Fonterra Case Study Analysis

This assignment delves into a comprehensive analysis of the Fonterra case study. It requires students to examine Fonterra's decision-making processes, particularly focusing on instances where discretion played a role. Further, it asks for an evaluation of Fonterra's reputation management strategies, especially in light of the 2013 bacterial contamination crisis and its impact on the global market. The analysis should consider various factors influencing Fonterra's success and challenges within the competitive dairy industry.

Running head: DIGITAL MARKETING
Digital Marketing
Name of the Student
Name of the University
Author Note

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Executive Summary
This report deals with one of the major dairy firms in the world that is Fonterra. The company
background has been provided in the report, which will help in identifying the establishment of
the company in the world. Apart from that, the strengths and weaknesses of the company has
been identified in an internal manner along with the opportunities and threats that the company
may face externally. This will help the company in understanding its position in the current
market. the report also throws light on the marketing strategies that the company needs to take up
so that it can establish its new product in the market. the right use of the marketing strategies will
help the company in attracting the customers towards the product and building a large base of
customers.

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Table of Contents
Section 1: Introduction....................................................................................................................3
Section 2: SWOT analysis of the company.....................................................................................4
Strengths......................................................................................................................................4
Weaknesses..................................................................................................................................4
Opportunities...............................................................................................................................5
Threat...........................................................................................................................................6
Section 3: Recommendation............................................................................................................6
a) Target Market..........................................................................................................................6
b) New product/ services description..........................................................................................7
c) Marketing mix relevant strategies...........................................................................................8
Price.........................................................................................................................................8
Product.....................................................................................................................................9
Place.......................................................................................................................................10
Promotion..............................................................................................................................10
4. Conclusion.................................................................................................................................11
Reference List................................................................................................................................13

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Section 1: Introduction
Fonterra is one of the leading exporters of dairy products in the world, as they are
responsible for more international trade than the other dairy companies in the world with respect
to the sales turnover. The chain for the company stretches from New Zealand to more than 140
countries, which shows an increase in the consumption of their products by the consumers. The
company started its operations in the early time of the 1800s and has been on a growing spree
since that time. It launched its first cheese company in 1871 by taking help of pooled resources,
which had an annual turnover of 50 tons of cheese. By the beginning of the 19th century, the
majority of the dairy factories that were present in the country were under the co-operatives and
they began to export their products overseas market as well ("Fonterra - The Global Dairy
Industry" 2018).
The company was started by Samuel Mardsen in the year 1814 and it launched its first
brand known as Anchor in the year 1923, the same year when the Dairy Board was established.
In 1935, the government had taken the control of exporting and marketing the dairy products and
felt the need of establishing a board within the country. Therefore, year 2961 saw the creation of
the board, which was named as Dairy Production and Marketing Board. By 2001, Fonterra Co-
Operative Group was formed, which was based on the merger of three dairy firms ("Fonterra -
Our Heritage" 2018).
The headquarters of the company is located in Auckland for New Zealand and in Victoria
for Australia. The company provides one-fifth of the exports that takes place in the country and
is responsible for a 7 percent growth in the Gross Domestic Product of the company. the
company produces and distributes its milk products in national and international countries such

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as Middle East, China, Africa and North America. The major brands under the company are
Anmum, Anlene and Anchor and the other brands that are available in the market are Tip Top,
DeWinkle and Fresh and Fruity (“Fonterra - Company Overview” 2018).
Section 2: SWOT analysis of the company
Strengths
The primary strength of the company is that it has a stable and and a secured chain for
supplying the milks on a long-term manner in a global manner as well. The demand that is
present globally has helped the company in increasing the relationship between the farmers and
the shareholders of the company as well. The company has a higher level of productivity with
respect to dairy products than any of the two dairy firms merged together. This is the strength for
the company, as the employees have helped the company by increasing its level of productivity
within the organization (Nilsson and Rydberg 2015).
There are a number of employees who have high levels of productivity that has helped in
the growth of the industry as well. New Zealand and Australia have a higher level of productivity
due to the high consumption of dairy products within these countries (Macdonald and Rowarth
2016).
Weaknesses
The relationship with the suppliers has to be maintained in a better way so that it can help
in getting the resources at a cheaper price. The competitors that are present within the market
will push the suppliers in increasing the prices so that the level of profit for the organization
decreases. After the merge up of the company with another, the company in the recent time is
facing a shortage of resources to increase its level of infrastructure, as the relocation of the

