The a2 Milk Company is one of the major milk companies established in New Zealand. Dr. Corran McLachlan founded the company in 2000 after a significant discovery that the different milk proteins have different effect on the people. He discovered that cow milk contains two different types of beta-casein protein, a1 and a2, which have different impact on the digestion system of the consumers of cow milk. It has been found that a2 protein is easier to digest (Jianqin et al., 2015). With this principle, the a2 Milk Company was established. It is a publicly listed company in both New Zealand and Australia. Since its establishment in 2000, the company has expanded its business in Australia, China, UK and in the USA. The mission of the company was to explore more to know the scientific benefits of a2 protein type in order to spread the nutritional goodness of the natural and real milk to more and more people (Thea2milkcompany.com., 2018). Over the years the company has emphasized on the fact that the cow milk contains two different beta-casein proteins and those have different effects on the people, especially in terms of digestion and delivering the most nutritional value. The company uses specially selected cows that produce a2 protein milk naturally and advertises it as a marketing strategy. It has been able to create awareness among the people about the goodness of a2 protein and a2 milk, which is high in nutritional value. The customers admit that they feel the difference in their digestive system and overall health, which brings business to the a2 Milk Company.
The purpose of this report is to present a strategic positioning of the a2 Milk Company which would help it to further expand its business and increase its profitability by capturing a bigger market share.
This report provides recommendation on the product lines, geographic segments along with five potential financial and non-financial measures for future success through the analysis of the current strategies of the milk company and its environment by using Porter’s Five Forces Model and Porter’s generic strategies.
The research for the report is conducted by collecting and analyzing secondary data. The data was collected from the official website of the a2 Milk Company of Australia and various online publications including annual reports. Porter’s five forces model and Porter’s generic strategies were applied on the data to get the outcome of environment and competitive analysis of the company and to provide recommendations on strategies for improving the product lines and geographic segments.
The a2 Milk Company is a leading publicly listed company in New Zealand and in other locations belonging to the food and beverage sector. The company has launched various categories of milk in different markets, such as, a2 MilkTM fresh milk, Blue and Lite milk, that is, whole milk and skim milk, infant formula milk, whole milk powder, and chocolate milk. In Australia, the company has a grocery value of around 9.3%, and the infant formula milk’s market share has increased from 16% to 26% (Thea2milkcompany.com., 2018). In New Zealand, the fresh milk brand AnchorTM is the endorsement partner of a2 Milk. In China, the profit for the infant milk by a2 jumped by 150% to $98.5 million in the first half of 2018 (Pash, 2018). In all the markets, the company has been able to capture a significant market share.
Figure 1: Porter’s Five Forces Model
(Source: E. Dobbs, 2014)
The intensity of the market competition in the Australian market and the profitability scope of a2 Milk Company have been analyzed using Porter’s Five Forces Model.
|
Threats of new entrants |
· Low marketing cost · Innovative products by other companies, such as, high growth UHT milk, low fat yoghurt · Lower barriers to entry · Lower value proposition to the customers |
|
Threats of substitutes |
· Low switching cost · Rival brands addressing the core needs of customers · Lower availability of substitute milk with a2 protein · Availability of substitutes, such as, lactose free milk, organic milk, low fat skim milk, high protein full milk etc. |
|
Bargaining power of suppliers |
· Higher priced products due to higher price charged by suppliers · Higher price charged by distributors |
|
Bargaining power of buyers |
· Purest quality is demanded at a lower price · Demand for offers for a lower price |
|
Industry rivalry |
· Dairy Farmers · Pauls · Green Pastures · Zymil · Devondale · Farmhouse Gold · Tempo · The Complete Dairy |
From the Porter’s five forces analysis of a2 Milk Company, it can be inferred that,
Figure 2: Porter’s generic strategies
(Source: Wicker et al., 2015)
Porter’s generic strategies are applied to find out the relevant competitive advantage of the a2 Milk Company in the Australian market. As seen from the above analysis, the company faces challenges from lower barriers to entry in the market, low switching cost, innovative products by rivals, higher product cost, and consumer’s demand for highest quality product at a relatively lower price. There are geographical barriers also as the company also operates in four other countries apart from Australia.
