This essay is aimed at reading about a company that opted to adjust with its core activities to produce better impacts with and avoids risks as well. The company is Fonterra, which is internationally recognized as being the world’s largest suppliers of dairy products (Fonterra, 2018). Fonterra already sells branded products across Australia, New Zealand, and parts of Asia. However, the company was strongly in disfavor of operating with the similar strategy in the United States and Europe. Reasons for this change in ‘Power Brand’ strategy which Fonterra has maintained since 2008, was simply to avoid market competition and minimize market risks. Indeed, Fonterra decided to team up with ‘Dairy Farmers of America’ by making a joint venture with the company. Fonterra had only a few options at the time it entered in the United States. The management team at Fonterra decided to collaborate with ‘Dairy Farmers of America’ instead of launching its own brands (Fonterra, 2018). Moreover, the purpose of this assignment is to understand why Fonterra has made adjustments to its ‘Power Brand’ strategy. The purpose is being served in this essay with the help of a theory related to market and marketing orientation.
A very brief background of the change in strategy: Fonterra had always relied on launching one of its four brands such as Anmum, Anlene, Fernleaf and FoodServices for a new market. It did so in Malaysia, Bangladesh and other parts of Asia. It did so in China where it launched Anchor dairy brand (Otago Daily Times Online News, 2018). However, it opted to go the other direction while intended to enter in the United States. According to the company’s officials, the move was opted to avoid possible competition from already operating businesses and to carry a low risk. Trade barriers and high branding costs produced unfavorable circumstances for Fonterra. Consequently, Fonterra had no other option than to switch to a joint venturing with ‘Dairy Farmers of America’ (Otago Daily Times Online News, 2018). Fonterra decided to switch to a strategic alliance instead of adhering to its ‘Power Brand’ strategy.
Fonterra’s strategy to operate as a milk ingredient supplier, not as a food company, can be understood from a few management theories. One of such theories is ‘Core Competency Theory of Strategy’, which says that firms must use its areas of strengths to fetch better results. It also encourages to use a strategy, which is hard for its competitors to imitate (Kolk & Rivera-Santos, 2018). Fonterra does it exactly what is being suggested to do in the ‘Core Competency Theory of Strategy’. Fonterra denies any threat of competition from food companies in the United States by following other than a traditional management strategy. The company instead of adhering to its branding strategy went for a strategic alliance with Dairy Farmers of America. Hence, instead of competing with food companies, Fonterra became their suppliers for the selected range of milk ingredients.
Frederick Taylor’s Scientific Management is another popular management theory that can help to understand a change in one of the core strategies being adopted by Fonterra. ‘Scientific Management’ advocates an evenly shared work responsibility between workers and the management. It means that the management should carry responsibilities such as giving instruction and performing the science part of work. On the other hand, workers would contribute with their hard works (Waring, 2016). It is to be noted that “Dairy Farmers of America” is a co-operative company where both farmers and leaders have separate roles and responsibilities to perform. Farmers will take care of the farming works. On the other hand, management will be responsible for adapting to feasible and robust management strategies to keep the business move on. Fonterra also is a co-operative dairy company, which is engaged in producing pure and fresh milk with the help of local farmers in New Zealand and in other parts of the world. The fact that Fonterra is the largest supplier of milk and milk-ingredients to various parts of the world just suggests that there is a good work orientation between the company’s management and local farmers.
This phenomenon is understandable from the modern marketing theory. Contrary to the traditional image of businesses, businesses have now started to grow in interest in a market-orientation strategy. This is particularly true in case of Fonterra, which moved away from its core strategy to launch one or few of its four power brands in each one of markets it entered. Instead, it collaborated with the ‘Dairy Farmers of America’ to be away from business risks and avoid the possible market competition. The modern marketing theory says that to achieve a sustained success, firms must be better than their competitors with respect to satisfying the needs of customers. In practicality, this is not yet identified whether there is any connection between marketing strategies and success. Since organizations like Fonterra are now more focused on marketing strategy, researchers will need to identify whether there is any true linkage between marketing strategies and business performance. As per assumptions of a number of researchers, there does not exist any universal business strategy. It means that one strategy cannot be an optimal choice for the rest others. Instead, types of strategies follow a contingency-based approach, which means that the effectiveness of strategies will depend on a fit or congruence between environmental and structural variables. Therefore, the primary focus of contingency theory has traditionally been on a relationship between environmental characteristics, organizational factors, and the strategic response from organizations (Wadongo & Abdel-Kader, 2014).
