Strategic management includes the formulation and implementation of the major goals and initiatives that top-level management on behalf of the owners of the company. This gaols and initiatives are taken keeping the resources and assessment of the internal and external environment in mind. The aim of the report to understand and appreciate the strategy implementation on the corporation selected in the Assessment 1. In the assessment 1, the company that has been selected is Fonterra, New Zealand. This is the fact that the company is situated in New Zealand but it has a huge presence in the Australian market. Along with this, the company falls under the agribusiness section. The report includes the details related to the Australian agribusiness sector with the international opportunity available for the Fonterra Company. The different international strategies that are suitable for the company are discussed. In addition, the market where the company can expand the business operations is discussed with the appropriate and inappropriate model of entry. In the end, the recommendation for the future strategic direction of the selected Food-focused Agribusiness in the international market has been done.
Australian Agribusiness sector is highly diverse and due to which it involves the agricultural services and products across the food supply chain (Australian Government, 2018). Agribusiness sector of Australia is on the mature phase of its lifecycle. The industry value of the sector is expected to rise at an annualised 2.5% in the 10 years from 2022-23 (IBIS World, 2018). In addition to this, the agribusiness sector of the country is able to occupy the important place in the economy with the strong track record for attracting the international investment throughout the agricultural supply chain. This is found in the research that Australian agribusiness and food has remained an iconic part of the identity (Williams, 2017). The industry is estimated as a $256 billion dollar and it continues to grow the GDP and economic prosperity of Australia. This is found that 2017 is considered as the year of challenges and opportunities for the Australian food and agribusiness sector (Minter Ellison, 2018).
Fonterra Company is one of the leading dairy producing companies and its consumer products offered by the company represented 12% of production output. Fonterra’s increase the sales in the seven places which include the Asia Pac and Latin America (Euromonitor International, 2017). The company has the vast opportunities in the overseas market due to which they can expand its business operations in other countries. Fonterra is breaking the new ground in the South Asia which is a rapidly growing market of dairy in the foreign market. The company is involved in the joint venture with the many other countries and this is the only way through which they are able to manage their operations in different areas across the world. Currently, the company has the vast opportunities in the market where they are still not able to reach.
According to the research, this has been found that the company has the opportunities to expand their business operations in the market of Bolivia. The company offer the different products which include milk, cream, butter, yoghurt and cheese (Fonterra, 2018). This has been found that Cheese in Bolivia is expected to record with a retail volume of CAGR of 6%. In addition, it is expected that the currently the availability of the international brands in the cheese continues to be limited because there are import regulations. This will make the company expand their production units. Fonterra Company can easily meet the needs of customers related to the milk and cheese because they have the operations in the neighbouring country of Bolivia that is Chile. Fonterra has the opportunity for the drinking milk as it is expected to record a retail value of CAGR of 4% with the constant price of more than the expected period. Along with this, yoghurt and sour milk products are predicted to record the 5% retail value of CAGR at the similar and constant prices of the year 2017 (Euromonitor International, 2017). In addition, the other predicted to record a retail value of CAGR of 3% at the 2017 prices. Fonterra Company can avail the benefit of this growth in the market as this is the only way through which they can achieve their motive to expand the business.
Along with this, the company has the opportunity in the market because they have the possibility of the growth in the other countries which helps the company in achieving their desired mission and vision in the market. The company will also be able to generate the profit in the market because the demand for the products in the market is increasing that work as a factor for the company.
This section of the report includes the discussion related to the international strategies that are suitable for the Fonterra Agribusiness. In the current competitive world, different companies make use of the different international strategies (Grünig and Morschett, 2017). Similarly, Fonterra company make use of the different strategies and the same has been discussed below: –
The multi-domestic strategy is a strategy which is used by the company to attain the maximum local responsiveness by making the offering customized so that they can match the conditions of the nation (Rothaermel, 2015). Fonterra Company offers their brand according to the needs of the customers, For example; currently, the company has signed the agreement with Bangladesh because they found the opportunity for the Anchor brand. The company has decided to offer the Anchor brand which includes the limited products and services offered by the company (Euromonitor International, 2017).
The global strategy is one of the effective international strategies that reflect that the organisation has developed to target growth beyond the borders. This strategy is followed by the companies with the motive to enhance the sales of goods and services in the market. This strategy includes the three strategies which are an international, multinational and global strategy (Wheelen, Hunger, Hoffman and Bamford,2017). Fonterra Company makes use of this strategy because they are able to manage their business operations in more than 100 countries across the world. Along with this, the company still have the opportunities in the markets where the demands for the dairy products are increasing (Business school, 2018).
In the transnational strategy, the company sell the products in the different countries across the world. In this strategy, the company doesn’t focus on the local needs of the customers they offer the products which are their main products (Gaffney, 2018). Fonterra Company is operating the operations in many countries where they are offering the products which are offered at every location across the world. The company is currently offering all its products in Australia, New Zealand, Chile, Malaysia, Japan, Sri Lanka, Indonesia, Brazil, Philippines, Thailand and Vietnam.
The mode of market entry is one of the important factors which are considered by the company when they take the step to expand their business in different areas across the world. There are different types of market mode of entry are available which include exporting, licensing, franchising, Joint venture, Licensing and many others. Out of these models, it has been found that the most appropriate mode of entry for the Fonterra Agribusiness Company is a Joint venture.