To increase the market share and profitability, the a2 Milk Company should opt for the differentiation leadership strategy under the generic strategies of Porter. Under this strategy, the companies target larger market and aim to achieve the competitive advantage in the industry through product differentiation (D. Banker, Mashruwala, & Tripathy, 2014). The a2 Milk Company already provides a differentiated product in the dairy industries across five countries, that is, milk that contains only a2 protein, and this can be used as the leadership strategy for increasing market share. The other strategies that should be followed by the company are:
The aim of the company is to improve its strategic position in the market and increase its profitability. Thus, it should focus on delivering a unique and innovative product at an average market price and simultaneously creating brand awareness among the customers across all segments.
While implementing the differentiation leadership strategy, the a2 Milk Company should adopt the following financial and non-financial measures to evaluate the success of the strategies.
Lastly, it can be suggested that, the annual sales report will reflect the revenue and profitability of the a2 Milk Company after the measures have been implemented. Apart from that, the company should conduct market surveys at a regular interval, bring more types of innovative milks with a2 protein and increase the customer awareness through promotional activities, highlighting the benefits of a2 protein and negatives of a1 protein. The company should also try to expand its business internationally in the markets, other than, New Zealand, China, USA and UK, through production as well as exports of existing and new products, such as, milk powder, formula milk, yogurt, cheese, sour cream etc.
Conclusion
The a2 Milk Company has been experiencing growth in the recent past due to its unique product offering to the markets in Australia, China, New Zealand, UK and USA. However, as the market competition is high, the company should focus and invest in improving its strategic positioning in the markets. From the Porter’s five force analysis, it is found that the company faces some major challenges from low switching cost, higher bargaining power of the suppliers, leading to a higher cost of products and availability of close substitutes. To improve its strategic positioning in the market, the milk company should focus on investing on promotions highlighting the nutritional value of the a2 protein to create brand as well as product awareness. It should also focus on increasing its distribution channels and display options in the markets to create more impact on the minds of the consumers. The milk has no perfect substitute in the market, which is beneficial for the company to implement the differential leadership strategy to capture a bigger market.
References
Banker, R., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy?. Management Decision, 52(5), 872-896.
Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.
Hargreaves, D. (2018). A2 Milk in ‘strategic partnership’ with Fonterra; Comprehensive deal outlined – but no financial figures. Retrieved August 17, 2018, from https://www.interest.co.nz/rural-news/92240/a2-milk-strategic-partnership-fonterra-comprehensive-deal-outlined-no-financial
Jianqin, S., Leiming, X., Lu, X., Yelland, G. W., Ni, J., & Clarke, A. J. (2015). Effects of milk containing only A2 beta casein versus milk containing both A1 and A2 beta casein proteins on gastrointestinal physiology, symptoms of discomfort, and cognitive behavior of people with self-reported intolerance to traditional cows’ milk. Nutrition journal, 15(1), 35.
Pash, C. (2018). a2 Milk Company smashes its profit and its shares go nuts. Retrieved from https://www.businessinsider.com.au/a2-milk-company-smashes-its-profit-and-its-shares-go-nuts-2018-2
Thea2milkcompany.com. (2018). About us. Retrieved August 17, 2018, from https://thea2milkcompany.com/about-us/
Westbrook, T., & Greenfield, C. (2018). Competition heats up for controversial a2 Milk Company. Retrieved August 17, 2018, from https://in.reuters.com/article/us-a2-milk-company-strategy-analysis/competition-heats-up-for-controversial-a2-milk-company-idINKCN1IH0T9
Wicker, P., Soebbing, B. P., Feiler, S., & Breuer, C. (2015). The effect of Porter’s generic strategies on organisational problems of non-profit sports clubs. European Journal for Sport and Society, 12(3), 281-307.
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