Question:
Discuss about the Strategic Management of Bellamy Company.
Bellamy is an organic food manufacturer which manufactures more than thirty products for children.
Ownership
A Tasmanian family founded the company in 2004 and was keen on providing healthy food to their children. Bellamy is certified by NASA and the baby food manufacturer produces and packages its products in Australia.
History
The share of the company is traded on Australian Stock Exchange. The company has remained the pioneer in the organic food manufacturing segment for babies.
Business Scope
Bellamy is more than a hundred-million-dollar company. The company’s offshore business is a major source of revenue and the purpose of the company is to provide nutritious organic food to babies met with standards of Australian Food Authority
Size
The company has the license to sell its products in more than three thousand stores in Australia including Coles and Woolworths supermarket.
The company manufactures wide variety of food products and its market can be segmented into the following categories
Children who are newly born to six months old-For infants various food products are manufactured by Bellamy including Organic Infant Formula Step 1 which provides meets the guidelines of Australian Food authority. The company also manufactures solid foods for infants like cereals.
For babies who are six months to more than a year old-Bellamy manufactures products like Organic Follow-on Formula Step 2 which provides the essential vitamins, amino acids and nutrients that will be required by a six months old baby who can no longer depend on breast-feeding as the only food supply. The company manufactures cereals, pasta and food that can be instantly served to babies.
For children who are one years to more than three years old- The company provides toddlers organic food of highest quality like Organic Toddler Milk Drink Step 3 which is a specially devised formula made of organic cow’s milk and thirteen essential vitamins. This drink also provides iron, calcium, fat, inulin and other nutrients required for proper growth of children. Snacks and pasta are other products manufactured by Bellamy.
In the domestic market that is Australia the brand is positioned as a premium manufacturer of organic products. The company exports its organic food products in major South East Asian countries including China, Singapore, Malaysia, Vietnam, Taiwan, Hong Kong .The company has subsidiaries in Shanghai and Singapore to handle the marketing and distribution activities in South East Asia. The company has plans of expansion in the United States and the United Kingdom and New Zealand is also a dominant market of Bellamy.
The macro environmental factors are the political, legal, socio-cultural, economical, environmental and technological factors of the external environment that should be analyzed by Bellamy for its sustainability, expansion and growth in Australia and international market. The external environment has several opportunities for a business and poses numerous threats to the business. Bellamy should analyze its macro environment to develop strategies and tactics for survival, market growth, product growth and market expansion (Kraak and Story 2015). Bellamy can utilize its internal strength to take leverage of opportunities of the external environment and the company can reduce the threats of external environment by minimizing its weakness. The PESTEL framework can used by Bellamy for the analysis of its external macro environment.
Political factors
These factors include the policies of Government like minimum national wage, labor laws, government regulation related to taxes like corporate tax, value added tax, foreign trade policy, import and export regulations which will affect the business of Bellamy. The Australian Government has Free Trade Agreements with other countries and Bellamy can utilize this opportunity for market expansion in off shore countries like South East Asian. The Australian Government provides several grants like Export Market Development grants and Bellamy can make leverage of this support from Government for expansion in off-shore market. The Australian Government provides financial assistance by its export credit Agency –Export Finance and Support and this factor can be utilized by Bellamy for its expansion in new markets for example, the United States and the United Kingdom(Ho 2014).
Economic
Australia is ranked number five in Index of Economic Freedom and the economic stability and transparent governmental policy of the country provides opportunity for Bellamy to sustain its business in the country. The quality of life in the country is high and people have high disposable income and purchasing power of consumers is high which can be an advantage for Bellamy. The ease of doing business in Australia is high with stable economic conditions.
Socio-cultural factors
The consumers of Australia are conscious about the health of their babies and children and organic food products are trendy among customers. The organic food products provide the necessary nutritional value to children and parents of Australia rely on the pioneer brand Bellamy while purchasing food for the children. The food products children consume during childhood are of prime importance for the physical and cognitive development of children and Bellamy has catered to this market need and positioned itself as a premium organic food brand.
In 2008, melamine-tainted milk powder caused death of six infants in China and since then the consumers of the country has been conscious about the food products. This food scandal in china can be an opportunity for Bellamy for market expansion as the company can position itself as a safe brand providing the essential nutritional value to the children of China.
Technological Factors
Australia is ranked among the top OECD nations as the Australian Government provides financial assistance in the R & D sector. The country provides numerous opportunities for Bellamy to invest in research and development of its organic food products which has special formula to provide the right nutrition to children. Also Australian government provides assistance to collaborate on digital platform with South East Asian countries for distribution and expansion which is an advantage for Bellamy (Armstrong et al. 2014).
China’s e-commerce market is more than a trillion with e-commerce giants like Alibaba. The country has made technological advancement in farming and digital technology is highly efficient in China. Bellamy can take leverage of this situation to expand its business in China.
