Reference no: EM132232188

Describe how VP group's scope has changed over the years. (I.e. how VP Group has changed what it does.) For each change, describe also reasons why VP changed its scope.

1a. Identify changes in vertical scope

1b. Identify changes in product scope

1c. Identify changes in geographical scope

2. Describe what growth options VP Group had in 2013. What would be motivation for each option?

VP Group: Vegpro Grows Beyond Kenya

Our business model is not growing vegetables or flowers or sugar or anything else—our business model is growing stuff in Africa, and adding value. We’re not that emotive about what it is. — James Cartwright, director of business development, VP Group

In October 2013, with rain pummeling their mud-spattered Land Rover as it idled on a steep dirt road in rural Nanyuki, Kenya, VP Group’s Managing Director Bharat Patel, Floriculture Director Umang Patel, and Business Development Director James Cartwright joked about the stark contrast between their current predicament—stranded in the lush Kenyan countryside until the slippery roads became passable—and their recent trip to the pristine, formal corridors of the International Finance Corporation (IFC) in Washington, D.C. Just a few days earlier, the directors of VP Group (VP), a Kenyan grower and processor of vegetables and roses mainly for export to U.K. supermarkets, had accepted the IFC’s Client Leadership Award for VP’s commitment to sustainable development. Since the 1990s, when the IFC funded its early expansion in Kenya, VP had played a central role in developing Kenya’s large-scale horticulture industry, providing vital employment to thousands of workers and helping fuel local economies. VP had also become a sustainability leader in the agriculture industry, practicing the stringent standards for safety and corporate responsibility that customers such as U.K. retailers Marks & Spencer (M&S) and Sainsbury’s required of their key suppliers. (See Exhibit 1 for VP Group divisions and Exhibit 2 for an organization chart.)

With 8,000 employees and 2012 sales of $121 million, VP had transformed itself in recent years by bringing marketing in-house, diversifying its products portfolio, expanding into new African markets, and rebranding from Vegpro to VP Group. The leadership team saw countless opportunities for further expansion, but their optimism was tempered by the risks in the operating environment. In Kenya, rising production costs and currency appreciation were eroding VP’s export advantage, while in the U.K., supermarkets refused to increase prices as they competed intensely for price-sensitive shoppers. Further squeezing VP’s margins was the cost of complying with retailers’ supplier standards, ratcheted up year after year. These factors had motivated VP’s push to vertically integrate and diversify. Yet the company still relied heavily on the U.K. market, where the heightened price sensitivity that arose after the 2008 financial crisis seemed to be the new normal.