand because it lessens its positive impact on the market. This weakness has implications on the reputational risk of the business because it could lead a rejection of the product by a section of the market (Adhikari, 2018). Stated differently, negative word-of-mouth communication could have negative outcomes on the business and its products (Pesch et al., 2017). Amadeo’s dependence on foreign importers is another weak point in the company’s operations and it adds to the heightened market risk profile mentioned above. Therefore, the company needs to make sure there is a seamless transfer of functions between its domestic and international operations.
- Opportunity and Threats: Amadeo’s external audit will be undertaken by evaluating its opportunities and threats. For example, using external suppliers to manage production is one opportunity available for the company to exploit because it could enhance supply chain linkages, which are instrumental in expanding production networks (Hutchins, 2018). However, this strategy requires the assumption of supplier risk in managing business operations because third-party operators have independent risk implications (Coleman, 2018; Hutchins, 2018). Opportunities also exist in marketing and sales because few people know of Mate in France and Europe. Notably, these marketing and sales opportunities should be designed to target Paris customers because this is where Amadeo’s main business outlets will be located. Competition from tea and coffee products is one of the major threats affecting Amadeo’s operations because both products are ingrained into consumer cultures in various parts of the world (Time Editors, 2018; Tucker, 2017). In Europe, there is an established tea and coffee culture in selected countries due to their history and cultures (Tucker, 2017). Given the difficulty of changing consumer culture, the risk manager must look for collaborative ways of managing this market risk (Time Editors, 2018). The COVID-19 pandemic is also a threat to Amadeo’s business operations because of its disruptive effect on supply chain operations and consumer purchasing behaviors (Wang and Keane, 2020). The extent of the effects of the pandemic on business operations is still unclear but, so far, most of them have been negative (Wang and Keane, 2020). Overall, the strengths, weaknesses, opportunities, and threats associated with Amadeo are summarized in table 1 below.
Table 1. SWOT Findings (Source: Developed by author)
Current Growth Strategy Analysis
Competitive Strategy
Amadeo’s competitive strategy is dependent on the development of Mate and its success across Europe and within the target market. The deployment of a robust digital marketing strategy is one part of the overall plan set to achieve this goal (Yang et al., 2018). As part of its competitive strategy, Amadeo also recognizes new growth opportunities in emerging markets, as affirmed by Dimic, Orlov and Äijö (2019). The firm intends to communicate superior values of the Mate product, such as its organic properties, in its marketing message to appeal to health-conscious customers (Violeta, 2018). However, successful product launch depends on a holistic overview of the market environment. Porter’s five-force analysis and the Ansoff Matrix are relevant models for this analysis.
Porter’s Five Force Analysis
According to Perera (2020), the five forces present in Porter’s model include supplier bargaining power, consumer bargaining power, the threat of rivalry, the threat of new market entrants, and the threat of substitute products. The impact of these forces on the implementation of Amadeo’s risk management strategy is outlined below.
- Supplier Bargaining Power: Amadeo’s supplier bargaining power is high because of the low availability of Mate producers. This statement means that the company’s risk profile is heightened because the unavailability of suppliers could lead to business process disruptions and negative production outcomes (Perera, 2020). Therefore, it is important to prioritize this risk area.
- Consumer Bargaining Power: Amadeo’s customers have a high bargaining power because of the relatively small size of the market. This statement emphasizes the need to focus on the impact that the high customer bargaining power would have on market risks. This is because high consumer bargaining power may make it difficult to justify high production or marketing costs (Baack, Czarnecka and Baack, 2018). Therefore, it is important to make sure that consumer bargaining power does not derail the achievement of the company’s marketing goals.
- The Threat of Rivalry: The threat of rivalry stems from the effects of a competitor’s actions on a business’s operations. Relative to this statement, the threat of rivalry in Amadeo’s business environment is low because of the presence of few competitors in the market. Therefore, the company enjoys minimal competition from rivals. This statement implies that risks associated with the actions of its rivals could have a low impact on the organization’s operations (Ensign, Fast and Hentsch, 2016).
