Discuss about the Australian Dairy Industry.
Inglenook Dairy was established by Troy and Rachel Peterken in 2011. This is a family owned business that produces a variety of dairy products to its precious customers. In current, the business of Inglenook Dairy has been influenced by its competitors (Inglenook Dairy. 2017). This research paper is helpful to examine the structure of the Australian Dairy Industry and intermediate market effectively. Along with this, the paper also inspects Inglenook Dairy’s current strategy and also investigates the existing opportunities as well as threats within the dairy industry.
The Australian dairy industry is the third biggest dairy exporter in the world. Along with this, the industry is the third prime rural industry in Australia. It exports approximately 50% of the production to other nations. The industry produces an assortment of dairy products such as: milk powder, milk, butter, yoghurt, and cheese. The dairy industry mainly focuses in the region south-east of Australia. Moreover, the Australian dairy industry is standardized by the Dairy Produce Export Control Act 1924-1938 (Cth) (The Australian Dairy Industry. 2011). In current, the industry is the third largest agricultural industry of the nation with a gross profit of more than $4 billion per annum.
On the other hand, in 2001, the deregulation within industry influenced the structure of the industry. It is because of, since deregulation in 2001, the Australian dairy industry is operating its business in a highly deregulated industry milieu. Moreover, due to the deregulation, the dairy industry has become a major subject of competition in the marketplace (Dairy Australia. 2012). After deregulation, Australia has started export around 40% of production instead of 50%. The below graph is helpful to show the effects of deregulation within industry:
(Source: The Australian Dairy Industry. 2011).
Along with this, The Australian dairy industry has applied the Dairy Structural Adjustment Program (DSAP) to eradicate state as well as federal legislation within industry. Moreover, a large number of players (dairy firms) exist within the dairy industry. It shows perfect competition market structure of the Australian dairy industry. Moreover, the dairy firms are obliged to produce quality products because of the perfect competition market structure of the industry (ADIC. 2014). In this way, it can be assumed that, the structure of the Australian dairy industry is highly competitive. Therefore, the dairy firms are bound to offer high quality products at lower costs in order to maintain their profitability in the marketplace.
Along with this, the below diagram is helpful to show that how raw milk is formed into dairy products and also distributed as well as marketed to final consumers.
(Source: OECD. 2011).
The above image fully illustrates the stages that are used to convert raw milk in dairy products and also distributed to the end-users.
This section analyzes the perfect competition market structure as the intermediate market in the production as well as distribution of final dairy products. Along with this, there are numerous competitors exist in the marketplace those produce intermediate goods with the help of raw milk. These goods may be skimmed milk powder, cream, cheese, etc. Moreover, the producers and distributors of these goods are considered as the intermediate producers because of they also produce substitute goods in the intermediate markets (Dairy Australia. 2017). On the other hand, at the present time, there are a lot of dairy firms or producers those produce these intermediate goods within nation. What’s more, there are many distributors those distribute these intermediate goods or products in Australia. This thing show that intermediate market also exists within nation.
Apart from this, according to Dairy Australia, in current, dairy industry is facing a lot of challenges at the time of production stage of milk. Intermediate goods and perfect competition structure are the major reasons of these challenges in Australia. The major issue that is involved in the production is related to the investment (Courvisanos, Wells and Kesting, 2011). Due to the perfect competition structure, the dairy firms require huge amount of money to survive in the marketplace. The high investment may create financial risks to the dairy firm and it affects the production of milk usually. Furthermore, in Australia, almost all the dairy firms produce intermediate market or vertically market related products and this thing also make competition tough among competitors. In Australia, there are many dairy firms those produce as well as distribute final dairy products to the end-users (ABC Rural. 2013). As a result, because of these intermediate goods, the perfect competition market structure of the Australian industry has become more complex & competitive to the producers and distributors also.
After the finical crisis 2007-2008, there can be seen a decrease in the demand of the Australian dairy products. This situation led the decline in the prices and profits at various stages of the production chain of dairy industry. Along with this, the bargaining power of supplier can be seen low within industry because of a lot of dairy firms or producers deal in the same products. But, the buying power of customers is high because of many dairy firms exist in the marketplace. As a result, customers have many alternatives those reduce the power and profits of producer at various stages of the production (Lee, 2012). Moreover, the price of dairy products is highly volatile within industry that also declines the profits of the producers in Australia. The decline in input price, divergence of markets, and food security standards & regulations also influence profits over pricing within industry. Apart from this, the need of high investment and financial risks related to the dairy business also influence profits at various stages of the industry.
