Discuss about the Marketing and Management Co-operative Dairies.
The Fonterra Co-operative Group Limited is owned by the cooperative dairy companies and by the farmers of the country. The establishment of the company happened in 2001 after the deregulation that was done by the government. This helped in merging the largest dairy companies of New Zealand, which were New Zealand Dairy Group and Kiwi Co-operative Dairies. The company now has its presence felt in more than hundred companies and is one of the largest exporters of dairy in the world. The headquarters of the company is located in Auckland, New Zealand and has more than thirty manufacturing sites, which is distributed around the country. The company currently employs around 22,000 employees who work for the organization and helps the company to achieve the desired targets (McGiven, 2016).
The company collects milk from the suppliers who are mainly the farmers and consumes around 17 billion litres every year, which is about 87 percent of the production of milk in New Zealand. It also acquires 4.9 billion litres milk from outside the country through various farmers and the joint ventures that the company has with others. The milk is then processed and made in to various products, which varies from milk powder to ice cream. The products are then packaged and distributed across the country and on a global scale. It is seen that the developing countries are more inclined towards high nutrition and brands that are associated with health and prefer the products such as Anlene and Anmum. The developed countries prefer products like Anchor and Tip Top, which can be differentiated by its taste. The other products that are produced by Fonterra are Calci Yum, Country Soft, De Winkel, Fresh ‘n’ Fruity, Galaxy, Ferndale, Primo and Kapiti to name a few. The company manufactures various dairy products that include milk, butter, ice cream, bread, cheese, yoghurt, and milk powder (Sneddon et al., 2015).
The vision of the company is to provide nutrition that is gained by dairy naturally to everybody, everyday and anywhere.
The mission of the company is to expand its operation globally and identify the areas that have high values for demand in milk so that the company can easily achieve the targets.
The goal of the company is to build strong relationships, which will last for a long-term with the partners and maintain the operations from the bottom level of the organization.
The objective of the company is to increase the sales volume and creating more values by identifying new markets where it can operate and meet the needs of the consumers with respect to requirements in dairy (Addison & Esar, 2013).
The company has a very steady and secured supply of milk from the various farmers in New Zealand. The farmers have the trust in the company because of the long-standing relationship that the company maintains with the stakeholders.
The company has merged with other dairy companies that is present in New Zealand so that the supply chain of the company can be increased and the resources that are available in the other companies can be utilized fully (Langford, 2013).
Since, the customers of New Zealand consume large quantities of dairy products, it helps the company to sell easily the products that they are manufacturing.
The company hires staffs that are best suited for the job in the company. The employees are allotted the jobs that they are qualified enough to carry out and put their expertise in full effect. This way the company does the management of the employees easily (Harris & Gibb, 2016).
The company maintains a good relationship with the farmers who supply them the milk for manufacturing the different products. The competitors can offer a better price for the milk and cancel the contract that the farmers and suppliers have with Fonterra (Langford, 2013).
The merges that the company made with the two different companies has made the overlapping of the resources that the company has. This has made the efficiency of the employees to decline and is seen in the production process of the company. The infrastructure and the relocation of the manufacturing sites are taking heavy tolls from the point of view of the company.
As the raw materials are perishable in nature, the dependence on the climate and the ecology is a major factor for the company as they are too reliable on it. These factors play a major role in hampering the productivity level of the company (Harris & Gibb, 2016).
Since, the company has goodwill in different countries across the globe; the entry to new markets will not create any barrier for them. This will help the company to gain access in any market that they want to target (Langford, 2013).
The World Trade Organization (WTO) through various negotiations has made the cost lower from the viewpoint of the suppliers, which helps the company to purchase the raw materials at a cheaper price.
The company can increase the brand identity by having a clean green image, which will add more values to its products in front of the customers. This image will help the company in selling more products and maximizing its profits (Harris & Gibb, 2016).
The company while going global may face competition from the local suppliers where they will increase the cost of the raw materials so that the company cannot purchase it. In this way, the local companies will restrict the entry of Fonterra in the market.
The competitors who supply dairy products on a local scale may take a global approach, which will hamper the sales activity of Fonterra (Langford, 2013).
The media and the legal formalities of some countries are very complicated, which will make the company to delay in their activities of producing the products in that country.
The company needs to rely on the exchange rates of the currency that they wish to gain entry. Since, the rates fluctuate on a daily basis the company will have to change the prices of the products accordingly, which will make them in having a negative brand image in front of the customers (Harris & Gibb, 2016).
The government of the country has issued guidelines to have a healthy diet by consuming more dairy products. The company will have more potential in the exporting market due to the new trade agreements that has taken place in the country with the company. There has been an increase in the tension between the political parties and the trade agreements between New Zealand and the other countries, which may hamper the sales of the company. The overseas network has increased the tariffs on the imported goods, which has enabled the local companies to thrive (Patemoster, 2015).