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resources and the infrastructures are not possible at a short notice. The dairy firms have to rely
on the ecology and the climate, as the sudden change in the weather conditions may result in the
low quality of milk, which may affect the other products as well. This can reduce the level of
efficiency of the firm, which will help the competitors in gaining a competitive advantage
(Pawson and Perkins 2017).
Opportunities
The organization needs to decrease the entry barriers in the market. Since the market
conducts in an open economy, it is easy for the rival companies in developing better dairy
products to sell in the market. This may affect the goodwill of Fonterra, as the competitors may
result in decreasing the sale of the company and hamper the sale as well (Livingstone et al.
2015).
The World Trade Organization (WTO) has increased the trade negotiations, which has
resulted in supplying the products at a lower cost. This will help the company in entering new
markets as well so that the consumers can be able to purchase their products and the goodwill of
the company can be increased as well.
The company can improve its image of green business by adding value to the nutrition
that is available in the product. Since most of the customers in the recent world have become
more conscious towards the products that they are consuming, it will be easy for the company to
sell the dairy products by providing a firsthand knowledge of the nutrients that are present in the
product. This will help the consumers in understanding the importance of the consumption of the
dairy products (Pang 2017).

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Threat
Most of the countries, due to the effect of globalization have increased the tariff rates for
the international companies so that it can help in protecting the local suppliers and increase their
rate of profit. Most of the competitors that are present in the market have been taking up the
global strategy so that it can help them in increasing their rate of profit and earn goodwill in the
foreign markets as well (Pavlovich, Sinha and Rodrigues 2016). The competitors after entering
the new markets will result in decreasing the profit of firm, as the customers will be able to use
the differentiated products as well at a cheaper cost, which may decrease the sale of the dairy
products produced by Fonterra. Since the company operates on a global scale, the rate of
exchange with respect to currency plays an important role in determining the prices of the
products. The drop in the prices may result in the decrease in the profit levels of the firm as well,
which would hamper its operations in those nations (Fu 2014).
Section 3: Recommendation
a) Target Market
The demographic analysis has to be conducted by the company so that they can
understand the various age groups that will be willing to purchase the products. The
demographic analysis will help the company in getting a better knowledge regarding the age,
gender of the population, marital status of the local people along with the religion and race that
the population belongs (Lockhart, Donaghy and Gow 2016).
The psychographic analysis will help in determining the likeliness within the population
for buying the particular product or services from the organization. The lifestyles and the
interests of the people have to be studied in a proper manner so that it can help the company in

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understanding the needs and preferences of the population. The attitudes and the opinions of the
customers need to be taken in to consideration so that it can help the company in manufacturing
the products in a better way, which will help them in earning better profit margins (McGiven
2016).
The company will be able to manufacture the products according to the tastes and
preferences of the consumers so that the product can be liked by them. In the Australian market,
it can be seen that the company will be manufacturing the products for all the age groups. This is
due to the fact that the dairy products can be consumed by people of all age groups (Fu 2014).
The dairy products are suitable for all the age groups and it will suit the lifestyles of the entire
population, as it helps in providing vital nutrients to the human bodies. The young age groups
will benefit from the dairy products, as it will help them in developing their bodies and providing
them with sufficient nutrients as well. The teenage customers along with the age group belonging
to 25-30 and 31 and above will be benefitting from the consumption of the dairy products, as it
will help them in revitalizing the necessary nutrients in their body (De Witt 2017).
b) New product/ services description
The company has launched a new product in the market known as Daily Fresh, which is
provided to the customers in a 750ml bottle. The Unique Selling Proposition (USP) for this
product is that the company labels the bottle in such a manner that it helps in highlighting the
freshness of the product on each day basis. This helps the company in providing knowledge to
the customers regarding the consumption of the products on an everyday manner (Edwards
2016).