- The Threat of New Market Entrants: There is a moderate threat of new market entrants because the market is niche. However, this is a potential risk area given that extended market success would naturally attract competitors who would be willing to get a stake in the market (Palmatier and Sridhar, 2017). It is important to innovate to address this potential risk area.
- The Threat of Substitute Products: There is a high threat of substitute products because of the popularity of tea and coffee. This means that Amadeo’s products have to convey a niche quality that would convince customers to buy the brand as opposed to conventional products. The high threat of substitute goods also increases the risk profile of new product development, especially if the firm cannot justify the high costs of Mate, compared to regular brands. Table 2 below summarizes the risk profile of Porter’s five forces analyzed above.
Table 2. Porter’s five force analysis (Source: Developed by author)
Current Expansion Strategy
The Ansoff Matrix is applicable to organizations that intend to review their growth strategies. It has four strategies, which include market penetration, product development, market development, and diversification (Adoko, 2017). Amadeo’s current market expansion strategy is focused on the development of a European market base using France as the gateway. The current plan is also intended to create product testing and brand development centers to act at sales points. The effective implementation of this plan requires the integration of an online and offline marketing approach to harness both altruistic and technical aspects of the brand development strategy (Sheth, Patel and Radadiya, 2019). This strategy is likely to increase market effectiveness.
The Amadeo project, which is expected to be launched in 2023, will support the company’s growth by including social networking tools to engage customers in real-time. This solution emphasizes the importance of integrating tech-based solutions in the company’s expansion plan (Rappaport, 2019). These proposals are contained in the company’s Ansoff matrix, as shown in Table 3 below.
As highlighted above, Amadeo’s overall strategy needs to combine a robust product, marketing, diversification, and market development plan (Kemp, 2018). In this regard, it will appeal to customers who want to be unique and stand out from the crowd.
Potential for Growth
Amadeo’s potential for growth is centered on the broad appeal of the Mate product. Given that its price is within the same range as that of its competitors, the odds of local and international acceptance is high. Additionally, the rarity of the brand increases the probability of market acceptance, especially in the initial stages of business conception (Shurtleff and Aoyagi, 2020). Word-of-mouth communication could be useful in “spreading the word” during the initial phases of business inception as well (Biberhofer et al., 2019). Mate’s organic features also complement Amadeo’s potential for growth because “healthy foods” are a growing market segment (Shurtleff and Aoyagi, 2020). In other words, the percentage of health-conscious consumers is increasing, and positioning Mate within this trend could help to improve its market appeal (Grunert, 2017). These insights suggest that the product’s ability to appeal to a broad range of customers plays a significant role in boosting its growth potential.
Strategic Risk Identification and Classification
Risks from the Implementation of Organizational Business Strategy
As highlighted in this document, Amadeo’s international business strategy is dependent on the successful market launch of Mate and the use of a digitization strategy to market the product in Paris. This production and marketing strategy has significant implications on the business’s risk profile of the enterprise (Rajagopal, 2019). For example, its digitization plan exposes it to the risk of hacking, identity theft, and cyber security threats (Management Association, Information Resources, 2018). Alternatively, launching Mate physical stores at the center of Paris exposes the business to the negative effects of stiff competition because this location is served with several competitors. Therefore, the implementation of Mate’s place strategy – at the center of Paris – may undermine the initial launch of the product because of competitive rivalry.
Strategic Risks
In the context of Amadeo’s operations, strategic risks may emanate from the use of a company’s assets, its people, or the business environment. The main risk profile affecting Amadeo’s strategic risk category is domiciled in its international operations. Particularly, the company’s dependence on overseas markets for its supplies exemplifies this risk category because any interruption to this value chain could negatively affect the business (Rana, 2020). This is an important consideration for the business because Amadeo prides itself in producing unique products. Mate is a fusion of South American and French ingredients, which means that supply chain disruptions from its overseas operations could negatively affect product quality (Shurtleff and Aoyagi, 2020). Cultural differences between its domestic and international operations also increase strategic risks for the business because they could cause a misalignment of business operations between its local and international enterprises. It is important to consider these issues when implementing the final risk management plan.