A recent emergence of a contingency perspective is due to its usefulness in understanding a handful of things such as strategy switch-over of businesses. As opined by Hall (2016), international distributor relationships have the impact of contingency factors. Suddaby (2015) analyzed and found contingency factors as supporting and influencing the technology transfer. Kim et al. (2015) observed that contingency factors variably impact the organizational structure. In line with the recent reemergence of contingency-oriented studies, this essay is aimed at identifying whether marketing strategies have any contribution in contemporary organizations or there is any relationship between strategies and market orientation.
The most fundamental and philosophical point of view of modern marketers is their centrality to marketing practices. The marketing concept says that in order to attain a sustained business, it is important that businesses are more capable of meeting the needs of consumers. In addition, firms that adapt to and implement the marketing strategy are termed to be market-oriented (Cohen & Olsen, 2015). Market-oriented firms are more often involved in activities to generate and implement market intelligence. Schniederjans & Schniederjans (2015) said that firms with better capabilities in adapting to types of market knowledge will be more successful due to their improved ability to access consumer data. The large-scale data that such firms have access to, will enable them to offer relevant products and services. These firms will expectedly be able to create greater satisfaction and customer value.
Kim et al. (2014) pointed out that firms that are market-oriented have more chances to fetch success and take advantage of opportunities, which are there in markets. Mole, North & Baldock (2017) found that there is a relationship between market-orientation and a new product success. In fact, most researchers who are aimed at finding the impact of being market-oriented, suggest that firms with better market knowledge are often more innovative. It means that such firms would be able to improve their overall performance. Jajja et al. (2017) observed that firms with higher innovation have maximum success.
In line with the marketing strategy literature, firms that follow a market-oriented strategy are more able to sense market trends and identify customer needs. Both of variables as stated in preceded line are necessary to produce a superior organizational performance. It suggests that a market-oriented approach is now necessary to produce bigger impacts with. Shepherd & Suddaby (2017) found that a market-orientation approach creates a proactive and an aggressive character of doing the business towards meeting consumer needs. Mom, Fourné & Jansen (2015) opined that firms with a market-oriented approach will produce wonder only when it is able to make a good balance between other strategies and its execution and is also aimed at attaining maximum advantages from the market. Moreover, aligning high-levels of market orientation with other marketing strategies of the same level is called a “recommended fit (RFit)”. This is suitable for those firms that follow high aggressive strategies. On the other hand, firms that follow low aggressive strategies, it is advisable to follow low-levels of market orientation. This is called an “other fit (OFit)”. The difference in aggressiveness can be due to the high implementing cost of a market orientation. However, firms with a less aggressive approach towards a market orientation will perhaps enjoy low market shares compared to more aggressive firms.
As firms, those operate in the dairy industry face greater competition in the United States and in Europe, marketing strategy must continue to be one of their weapons to produce better impacts with. Fonterra appears to have followed a wiser strategy towards attaining its mission to become a global leader in supplying fresh and quality milk and milk-ingredients. The company seems to have followed an appropriate “fit” by identifying market needs in the United States and relevant challenges of operating as a brand. It is appreciable as well how Fonterra was able to avoid the possible competition in the United States (Maron et al., 2015). In spite of relying on its successful ‘power brand’ strategy, Fonterra did decide to go the other way of it. As it is evident, Fonterra is enjoying no competition in the United States and is also being able to reach to a huge consumer base in the United States.
Contingency theory looks still valid in modern businesses as it encourages an appropriate combination of organizational structure, strategy and the environment businesses operate in. Indeed, these combinations have been found more relevant for success. Therefore, this also can be said that an appropriate fit between market orientation and other marketing strategies is a profitable choice for modern businesses (Otley, 2016). The findings suggest that Fonterra follows the contingency approach and relies on a combination of a high degree of a market orientation and a more aggressive market growth to operate in the United States. It means that Fonterra has no real rivalry and is in a good position to make more profits compared to food companies in the United States. The contingency approach of Fonterra is a potential move but has a few limitations. The combination of a market orientation and other marketing strategies being adopted by Fonterra is productive only in given circumstances and depending on the profitability indicators being applied by the company.