Environmental factors
The environmental factors in Australia provide favorable conditions for Bellamy as the country has huge opportunities for agro-based companies. The country has demand for clean, green and safe products and Bellamy can take advantage of this opportunity for manufacturing its organic products. Products of organic farming is free from harmful chemicals and fertilizers and are rich in antioxidants and Australia is often considered one of the best countries to encourage environment friendly method of organic farming. Bellamy can take leverage of the natural resources and organic farmland of Australia to manufacture its products.
Legal factors
The food products of Bellamy are for babies and therefore the company has to abide by the health and safety standards of Australian Food Authority and consumer laws of the Australian government should be taken into account by Bellamy while manufacturing its products. The laws of Australian Government are transparent and Bellamy should set up its pricing policy keeping in mind the consumer laws of the government. The company should provide workplace safety to the employees of agricultural sector and organic farming sector and cater to their health conditions and wages at work which will enable the company to abide by the labor laws. Other laws of the Australian government relate to fair competition in the local market and tax policies should also be taken into account (Hemmerling, Hamm and Spiller 2015).
From the above PESTEL analysis it can be concluded that the Australian government provides favorable conditions for Bellamy for sustaining its business.
Michael Porter has analyzed five forces of market to critically examine the attractiveness of an industry and the competitive forces prevailing in the industry. The five forces of Michael Porter are bargaining power of consumers, bargaining power of suppliers, threats of new entrants, threat of substitutes and industry rivalry. These five forces can enable Bellamy to contemplate on its strength and weakness for sustaining its business.
Threat of Substitutes
The demand for organic food products for infants and children is huge and there are few substitutes of products of Bellamy which are meets the standards of Australian Food Authority. The company has a good product line with products ranging from cereals, pastas to specially formulated milk products for children. Therefore, Bellamy faces relatively low threat from substitute of its products however products from global giants like NESTLE which also specializes in food products brands for children can be threat for Bellamy. However the company has been pioneer in organic food brand and has a high brand value which enables Bellamy to combat the threat of substitutes (Bellamy 2014).
Bargaining power of Supplier
Organic farming requires special techniques for soil and crop health. The organic farming sector is dependent on organic fertilizers and special attention should be paid to crop health, nutrient availability and soil structure. So bargaining power of Suppliers of Bellamy is relatively high as the company is dependent on its suppliers for their technical know-how and switching costs of suppliers can be relatively high for the company.
Bargaining power of consumers- Consumers are willing to pay best prices to buy the nutritional food products if Bellamy and they do not negotiate with the price of food products for their children. There are very few players in the market who produce organic food products for children. Consumers rely on the pioneer brand Bellamy for its high-quality food products and are and the company has high perceived value on the minds of consumers (Grunert, Hieke and Wills 2014). The bargaining power of consumers is relatively low in Australia as consumers do not have options to switch from one brand to another due to few players of organic food products for children in the market. Customers are willing to pay a premium price to buy products of Bellamy both in Australia and in global markets.
The threat of new-entrants
Bellamy faces the low threat from new entrants in the market. The entry barriers in the organic food industry are relatively high due to high investment in the operational and distributional costs ( Flammer 2015).A company willing to make its entry into the market of producing organic food products has to invest the huge amount of money in Supply Chain and Logistics Management to build an efficient network of suppliers and distributors. Marketing and promotional costs for the company will also be high as the company has to invest a lot of money to build its brand image in the mind of customers (Cairns et al 2013). In the organic food market for children, consumers tend to rely on well-established pioneer brands which already possess the technical know-how for manufacturing the nutritious organic food products of children and consumers will not prefer to experiment with new brands as it can pose risk to the health of their children (Grimm, Hofstetter and Sarkis 2014). Therefore, Bellamy has the advantage of creating high customer perceived value by providing high-quality products to consumers and do not have to worry much about threats from new entrants.
Market Rivalry
Bellamy faces medium market competition from global giants like NESTLE and from local players like Only Organic. Other competitors of the company are Blackmores, Devondale, Aussie baby. The company has the advantage of being the leading organic food manufacturer and has a well-developed product line (Dembek and Bhakoo 2016). However, the competition in the market can be combated by Bellamy by continuously upgrading its technological know-how.
It can be concluded from the above Porter’s five forces analysis that the bargaining power of suppliers for Bellamy is relatively high and market rivalry is medium-high which can pose threat for Bellamy. However, the threat of substitutes, the threat of new entrants and bargaining power of suppliers are low for Bellamy and these factors can provide the opportunity for the company to sustain its business (Reim, Parida and Örtqvist 2015).