Regulatory and Reputational Risks
Regulatory and reputational risks have an impact on a company’s image because of their effects on consumer perceptions. According to Hessami (2019), reputation risk refers to the occurrence of incidences that may negatively affect a firm’s image. In the context of Amadeo’s operations, its reputation and regulatory risks could emerge from various sources, including, market, planning, brand, investor, customer, and market-related activities (Shakeel, Yaokuang and Gohar, 2020). The use of third-party services portends the greatest threat in this risk category because of differences in laws and business culture (Shakeel, Yaokuang and Gohar, 2020). Therefore, third-party inefficiencies could be misinterpreted to be those of the Amadeo’s, thereby creating a negative impact on its image (Lewis, Ricard and Klijn, 2018). Therefore, it is important to understand factors that affect how the public will perceive the company’s role in their lives.
Risk Assessment
In the context of this review, the risk assessment plan will include discussions on assessment criteria, impact scale, the likelihood or risk occurrence, and risk assessment. At the end of this assessment, these risk categories will be used to develop the risk interaction map.
Assessment Criteria
Developing risk assessment criteria refers to the process of assigning values and opportunities to various risk categories. The assessment criteria to be adopted at Amadeo should be based on an assessment of their impact and likelihood of occurrence, as illustrated below.
Impact and Likelihood Scale
Risks have varied impacts on business processes based on their nature and scale of operations. The likelihood and impact scales of risks affecting Amadeo’s operations appear in Table 5 below.
Table 5. Impact vs. Probability Matrix (Source: Developed by Author)
Based on the scale highlighted above, risks that have been categorized as “high” or “very high” need special attention in the company’s risk profile because they have the highest likelihood of occurrence and impact on Amadeo’s activities (Ujwary-Gil and Nalepka, 2018). The risk assessment and interaction map below is based on this scale.
Risk Assessment and Interaction Map
A risk assessment and interaction map shows the relationship between various levels of risks described above. According to Hutchins (2019), Bérard and Teyssier (2018), risks rarely occur in isolation. This statement implies that they are interconnected because the occurrence of one risk event could increase the likelihood of another one happening. The risk interaction map for Amadeo is described in Table 5 below.
Table 5. Risk Assessment and interaction map (Source: Developed by author)
Table 5 above shows that the main risks affecting Amadeo’s operations include economic downturn, supply chain disruptions, cultural conflicts, 3rd party incompetency, and cyber security attacks. Based on a review of data generated from Tables 4 and 5 above, the highest risk profiles are seen between third-party actors and cultural conflicts, which have a score of 0.36 and 0.82, respectively. At the same time, the lowest risks were reported in supply chain disruptions and cyber security attacks, which had scores of 0.05 and 0.08, respectively. Therefore, based on a review of data generated from Tables 4 and 5 above, risks with the highest probability and impact include cultural and third party conflicts because of the global nature of Amadeo’s operations.
Risk Prioritizing and Opportunity Map
In this analysis, risk prioritization processes and opportunity map development will be dependent on a comparison of Amadeo’s current and target risk levels. Similarly, a review of the target company’s risk profile using the risk hierarchy model will provide the basis for prioritizing risks.
Level of Risk against Targeted Risk Level
It is important to compare the current and targeted risk levels of Amadeo’s operations to identify risk management gaps. The current risk level is “moderate” given the findings of the company’s external and internal environments. However, the targeted risk level is “low” meaning that the associated risks should have the lowest probability of occurrence. The current “moderate” level of risk means that the firm should lower its rating from 3 (moderate) to 1 (low), which is the acceptable level. The existence of a difference in desired and current targets means that there is an opportunity for improving Amadeo’s risk management plan.
Risk Hierarchy Model
The risk hierarchy model is important in understanding the main types of risk to prioritize in Amadeo’s risk management plan. The risk hierarchy model outlined below is derived from an analysis of the firm’s operations and the categorization process is by risk type.