The joint venture is the mode of entry in which the two or more firm join together to form a new business entity that is considered as the separate entity. The company come into the contract and they perform the business activities together (Yan and Luo, 2016). It offers the strengths to offer the terms of required capital. There are numerous benefits of this mode of entry due to which this entry mode is beneficial for the Fonterra agribusiness company.
It offers the large capital funds that remain suitable for the company. The risk that the company face in the market spread among both partners. In this mode of entry, both the company share the skills which include technical, technology, human skills, marketing and expertise skills in the market. These skills can be used by both the companies in the market where they are performing their business operations (Holmes et al, 2018). Both the parties put the combine efforts which help to achieve the business operations in the market. In the chosen market of Bolivia, the company should make use of this model of entry only which will help them in expanding the business effectively.
The most inappropriate mode of the market entry for the company is exporting the products in the other markets. In this mode of entry, the company need to the sale the products in abroad for the consumption and for-profit (Stoian, Rialp and Dimitratos, 2017). This mode leads to the chances of misunderstanding among the parties in which the deal is taking place. Along with this, the rise in the awareness among the market considering the safety this is the fact that the government has brought the regulations related to the import of the products which directly affect the exporting mode of entry of the Fonterra Company (Shen, Puig and Paul, 2017). According to the analysis, this is found that the exporting is considered as the inappropriate mode of entry for the company
It is suggested to the company to expand their business operations in the market of Bolivia as this will help the company to meet its organisational objectives. For the future directions, it is suggested to the company to set a production unit in the country and to export the products in the other neighbouring countries (NZ Herald, 2013). This will help them in covering the major portion of South America. Along with this, the Fonterra Company will be able to generate the profit with the expansion in the countries. This is the fact that the company will face the competition from the existing players of Bolivia but the Fonterra need to use the joint venture as a market entry mode with the help of which they will be able to face the competitors by making the appropriate strategies in the market
Conclusion
In the end, it can be concluded that Fonterra Agribusiness Company has already identified the opportunities and accordingly they have taken the step to expand their business operations in the market. Furthermore, the rise in the industry of the Food and agribusiness lead to more opportunities for the company. The opportunities in the growing market have been determined which shows the opportunities in the neighbour countries of Chile which include Bolivia and Peru. Further, this has been found that it has expected that there will be a rise in the dairy, milk and cheese products of Bolivia. Moreover, the company will not face any issues because they can easily understand the culture of the people because it is near to Chile. All these opportunities help the company in fulfilling their international strategies. Further, the discussion related to the Fonterra market entry mode has been done which shows that they should select the Joint venture for expanding the business in the market of Bolivia. The recommendations have been offered to the company for the near future market.
References
Australian Government (2018) Agribusiness [Online]. Available from: https://www.austrade.gov.au/International/Buy/Australian-industry-capabilities/agribusiness [Accessed on 3rd October 2018]
Business school (2018) Insight into New Zealand’s biggest company, Fonterra [Online]. Available from: https://www.business.auckland.ac.nz/en/about/news-and-media/news/mr-2014/08/04/insight-into-new-zealands-biggest-company-fonterra.html [Accessed on 3rd October 2018]
Euromonitor International (2017) Dairy in Bolivia [Online]. Available from: https://www.euromonitor.com/dairy-in-bolivia/report [Accessed on 3rd October 2018]
Euromonitor International (2017) Drinking Milk Products in Bolivia [Online]. Available from: https://www.euromonitor.com/drinking-milk-products-in-bolivia/report [Accessed on 3rd October 2018]
Euromonitor International (2017) Fonterra Co-operative Group Ltd in Packaged Food [Online]. Available from: https://www.euromonitor.com/fonterra-co-operative-group-ltd-in-packaged-food/report [Accessed on 3rd October 2018]
Fonterra (2018) Products [Online]. Available from: https://www.fonterrafoodservices.com.au/product.php [Accessed on 3rd October 2018]
Gaffney, C. (2018) Differences Between a Multidomestic & a Transnational Company [Online]. Available from: https://smallbusiness.chron.com/differences-between-multidomestic-transnational-company-33807.html [Accessed on 3rd October 2018]
Grünig, R. and Morschett, D. (2017) Developing international strategies. New York: Springer Berlin Heidelberg.
Holmes Jr, R.M., Hoskisson, R.E., Kim, H., Wan, W.P. and Holcomb, T.R. (2018) International strategy and business groups: A review and future research agenda. Journal of world business, 53(2), pp.134-150.
IBIS World (2018) Agribusiness – Australia Market Research Report [Online]. Available from: https://www.ibisworld.com.au/industry-trends/market-research-reports/thematic-reports/agribusiness.html [Accessed on 3rd October 2018]
Minter Ellison (2018) Australian food and agribusiness 2017 key themes [Online]. Available from: https://www.minterellison.com/articles/australian-food-and-agribusiness-2017-key-themes
NZ Herald (2013) Chile a model for Fonterra expansion [Online]. Available from: https://www.nzherald.co.nz/the-country/news/article.cfm?c_id=16&objectid=10887780 [Accessed on 3rd October 2018]
PWC (2018) Agribusiness & Food [Online]. Available from: https://www.pwc.com.au/agribusiness.html [Accessed on 3rd October 2018]
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Stoian, M.C., Rialp, J. and Dimitratos, P. (2017) SME networks and international performance: Unveiling the significance of foreign market entry mode. Journal of Small Business Management, 55(1), pp.128-148.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E. (2017) Strategic management and business policy. pearson.
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Yan, A. and Luo, Y. (2016) International Joint Ventures: Theory and Practice: Theory and Practice. New York: Routledge.
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