The recessions and the financial meltdown on a global scale has seen a decrease in the demand of the exported goods. The constant change in the exchange rates affects the company positively or negatively. The exports of the goods may become cheaper or expensive depending on the rates of other countries. The interest rates in the country are very high, which directly affects the farmers who supply milk to the company. It can restrict the investments on a long-term, which will result in low productivity of the company (Pham Duy & Chau, 2015).
The increase or decrease in the birth rate and the life expectancy of the people in the domestic and overseas market will affect the sale of milk products for the company. A number of people are being able to identify that they are lactose intolerant, which affects the sales of the company. The consumers are increasingly changing their tastes and behavioral pattern that is they are shifting their focus from milk products to fruits and drinking herbal teas (Lee et al., 2012).
The improvements in infrastructure with respect to transportation will see an increase in the products to be circulates at a reduced cost. This will help in satisfying the customers and decrease the amount of wastage and shrinkage for the company. The company can use innovative ideas in packaging their products so that the USP of the company is maintained in the markets (Pham Duy & Chau, 2015).
The company is heavily dependent on the weather. If there are any natural disasters, which results in flooding or any other disasters can affect the health of the cows resulting in poor quality of milk. The cattle may be introduced to diseases or pests, which may affect the milk quality and cause deaths in the herd. The company needs to see that the milk that is being used is from the cows that are free of diseases (Patemoster, 2015).
The Health and Safety in Employment Act has been amended, which will affect the workers in the farm heavily. The Dairy Industry Restructuring Agreement ensures that the farmers are free to join and leave the company and sees that the price paid for the milk is fair. The company is bounded under Raw Milk Regulations, which sees that a certain portion of the milk is available to the local processors and has the right to access the financial information of the company (Lee et al., 2012).
Since the government has deregulated the market structure in the country, it makes the nation a member of the free trade economy. This will attract the foreign companies, which will give stiff competition to the company. The new participants have a global exposure, which will increase the price of the shares of Fonterra in the export market (Peet, 2012).
Fonterra has a long-term relationship with the farmers of the company, which helps them in getting the fresh supply of the milk from them. In this way, the company has an advantage of purchasing the milk at a lower cost on a global scale as well. This gives an opportunity to the company to produce the products at a cheaper cost and maximize its profits (Pangbom, 2012).
The buyers play an important role in the market as they create the demands for the products. The company recently has been facing fluctuations in the prices because of the constant change in the supply and demand of the dairy products. The company has introduced a sales technique, which is online so that the buyers do not have to go to the stores to purchase the products, instead it can be delivered to their place (Peet, 2012).
The company deals in dairy products, which is manufactured naturally. However, there are substitutes for this product such as soya milk and others, which affect the sales of the company. The change in the taste of the consumers has seen a decrease in the consumption of dairy product and an increasing shift to the substitutes (Cernusca, Gold & Godsey, 2012).
The company has seen stiff competition from the companies like Nestle and Kraft, which deals with the same products as of Fonterra. This has resulted in a downward shift of the profit for the company. Fonterra has merged with two other companies but that is not stopping the competitors from gaining profits on a global scale as the free trade economy has given access to the competitors to increase the sales and maximize the volume of profit (Pangbom, 2012).
The company needs to adopt three new strategies so that the future of the company is secure. The strategies will be:
iii) Satisfying the stakeholders.
The first strategy is needed because in developed countries like United States of America (USA), the company just markets the products, which are produced by some other companies present there on a local level. They do not match up to the quality that Fonterra produces, which results in the loss for the company. The company needs to set up their own plant in these countries, which will require some time. It will benefit the company as they can directly produce the product and inspect the quality of it. They need to identify the stakeholders who will lend all their support to the company so that the company does not face any problem in setting up the plant (Evans, 2012).
The second strategy that the company can use is to create values by systematically producing large amount of products with the help of a proper value chains and shifting more products in that segment, which helps in gaining more profit for the company. The resources that will be required in this will be to process the raw material that is the milk in to various commodities and ingredients. The risk involved in it will be the time factor and the innovation through the technologies. The company needs to see if the target market is ready to accept the product or not by giving out few samples. If the reaction is good, then the company can produce the products on a large scale (McDowell & Nash, 2012).
The third strategy needs to be implemented because the perception that the company has in front of the public cannot be hampered. It will take some time to focus on the issue, but the signs are on a positive note. The resources will be to maintain a clean communication patter with the stakeholders through proper calls and emails. This will ensure that the stakeholders are well informed about the changes that are happening in the company (Evans, 2012).
The strategy that needs to be taken up by the company for its benefit is the first one that is infrastructure for producing milk in the global market.
The Demand for Dairy is growing at a speed 2.7 % percent annually and the anticipated growth is subjected to increase to 147 billion liters of growth over a decade. Moreover, it is important for Fonterra to expand their business operations globally and make possible infrastructure in countries where there is a huge demand of Dairy Products.
The Two Smart Objectives of Fonterra while expanding their business operations must be Innovation & Sustainability. Innovation in the product line and quality will make their Dairy Products accepted across the world and it will provide them a basic opportunity to increase their sale and earn sufficient revenues.