According to figure 1 above, market risks should be given the utmost priority because they have a high likelihood of occurrence. Similarly, their impact on business operations is higher compared to the other risk categories. Supplier risks form the second priority category and they are associated with cyber security threats, raw material shortages, and production disturbances (Makrides, Vrontis and Christofi, 2020). Reputation risks should be given the least priority because of their low likelihood of occurrence and impact on business operations. The business strategy risk appears in all three categories of risk described above because it emerges from the implementation of the overall corporate strategic plan (Rael, 2017a). Therefore, it is inherent in all the risk groups described.
Risk Response and Recommendation
According to Rael (2017b), there are four main responses to risk – minimizing, sharing, accepting, and avoiding. The following risk response plan could be implemented at Amadeo.
Risk Response Plan
The risk response plan will be categorized into two sections. The first one will be defined by risks that have a negative attribute, while the second category will comprise risks that have a positive attribute. When responding to negative risks, appropriate actions are to avoid, mitigate, transfer, or accept the consequences. Comparatively, positive risks should be exploited enhanced, shared, or accepted. The analysis of Amadeo’s operations completed in this study showed that cultural conflicts and 3rd party actors were the major risk categories affecting the enterprise because they have a higher than “three star” status. These risk categories are defined by market, supplier, reputational, and business risk. Table 6 below shows the appropriate response for each category of risk
Table 6. Risk response plan (Source: Developed by author)
Market risks are mitigated because of their potential to transform into profitable opportunities for growth. Comparatively, supplier risk is shared because of the ambitious nature of Amadeo’s foreign venture. This quality allows Amadeo to share the burden of risk by giving its partners the option of sharing profits as well (Köbis, Soraperra and Shalvi, 2021). Hutchins (2019) suggests that such a strategy should be adopted when organizations find it unavoidable to manage the scope of their risks yet experience difficulty deviating from their original plans. This is the current state of Amadeo’s operations because its French venture is a “high-risk high-reward” project and it could be successful if it uses the right partners to share risks (Köbis, Soraperra and Shalvi, 2021). Looking for partnerships with other businesses that share a similar vision could be a positive first step in realizing this goal. Similarly, seeking third-party solutions from ICT developers could help to minimize areas of inefficiency that increase its risk profile.
The avoidance option is selected for the reputation risk of Amadeo because of the potential negative press that the company could suffer because of unflattering imaging. Therefore, risks that negatively reflect on the company’s image should be avoided. This strategy aligns with the recommendations of Archetti (2021) Wang and Keane (2020), which suggest the need to adopt creative public relations management strategies to maintain a positive brand image. In the last risk category identified in this review, the appropriate action to take for the business strategy risk is to “exploit.” This is because opportunities for advancing the company’s objectives could emerge at different points of implementing the risk management plan. Therefore, there should be heightened awareness to identify these opportunities.
Recommendations
The digital marketing strategy has emerged as a central pillar in the operations of Amadeo’s global operations. Its adoption means that part of the company’s marketing plan should involve the use of social media as a primary consumer engagement tool. Given that most coffee buyers are young people, new growth opportunities should be designed to exploit marketing opportunities that are relevant to this demographic group. Influencers may be used to convey marketing messages to a young audience via social media. This proposal aligns with research done by Haenlein et al. (2020), Chopra, Avhad, and Jaju (2021) which affirmed the success of influencer marketing on popular social media platforms, including Instagram and TikTok. Amadeo has an opportunity to use social media to enhance consumer engagement as well.
Conclusion
This report has shown several risk factors that are relevant to Amadeo’s internationalization plan. Market, reputational, business, and supplier risk categories emerged as the dominant focus areas in the assessment plan. Given their varied impacts and scope on business processes, each of these risk categories has been assigned different actions. Emphasis has been given to reputational risk because of the potential negative impact it would have on the Mate brand if it occurred. Additionally, it is important to control risks that emerge from the implementation of Amadeo’s business strategy because they cut across different functional areas. It is assumed that the guidelines for risk action implementation outlined in this report would aid Amadeo to successfully venture into the European market.
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