Addressing diminishing profit margins within the Dutoit Group : a value chain analysis
Thesis (MBA)--Stellenbosch University, 2014.
ENGLISH ABSTRACT: Rapid urbanisation, coupled with growing per capita incomes and a rapid rising middle class, is triggering rapid growth in urban food markets. Despite these opportunities, agriculture in South Africa is confronted with diminishing profit margins due to direct production cost increasing at rates above the revenue generated from agricultural products. This research assignment has aimed to define the attributes of an effective agricultural value chain in South Africa, given the challenges faced. To achieve this goal, the research focus was on the results of an in-depth analysis of the Dutoit Group’s deciduous fruit value chain. To be able to perform a value chain analysis it is of utmost importance to first understand the meaning of the concepts as well as their origin and the evolution of their application. This is achieved through a comprehensive study of literature. Three value chain analysis tools were used for the research. These tools were an industry analysis, value chain maps and benchmarking. Through the literature review the importance and relevance of these three tools were also explored and reasons provided why they can be regarded to be adequate for a proper in-depth analysis. An overview of the Dutoit Group’s history, focusing on the specific key events influencing the evolution of their value chains, is also discussed together with their business philosophy, business model and main accomplishments. This is done to provide context to the environment in which the value chain analysis process was performed. The main focus of the fourth chapter is the application of the three value chain analysis tools on the Dutoit Group’s deciduous fruit value chain, utilising primary and secondary data collected through interviews with specific value chain actors, observations, management information and literature obtained from the public domain. Through the application of the three value chain analysis tools the effectiveness of the Dutoit Group’s deciduous fruit value chain was evaluated, and strengths and weaknesses identified. The research results showed that the Dutoit Group’s internal deciduous fruit value chain has been effective in addressing the risk of diminishing profit margins. In addition the results showed that the key attributes of an effective value chain which are able to address the current challenges are defined as effective integration, strong relationships between value chain actors, high levels of productivity and strong leadership.