Hygeia International

The question now facing Hygeia is whether to integrate forward in Nigeria – that is, actually to produce eggs or meat or to stop with fertile eggs or chicks to be sold to the farmers. 1. Questions on the case:

a) Identify Hygeia’s five production policy issues as enumerated in the case? b) What major problems are likely to confront a foreign company operating in Nigeria? c) What would you recommend that should be done on this proposal? 2. Without good policies, a business organization will have no sense of direction. a) What do you understand by policy?

b) Mention and discuss the characteristics of a good and effective policy. c) What are the advantages of written policy?
3. Effective organizational performance is usually constrained by environmental factors. Identify and discuss the relevant environment in business management and operations.

4 a) With the aid of a suitable diagram and appropriate examples, discuss the strategy-making levels in a diversified organization. b) Mention and discuss the supporting factors in strategy implementation. 5 a) Clearly discuss the following alternative strategies:

i) Backward and Forward Integration.
ii) Merger and Acquisition strategies.
iii) Stable Growth Strategy.
iv) Incremental Growth Strategy.
b) Give a clear explanation of the following corporate planning approaches:
i) Goals-Down, Plans-Up Approach.
ii) Top-Down Approach
iii) Bottom-Up Approach

HYGEIA INTERNATIONAL
Expansion in Nigeria is the issue. Henry Livingstone, Vice President of the Africa/Middle East Region of Hygeia International, has just received a proposal from his Nigerian Managing Director for a major move into poultry production. This would extend Hygeia’s profitable agricultural activities even more in that West African country. Corporate Base

Hygeia International is one of the ten leading pharmaceutical companies of the world. Based in the United State, Hygeia also has laboratories and plants in many countries. Over a third of its net income is earned outside the U.S.; and because of growing federal regulation, Hygeia looks abroad for a rising percentage of its future income. Like other large pharmaceutical firms, Hygeia has converted drugs designed for humans to use in farm animals. This opens up a large market with relatively low R & D expense. In addition to veterinary product for the control and treatment of disease, Hygeia produces a variety of feed supplements. Now about 15 percent of Hygeia’ s total sales of over a billion dollars come from “agricultural” activities!

Hygeia’s agricultural business includes active participation in mass production of poultry. Today, frying chickens are raised in 100,000 chick batches. Thanks to genetic selection, scientific feeding, and strictly controlled environment, ‘friers’ can be ready for market in ten weeks. Egg production is similarly engineered. Significantly, these mass production methods provide one of the most efficient conversions of cereal grains into protein known on earth. Of course, two essential features of such operations are drugs for disease control and feed supplements.

Hygeia makes both (as do several competitors). Moreover, to keep in contact with the latest developments, Hygeia has a subsidiary focusing on development of new genetic strains in chickens – for faster growth, larger proportion of white meat, more eggs, disease resistance, or other desired characteristics. In the U.S. Hygeia itself does not produce chickens or eggs commercially nor sell chicks for this purpose, but it does have experts familiar with the entire technology. As part of its international expansion, Hygeia has helped to promote modern poultry technology in Europe, Latin America – and now Nigeria. Potential Market

A British colony until 1960, Nigeria is growing dramatically. It is by far the leading black African country economically. Its large population of over 160 million (growing 2.7 percent per year) coupled with massive foreign exchange from its crude oil exports ($25 billion in 2012) provide a base for all sorts of expansion. At the time of independence, Nigeria was a relatively poor developing country with only modest agricultural exports. Probably 90 percent of its population relied on the small village economy, also unchanged for centuries. Political independence provided the drive, and oil the financial means to modernize. Even now the average annual per capita l income of about $500 is unevenly distributed, with many village people being very poor. National plans call for universal education and the improvement of hospitals, roads and airports, electric plan, radio and TV, and industry.

Lagos, the commercial capital, already has a population of over 10 million and so many automobile that new bridges and a fine elevated highway cannot handle the traffic. Such a rapid transition naturally creates strains. Politically, the most important task is to unite three major tribal groups: the Hausa-Fulani in the north, Ibo in the east and Yoruba in the west. They speak many different languages (English is the common language) and traditionally are suspicious of each other. A serious civil war occurred from 1967 to 1969 when Biafra tried unsuccessfully to secede. The constitution provides for democratic government, and a three tier of government. Although significant European influence in Nigeria is only about a century old along the southern coast, the Moslem religion and associated ideas have been present in the north, the more arid, regions since the 12th century. (Kano, for example, was a city state when Europe was still in the Dark Ages).

Nevertheless, society continues to center around the simple village economy with strong emphasis on loyalty to the extended family. Today over three-quarters of the population relies on localized agriculture. The great movement now occurring is from the village to the city, with all the social and economic adjustments tied to such a shift. The total population growth, and’ especially the movement to the cities, has created problems of food supplies, Nigeria has much fertile land, but sugar and cereals are being imported. The village society is unsuited to large-scale agricultural technology, and marketing channels are poorly developed. Particularly serious is the shortage of protein foods. The production of peanuts is rising slowly, but the amount of meat going into markets is stable at best. Therefore, one facet of the national plan is to increase agricultural output.

A system of agricultural agents to advise farmers is being established, some research on products and technology is underway, and loans to farmers are available on favorable terms. A major bottleneck in this effort is trained human resources. The number of experts capable of dealing with local farmers is very limited, and farmers with knowledge, skill, and capital needed for modern agriculture are scarce. As usual, pricing presents a dilemma. High prices, which will stimulate farm output, also lead to high food prices for the city dweller that is already caught in inflation. Nigeria, like the US., has basically a free price system but resorts to some political control of items that are important in the workers’ cost of living.

In this situation, government officials would like to increase substantially the supply of eggs and chickens. And if this can be done without raising the real (adjusted for inflation) prices, that is even more attractive. A relatively small technical staff in the Ministry of Agriculture is working on poultry, and low-interest loans are available to farmers who wish to install modern poultry-raising equipment. A few demonstration farms are in operation, and their results show the advantages of mass production methods. However, the response to date has been limited. The concept of producing eggs or chickens in large quantities is new, and few farmers have a technical background in scientific feeding disease control, and mechanical equipment. Product/Customer Issue for Hygeia

Hygeia International is already well established in Nigeria. It has built a “dosage” plant where several hundred different pharmaceutical products (imported) are put into pills, capsules, bottles, and other forms suited to local use. These pharmaceuticals are sold to hospitals, clinics, and drugstores in much the same way as ethical drugs are sold in the U.S. The sale of Hygeia products is helped by the local company’s full cooperation with the “indigenization program” which requires the employment of Nigerians for virtually all positions. Also, to comply with recent laws, 40 percent of the shares of the local company have been sold to Nigerians. A substantial amount of training and technical advice continues to be provided for a fee by Hygeia offices in Europe and in the D.S. Hygeia’s policy is to cooperate as fully as it can in the development of medical services in Nigeria.

In the agricultural area, Hygeia follows a similar practice. It imports and sells unique medicines and feed supplements, and it is active in technical development Working closely with government and trade association officials, Hygeia helped set up demonstration sites for poultry colony housing and displays on lighting, ventilation, and feeding routines. It trains farmers on disease control and forecasts epidemics or disease frequency. Also, it has helped to establish reliable regional feed mills. As a result of the total cooperative program, the number of egg-laying hens has increased to perhaps ten million. There is opportunity for expansion, and the potential market is great. The question now facing Hygeia is whether to integrate forward in Nigeria – that is, actually to produce eggs or meat or to stop with fertile eggs or chicks to be sold to the farmers.