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The customers get a better knowledge from the bottles, as they get to know the
manufacturing date of the products and the freshness of the product as well. the company will be
beneficial, as the products are being manufactured with respect to the taste and preferences of the
customers due to the rise in the household incomes (Baker 2016).
The specifications that are being attached in the label of the products of the company will
increase the sales in the market, as the consumers will be able to understand the freshness
content of the product. The manufacturing of the products on an everyday manner will help in
providing the fresh ingredients to the customers so that they can be able to gain the full benefits
after the consumption of the product (Shadbolt and Duncan 2014).
The company is also taking the help of an online platform for the execution of the
products in the markets so that the product can be delivered efficiently to the customers within a
3 kilometer radius. The customers will be able to take a scan of the barcodes that are present in
the product so that they can get all the rightful information regarding the quality of the product.
After the order has been placed by the customers regarding the product, it will be delivered to
them within half an hour (Scott, Bowden and Rowarth 2017).
c) Marketing mix relevant strategies
Price
The factor of pricing plays an important role in determining the value of sales that will be
made by the company. The pricing policy adopted by the company plays a significant role in
determining the shares and fluctuations that are taking place in the market due to the various
circumstances. Pricing is an important element, as it helps in generating better turnover for the
organization. The marketers of the company need to analyze the situation so that the price of the

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products can be done accordingly. The consumers will be willing to pay an extra amount for
better quality of products, as it will help them in replenishing their demands and substitute it with
the consumption of one product only (Woodford and Lucock 2013).
The company will be adopting the strategy of penetration pricing so that the products can
be priced at a lower rate, which will help them in gaining an advantage over the rival firms that
are present in the market. The penetration strategy will help the company in gaining a better
percentage of shares in the market after which the prices can be increased again in the market.
The consumers will be willing to pay a premium price for the product, as they are of the
perception that the product is superior to the others that are present in the market (Muirhead
2014).
Product
The product is an important part of the marketing mix tool, as it helps in the survival of
the company in the market. The better quality of product will help in attracting new customers
towards the company so that a larger base of customers can be built. It will also help the
company in gaining a competitive advantage than the rival companies that are present in the
same market by providing better quality of products at a competitive price (Anuranga 2014).
The Daily Fresh that is being provided by the company is an innovative product, as the
labels contain the days till which the product can remain fresh along with the time that the
product has been made. This will help the company in gaining a competitive advantage over the
other firms that are operating on a local manner, as the consumers will have a prior knowledge
regarding the manufacturing of the products. The stocks of the company are replenished on an
overnight basis so that it can provide the fresh quantity of milk to its customers. These will help

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the company in attracting large number of customers and build up its customer base as well
(Shadbolt and Duncan 2014).
Place
The production of the Daily Fresh product takes place in the factory of the company that
is situated in Australia on a regular basis so that it can help in delivering the best quality products
to its customers. After the products are manufactured, it is packed and transported in a safe
manner with the help of the company trucks to the local retail and wholesale stores. The online
platform collects the products directly from the warehouse of the company so that they do not
have to pay an additional cost to the wholesalers or the retailers (Edwards 2016). This helps them
in keeping their profit margins low and provides the products at a better rate of discount. The
distribution channels of the company are well coordinated, which helps them in supplying the
products within the specified time for the customers to enjoy it. The replenishment of the
products are also done properly, as the company communicates with the sellers in a proper
manner and takes feedbacks from them as well regarding the taste and the preferences of the
customers (Muirhead 2014).
Promotion
This is the strategy that needs to be undertaken by the company so that there is a proper
mode of communication between the target market and the product that is being introduced
there. It is the process through which better levels of awareness can be created by the company
towards the customers regarding the product being available in the market. The promotional
tactic used by the company helps the target customers in associating themselves with the product
that is being available in the market. It also helps up in creating the chain of supply so that the
product can be highlighted after the customer has entered in to the shop (Fu 2014). The company