The decision to collaborate with “Dairy Farmers of America” and operate as a joint venture was indeed a very calculated approach of Fonterra. Since the dairy industry is prone to the greatest amount of risks, Fonterra can fall to serious troubles leading to a damage being done to its different brands. Some of the areas of greatest risks to this industry are innovating new products, packaging and applying solutions to enter new markets. The list of risks also includes reliably, profitably and efficiently offering milk and milk-based products while maintaining the quality of products and services as well. Be able to maintain the highest standard of compliance with the industry and government regulations on worker safety, food quality and the environment in the United States is also a huge challenge (Kitching, Hart & Wilson, 2015). Hence, there was the need for a strategy, which is much safer and secured as well.
Conclusion:
In summary, this can be concluded that Fonterra was able to effectively understand the US market and so, planned to operate in a joint venture with “Dairy Farmers of America”. Fonterra considered a switch over from its core strategy to a market-oriented approach to enter in, the US market. Fonterra played safer by not being into a direct competition from food companies in the United States. Rather, Fonterra opted to supply those food companies the milk and the chosen milk-based products. Therefore, the contingency combination being followed by Fonterra and as mentioned in this essay suggests that Fonterra has a good understanding of its competency and the market competition in the US.
References
Cohen, J. F., & Olsen, K. (2015). Knowledge management capabilities and firm performance: A test of universalistic, contingency and complementarity perspectives. Expert Systems with Applications, 42(3), 1178-1188.
Fonterra. (2018). Fonterra set to make further gains in global market with new Bangladesh partnership. Retrieved from https://www.fonterra.com/nz/en/our-stories/media/fonterra-set-to-make-further-gains-in-global-market-with-new-bangladesh-partnership.html
Hall, M. (2016). Realising the richness of psychology theory in contingency-based management accounting research. Management Accounting Research, 31, 63-74.
Jajja, M. S. S., Kannan, V. R., Brah, S. A., & Hassan, S. Z. (2017). Linkages between firm innovation strategy, suppliers, product innovation, and business performance: insights from resource dependence theory. International Journal of Operations & Production Management, 37(8), 1054-1075.
Kim, M. J., Chung, N., Lee, C. K., & Preis, M. W. (2015). Motivations and use context in mobile tourism shopping: Applying contingency and task–technology fit theories. International Journal of Tourism Research, 17(1), 13-24.
Kim, T. H., Lee, J. N., Chun, J. U., & Benbasat, I. (2014). Understanding the effect of knowledge management strategies on knowledge management performance: A contingency perspective. Information & management, 51(4), 398-416.
Kitching, J., Hart, M., & Wilson, N. (2015). Burden or benefit? Regulation as a dynamic influence on small business performance. International Small Business Journal, 33(2), 130-147.
Kolk, A., & Rivera-Santos, M. (2018). The state of research on Africa in business and management: Insights from a systematic review of key international journals. Business & Society, 57(3), 415-436.
Maron, B. J., Rowin, E. J., Casey, S. A., Link, M. S., Lesser, J. R., Chan, R. H., … & Maron, M. S. (2015). Hypertrophic cardiomyopathy in adulthood associated with low cardiovascular mortality with contemporary management strategies. Journal of the American College of Cardiology, 65(18), 1915-1928.
Mole, K., North, D., & Baldock, R. (2017). Which SMEs seek external support? Business characteristics, management behaviour and external influences in a contingency approach. Environment and Planning C: Politics and Space, 35(3), 476-499.
Mom, T. J., Fourné, S. P., & Jansen, J. J. (2015). Managers’ work experience, ambidexterity, and performance: The contingency role of the work context. Human Resource Management, 54(S1), s133-s153.
Otago Daily Times Online News. (2018). Fonterra strategy changes to selling ingredients, services. Retrieved from https://www.odt.co.nz/business/fonterra-strategy-changes-selling-ingredients-services
Otley, D. (2016). The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, 45-62.
Schniederjans, D., & Schniederjans, M. (2015). Quality management and innovation: new insights on a structural contingency framework. International Journal of Quality Innovation, 1(1), 2.
Shepherd, D. A., & Suddaby, R. (2017). Theory building: A review and integration. Journal of Management, 43(1), 59-86.
Suddaby, R. (2015). Can institutional theory be critical?. Journal of Management Inquiry, 24(1), 93-95.
Wadongo, B., & Abdel-Kader, M. (2014). Contingency theory, performance management and organisational effectiveness in the third sector: A theoretical framework. International Journal of Productivity and Performance Management, 63(6), 680-703.
Waring, S. P. (2016). Taylorism transformed: Scientific management theory since 1945. UNC Press Books.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download