Inglenook Dairy’s adopts and implements numerous effective strategies to capture more and more potential profit of the industry. Inglenook Dairy executes these strategies into the processing as well as marketing of its own dairy products. For case, Inglenook Dairy produces and distributes top quality milk as well as dairy products within nation. Moreover, the dairy develops strong relationship with the producers of raw milk to fulfill the necessity of dairy products and to cover more profit within industry (Pryce and Hayes, 2012). Inglenook Dairy also implements a boutique model to produce dairy products and to distribute these products within the market in an immediate manner. This boutique model plays a significant role to provide competitive advantages and profits in the competitive marketplace. In this way, the current strategies of Inglenook dairy are beneficial and according the needs & requirements of the dairy industry.
In the Australian dairy industry, a lot of opportunities exist that Inglenook Dairy can capture to earn long run profits within industry. For case, the major opportunity is that the demand of dairy products is increasing in all over the world. In the condition, Inglenook Dairy can cover market of other countries especially Asian countries to earn long run profits effectively. Apart from this, there are some potential threats such as: high competition within industry, climate change, input prices, etc. that may influence the long run profitability of Inglenook Dairy.
There are some major suggestions or recommendations that might be helpful to Inglenook Dairy in order to accomplish its goals of sustainable long run profitability effectively. First of all, Inglenook Dairy should use advanced technologies to produce and distribute its products in the international market quickly. Along with this, Inglenook Dairy should expand its product line and market to fulfill the need of customers in a proper way. Inglenook Dairy should adopt and implement innovative business models to produce innovative dairy products and to offer the existing products in a more innovative way. Inglenook Dairy should make more use of Social media to know the valuable suggestions of customers (Mazzarol, 2014). In this way, these strategies would be beneficial to Inglenook Dairy to achieve its goals of sustainable long run profitability.
Conclusion
On the basis of the above analysis, it can be assumed that, the Australian dairy industry is a very popular industry in the world. It is famous because of its quality dairy products. The industry survives in a highly competitive market. Along with this, it is also observed that, Inglenook Dairy uses a lot of important strategies to survive and to capture more profits within industry.
References
ABC Rural (2013). Milking the profits – who’s talking the cream? Available At: https://www.abc.net.au/news/2013-04-22/milk-wars/4639078 [Accessed On: 21st Jan. 2017]
ADIC. (2014). Australian Dairy Industry. Available At: https://www.australiandairyfarmers.com.au/pdf/submissions/2014/ADIC-Agricultural-Competitiveness-Issues-Paper-April-2014.pdf [Accessed On: 21st Jan. 2017]
Courvisanos, J., Wells, P. and Kesting, S. (2011). Political Aspects of Innovation in the Australian Dairy Industry. Available At: https://federation.edu.au/__data/assets/pdf_file/0007/27871/008-2011-Courvisanos.pdf [Accessed On: 21st Jan. 2017]
Dairy Australia. (2012). Dairy 2012 Situation and Outlook Summary Report. Available At: https://www.dairyaustralia.com.au/~/media/Documents/Stats%20and%20markets/S%20and%20O/S%20and%20O%20May%202012/Situation%20%20Outlook%20Summary%20Report%20FinalLR%20FINAL.pdf [Accessed On: 21st Jan. 2017]
Dairy Australia. (2017). About the Industry. Available At: https://www.dairyaustralia.com.au/Industry-information/About-the-industry.aspx [Accessed On: 21st Jan. 2017]
Inglenook Dairy. (2017). Home. Available At: https://inglenookdairy.com.au/ [Accessed On: 21st Jan. 2017]
Lee, T. (2012). Milk Wars. Available At: https://www.abc.net.au/landline/content/2012/s3561483.htm [Accessed On: 21st Jan. 2017]
Mazzarol, T. (2014). The role of co-operative enterprise in Australian agribusiness, The Conversation. Available At: https://theconversation.com/the-role-of-co-operative-enterprise-in-australian-agribusiness-22147 [Accessed On: 21st Jan. 2017]
OECD. (2011). Competitiveness and Private Sector Development Competitiveness and Private Sector Development: Kazakhstan 2010 Sector Competitiveness Strategy: Sector Competitiveness Strategy. USA: OECD Publishing.
Pryce, J. and Hayes, B. (2012). A review of how dairy farmers can use and profit from genomic technologies. Animal Production Science, 52(3), pp.180-184.
The Australian Dairy Industry. (2011). The Basics. Available At: https://www.pwc.com.au/industry/agribusiness/assets/australian-dairy-industry-nov11.pdf [Accessed On: 21st Jan. 2017]
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