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will try to promote the new product in the market with the help of advertisements and providing
free samples to the customers as well.
The medium of advertising that will be used by the company for promoting the brand will
be through the billboards and banners so that it can help in grabbing the attention of the
customers. It will also advertise in the newspapers as well so that the consumers who are regular
at reading the morning or the evening paper will get a firsthand knowledge regarding the product
(McGiven 2016). The advertisements will be shown in between the television and cartoon
programs as well so that the young children can also get to know about the product, as they do
not have the habit of reading the papers. The design of the logo for the new products has to be
done in such a manner so that it can help in attracting the customers towards them (Pang 2017).
The other method of promotion that can be used by the company is to provide free
samples to the customers so that it can help them in getting a taste of the product. This will help
the customers in differentiating the products from the other companies that are available in the
local market. After the sampling has been done by the customers, the company can provide point
systems to them so that the next purchases can be done based on the accumulation of points.
These points can be accumulated by the customers and capitalized in getting a free bottle of the
milk product as well (Nilsson and Rydberg 2015).
4. Conclusion
Therefore to conclude, it can be said that the company needs to use the marketing mix
tools that are available to them so that it can help in creating awareness among the consumers.
This will help the company in increasing its profit margin and widen its base of customers as
well. The use of the online channels of marketing along with the distribution of the products in

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the local market will help the company in raising the awareness levels among the customers. The
proper selection of the target market will help the company in increasing its sale and profits with
respect to the new product as well.

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Reference List
Anuranga, B.K.H.D., 2014. DCD, a Potential Shield to Uplift Local Milk. Scientific Reseach
Journal, pp.20-25.
Baker, R., 2016. Implementation of the Fonterra Palm Kernel Guideline.
De Witt, M., 2017. Discretion in Decision Making: The Fonterra Case (Doctoral dissertation,
University of Waikato).
Edwards, M., 2016. Complaints in the food and drink industry.
Fonterra - Company Overview. 2018. Fonterra.com. Retrieved 30 January 2018, from
https://www.fonterra.com/nz/en/about/company+overview
Fonterra - Our Heritage. 2018. Fonterra.com. Retrieved 30 January 2018, from
https://www.fonterra.com/global/en/About/Our+History
Fonterra - The Global Dairy Industry. 2018. Fonterra.com. Retrieved 30 January 2018, from
https://www.fonterra.com/nz/en/financial/global+dairy+industry
Fu, S., 2014. The role of Chinese social media in reputation management: the case of Fonterra.
Livingstone, P.G., Hancox, N., Nugent, G., Mackereth, G. and Hutchings, S.A., 2015.
Development of the New Zealand strategy for local eradication of tuberculosis from wildlife and
livestock. New Zealand veterinary journal, 63(sup1), pp.98-107.
Lockhart, J., Donaghy, D.J. and Gow, H., 2016. Murray Goulburn and Fonterra are playing
chicken with dairy farmers.

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Macdonald, T. and Rowarth, J., 2016. Critical success factors when going global: Agribusiness
co-operative growth.
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), p.16.
Muirhead, B., 2014. The Role of International Trade in the Rise of the New Zealand Dairy
Industry from Its Beginnings to the Fonterra Era.
Nilsson, J. and Rydberg, C., 2015. Factors behind the Fonterra shareholders’ rejection of the
board’s capital restructuring plan of 2007.
Pang, A., 2017. Product safety failure and restoring reputation across markets: Fonterra's
management of the 2013 bacterial contamination crisis. Journal of Marketing Channels, 24(3-4),
pp.136-152.
Pavlovich, K., Sinha, P.N. and Rodrigues, M., 2016. A qualitative case study of MNE
legitimacy: The Fonterra-Sanlu IJV corporate milk scandal in China. International Journal of
Emerging Markets, 11(1), pp.42-56.
Pawson, E. and Perkins, H.C., 2017. New Zealand going global: The emerging relationships
economy. Asia Pacific Viewpoint, 58(3), pp.257-272.
Scott, A., Bowden, S. and Rowarth, J., 2017. Critical success factors when going global: New
Zealand dairy companies.
Shadbolt, N.M. and Duncan, A., 2014. Fonterra as a case study of co-operative capital structure
innovation. International Summit of Cooperatives, Quebec, Canada, pp.6-9.

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Woodford, K.B. and Lucock, X., 2013. New Zealand's dairy opportunities in China.