Doing this analysis is very essential for any and every organization in order to know the environment or the conditions in which the industry is working (Markovina et al 2015). In other words, it helps the company understand the different forces that might affect the profitability and it is according to this that the organization sets its goals and strategies accordingly. In the same way, it has also been very beneficial for Bellamy company to understand its competitive environment through this Porter’s five forces and in turn, it has helped them to set their strategies accordingly (Child and Hsieh 2014). It enabled them to know the competition existing in the market and the strategies that they need to take in order to overcome that competition. Apart from this, it also enabled them to know the bargaining power of their consumers, the threat of entrance of new firms etc, as a result of which, they could conclude that they have to constantly keep on diversifying their products and keep on updating their technological know-how so that they can satisfy the changing demand of the consumers as they know that their buyers can easily shift onto other alternatives as they are available in plenty in the market.
This interconnectedness between the macro-environmental forces and the competitive forces helps the company to formulate its overall strategic planning that might turnout to be profitable for the organization in the long run (Lee and Yun, Z.S., 2015). It enabled Bellamy company to know about both it’s internal as well as the external factors on which it needs to work in order to overcome all the loopholes and increase their profitability in the long run. The company realized that it needs to focus on the external factors like demographic environment, natural forces, technological forces, political forces and also the social and cultural forces. This is a point of prime advantage for this company since it is very much well aware of the target market (Knox 2017). In other words, Bellamy company is mainly dealing in the baby organic food products and for this reason (Ladhari and Tchetgna 2015), they are saved from the time that would otherwise have been wasted in dividing the population according to age, gender, location, race and occupation (Reim, Parida and Örtqvist 2015).
As far as the economic factor is concerned, Bellamy has realized that in this present scenario, there is a high demand for top quality baby food products and people are ready to spend the good amount of their income in order to get a good health for their babies(Wang 2016 ). However, Bellamy has to constantly keep on upgrading the quality of their products in order to meet with the ever-increasing and changing demands of their customers (Wang 2016).
Natural forces are perhaps one of the most important aspects that Bellamy company needs to focus upon because their main motive is to provide quality food to their customers, in other words, their main objective is to supply fresh, healthy and safe food to the babies of their customers. This company guarantees that they use all the best quality and fresh, natural input products for the production of their items. They take all the locally cultivated products for the production of their goods and services, as a result of which any change in the natural environment might affect their production a great deal, any natural calamities will also affect their production and might, in turn, hamper their sales and their profit margins. Hence, they always need to keep sufficient backup or alternatives at hand so that their production does not get affected even if there is shortage of input materials but they must under no circumstance compromise with the quality of the product
The increase in health consciousness which seems to be the major driving force for this industry. The new products and market research are mainly based on the long-term infant development, and many products among this are also very much nutritious and added with special health and nutrient value to increase the appeal (Schaltegger and Burritt 2014). The return of many expecting mothers into labor pain followed by childbirth has also resulted in increasing the sales of the company. Parents are not willing to compromise at all with the health of their children and want to give them the apt, healthy and fresh nutrients right from their childhood in order to give them a fresh, fit, healthy and a bright future, and as the market trend suggests, the parents are not willing to cut down expenditures on baby food.(Maestre et al 2014).
Just like the many other tools pestle, SWOT etc are used to examine the internal and external sources of a company, VRIO is one such model that is used to examine the internal sources of a company
V (valuable) – The first and the foremost thing that this framework helps to follow is that whether the resource adds value by allowing a firm to exploit the opportunities or defend against threats. As far as the Bellamy Organic Food is concerned, it really helps to add value because it mainly operates in baby food products. This is something which is of a great demand in today’s scenario and it has been seen that all the customers in general and the parents in particular are very much alert about the health of their children a naturally have a high demand for the best available baby food products in the market and by allowing good amount if discounts on their products, Bellamy is also able to attract a strong customer base.
R (rare)- having resources which are uncommon and rare will obviously help in attracting more number of customers and this in turn will give competitive advantage to the company. But at the same time, if the resources used by the company are common and easily available, then there can be a good amount of competition as the customers can easily switch over to the other alternatives that are available in plenty in the market.
As the resources used by this company are rare, valuable and very costly to copy or imitate, it helps the firm to achieve competitive advantage. There are like three reasons that makes the resources had to imitate, they are
As history has it, parents will always be very much concerned about the health and well being of their kids and it is for this reason that Bellamy started producing their products with the best available resources. If the resources that are used are uncommon in nature, they will have a good competitive advantage and the other companies will obviously find it tough to identify the particular resources. It also helps in developing a interpersonal relationship between the company and the customers as the customers have vested their faith in Bellamy products for the well being of their babies.
Bellamy Company has been able to organize its management system, its policies, and processes and also the organizational structure and culture so that it is able to fully realize the value of its management system, and it has also been able to realize fully the potential of its resources and capabilitie.
Conclusion
hus, it is concluded from this paper that Bellamy Company has performed well in the past few years as is reflected by its sales revenue, which is evident by the fact that they have been able to satisfy the needs and demands of their consumers. But at the same time, there is also the threat of the entrance of new firms and the customers can easily switch over to other alternatives as there are plenty, operating in the market. This makes it very much essential for the company to keep on upgrading itself for improving their production both in terms of quality and quantity.
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