Growing Plant Care
Plant Care develops biological pesticides and fertilizers for plant protection. It is a business unit of Lallemand (headquarters in Canada) and is constituted by two companies: Ithec, located in France, and Verdera, located in Finland. The case describes how the managers of Plant Care are currently in the process of deciding whether they should expand abroad, to how many countries, and at what speed. Despite the fact that the biological pesticide and fertilizer industries present many growth opportunities, and despite Plant Care's success in France and Finland, the decision to expand abroad is complex, due to factors that include a lack of foreign experience, lack of abundant financial resources, constraints imposed by headquarters, etc. First of all, students have to decide whether Plant Care should expand abroad or not. If yes, they have to decide how quickly it should expand and the timing of the foreign market entry. Finally, students are required to put themselves in the shoes of the divisional managers at headquarters. How much managerial and financial autonomy should headquarters give to Plant Care?
This case is designed for MBA students in international strategy as well as M.Sc. students following the International Business option, as it explores the exportability of business models and the difficulty of planning growth. The case is also appropriate for MBA students taking a strategic management course, as it explores both the relationship between headquarters and subsidiaries and the rivalry dynamics in highly competitive industries.
This case aims to help students to:
1) Identify the constraints that firms face when deciding on an international expansion. Plant Care’s budget is not unlimited. According to the information in the case, Lallemand’s policy is to treat business units as financially independent units, so it seems unlikely that Plant Care will get extra funding for its international expansion. Accordingly, if Plant Care decides to expand very aggressively in many new markets, its budget for R&D will shrink. A negative financial result could jeopardize Plant Care’s competitive position.
2) Realize the complexity of business models and how difficult it can be to replicate them in a foreign country. Foreign market circumstances, lack of foreign experience and uncertainty regarding product adaptability can make the replication of the business model abroad a difficult task.
3) Understand the conflicting views between headquarters and the subsidiaries. While subsidiaries have their own agenda, headquarters has to maintain a balance in the allocation of resources among the different subsidiaries. The resources assigned to one specific business unit won’t be available to other business units.