Whereas, Sustainability in their business actions are one of the objectives that is to be implemented efficiently by Fonterra while setting up infrastructure of producing milk in the global market place (Ghezzi et al., 2015).
ACTION PLAN
|
Proposed Action |
Timeframes |
Milestones |
Deadlines |
|
Setting up of Plant |
90 Days |
Building Proper Infrastructure |
4 Month |
|
Availability of Raw Material |
15 Days |
Increase in Production |
1 Month |
|
Logistics |
10 Days |
Ease of Transportation |
15 Days |
|
Marketing |
7 Days |
Customer Awareness |
2 Weeks |
|
Revenue |
30 Days |
Generation of Profit |
2 Month |
The business plan will be effective enough to understand and address the resource requirements and with the help of available budget, Fonterra must set up a plant where there is large accessibility of people by which they can acquire cheap labor and proper facilities for acquisitions of raw materials.
Fonterra must gain competitive advantage in the market place by making their products according to the taste and preference of their customer base in their chosen country that will provide them to ensure satisfaction to their consumers and increase the sale of the Dairy Products (Pedersen & America, 2015).
Moreover, there is always a possibility of risk associated while expanding business operations worldwide such as political unrest, economical pressure and local pressure. Fonterra while expanding their business must address all the following factors and should take proper measures to tackle all the situations positively. The contingency plan of the organization is to develop a market research team before setting up any plant in an area that will give them the opportunity to address the potential demand of the market before investing in it.
After expanding their business globally, Fonterra should appoint employees to monitor and review their business operations weekly as to identify the possible outcomes of the actions. The outcomes then must be rectified with the objectives of the business and the changes will take prior effect.
The most important step while expanding the business is that Fonterra needs to obey and maintain all the following documentations and approval of countries while expansion. Each country has set of different rules for foreign organization that is to be taken into consideration by Fonterra (Stahl, Pless & Maak, 2013).
Conclusion
After completing the report, it can be concluded that the company needs to adopt the strategy to enhance its business in the global market. this will ensure that the company can get good returns on the investment that it will make in the countries. Since, the company focuses on marketing their products rather than manufacturing it, they need to build their brand image in the eyes of the public. The setting up of the plant needs to be done in consultation with the stakeholders present there, which would help the company to smoothly carry out the infrastructural process.
References
Addison, J., & Esar, E. (2013). Chairperson’s Report. Newsletter.
Cernusca, M. M., Gold, M. A., & Godsey, L. D. (2012). Elderberry market research
Evans, L. (2012). Cooperatives in New Zealand: the particular case of dairy.
Ghezzi, A., Cavallaro, A., Rangone, A., & Balocco, R. (2015, April). A Comparative Study on the Impact of Business Model Design & Lean Startup Approach versus Traditional Business Plan on Mobile Startups Performance. In ICEIS (3) (pp. 196-203).
Harris, C., & Gibb, J. (2016). Strategies to Prepare and Plan for Market Shocks: A Study from New Zealand Businesses. Journal of Asia Entrepreneurship and Sustainability, 12(1), 77.
Langford, W. (2013). Operating mechanics of New Zealands four main rural retail businesses.
Lee, J. M., Matthew, C., Thom, E. R., & Chapman, D. F. (2012). Perennial ryegrass breeding in New Zealand: a dairy industry perspective. Crop and Pasture Science, 63(2), 107-127.
McDowell, R. W., & Nash, D. (2012). A review of the cost-effectiveness and suitability of mitigation strategies to prevent phosphorus loss from dairy farms in New Zealand and Australia. Journal of Environmental Quality, 41(3), 680-693.
McGiven, A. (2016). The Future Opportunities and Challenges for one of the World’s Largest Dairy Export Firms: Fonterra in New Zealand. The Journal of Applied Business and Economics, 18(3), 16.
Pangborn, M. (2012). Growth and innovation in the Canterbury dairy industry (Doctoral dissertation, Lincoln University).
Paternoster, S. (2015). Arla Foods seizing opportunities in Chile.
Pedersen, R., & America, F. N. (2015, February). Becoming Globally Relevant: Sourcing Dairy from Around the World. In Agricultural Outlook Forum 2014 (No. 205073). United States Department of Agriculture.
Peet, J. R. (2012). Comparative policy analysis: Neoliberalising New Zealand. New Zealand Geographer, 68(3), 151-167.
Pham Duy, Q., & Chau, T. (2015). A strategic market research for Valio LTD.: Vietnamese powdered milk market analysis.
Sneddon, N. W., Lopez-Villalobos, N., Hickson, R. E., Shalloo, L., & Garrick, D. J. (2015). Estimation of crossbreeding effects on yields of dairy products and value of milk processed in different product portfolios. In Proceedings of the New Zealand Society of Animal Production (Vol. 75).
Stahl, G. K., Pless, N. M., & Maak, T. H. O. M. A. S. (2013). Responsible global leadership. Global leadership: Research, practice, and development, 240-259.
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