Analysis of External Environment and Organizational Culture of Fonterra

This article provides an analysis of the external environment of Fonterra, a leading dairy company, and discusses its organizational culture. It also discusses the role of leadership and stakeholders in the company and reflects on the impact of recent incidents on the company's reputation.

Running head: BACHELOR OF APPLIED MANAGEMENT
Bachelor of Applied Management
Student’s Name
University Name
Author’s Note

2BACHELOR OF APPLIED MANAGEMENT
Table of Contents
1. Perform an analysis of the External environments of the business....................................3
2. For the chosen organization,...............................................................................................4
a) Identify its organizational culture...................................................................................4
b) Explain how this culture is shown in the organization...................................................5
c) Discuss how employees can learn the culture of an organization...................................5
d) Discuss how this culture impacts on the performance of the company..........................5
Learning outcome: 6..................................................................................................................6
Questions 3.............................................................................................................................6
a).............................................................................................................................................6
b).............................................................................................................................................6
c).............................................................................................................................................6
d..............................................................................................................................................6
Question 4...............................................................................................................................7
a).............................................................................................................................................7
b).............................................................................................................................................7
4c) Span of Control................................................................................................................8
4d) Benefits of centralised as well as decentralised organisational structure........................8
Reference List and Bibliography.............................................................................................12

3BACHELOR OF APPLIED MANAGEMENT
1. Perform an analysis of the External environments of the business
One of the top six dairy organizations in the globe, Fonterra is the leader in many of the
markets. The primary mission and the vision of the company are to lead in the dairy products
and sell the milk of the shareholder of the company (Pham Duy & Chau, 2015). The
competitive strategies among the global dairy industry are actually being driven by number of
complex situational factors. These include the consolidation of the base of the customer, the
protectionism and liberalization of trade and the increased requirement for the environmental
and the customer awareness.
There have been some of the significant barriers towards the entry of the dairy of the
industry. These include trade/political barriers, sale economies, access towards the
distribution of the networks, distance and the access to supplies.
The analysis of the environment of the business of the famous dairy company, Fonterra can
be done by PESTEL analysis for the analysis of the macro environment of the organization.
PESTEL analysis of the dairy company provides a detailed summary of the challenges and
the weakness the company has which is prevalent in the macro environment.
Political Factors – The political factors of the company includes trade barriers and the context
of protectionism that furthermore includes labeling, trademarks and arguments related to bio
diversity. Some of the other factors furthermore include free trade arrangements and
negotiation and deregulations of the dairy market (Dooley et al., 2017). Furthermore political
stability and the essentiality of the food sector towards the economy of the New Zealand
contribute to the political factor that tends to affect the organization.
Economic Factors – Macro economic factors including the rate of inflation, the savings rate,
the rate of foreign exchange and the economic cycle denotes the aggregate investment and
demand in the economy of the country. Factors such as the unemployment rate, educational

4BACHELOR OF APPLIED MANAGEMENT
level of the company, labour costs and the rate of the productivity of the company
furthermore contribute to the effect to the dairy company.
Social Factors – Some of the social factors contributing to the business of the dairy company,
Fonterra is the increasing demand of the market of the consumer and the growth of the
standards of labeling (Ngo, 2018). Factors such as growth in nutrition and bio markets
together with the cultural differences in the perception of milk are some of the social factors.
Technological Factors – Stocks for feed for reduced emissions and great productivity together
with the advanced ingredients and the reduction of the bi products and the consumption of the
energy during the process contributes to the technological factors of Fonterra
Legal Factors – The threats in connection to the legal challenges in the grounds of the
environment or the health together with the commissions of the anti-competition that allows
in increased environmental regulations are some of the legal factors of Fonterra.
Environmental Factors - Environmental factors include unpredictability of the climate, the
issues relating to GM and bio diversity. Furthermore seasonal nature regarding the milk
supply and intergenerational sustainability of the dairy farming of Fonterra contributes to the
environmental factors.
2. For the chosen organization,
a) Identify its organizational culture
The culture serves as the king over the strategy for the dairy company, Fonterra. The culture
among the organization and among the operational workers is generally challenging as well
as fun loving providing an essential sense of respecting and motivating each other (Dooley et

5BACHELOR OF APPLIED MANAGEMENT
al., 2017). For being the globes’ most trusted source of the dairy nutrition, Fonterra’s set of
aims and values forms the basis of the culture.
b) Explain how this culture is shown in the organization
The code of the business and the organization’s culture helps the employees in the
organization to make the correct decision at their employment. The culture reflects their
values outlining the expected nature and conduct and helps in translating the commitments of
the company into actions.
c) Discuss how employees can learn the culture of an organization
The employees of the company get ample opportunity to develop their set of values related to
the culture of the organization. This is because the shared values of Fonterra don’t develop in
a manual basis (De Witt, 2017). The employees get the chance to evaluate their decision
making skills every day.
d) Discuss how this culture impacts on the performance of the company
The culture of the organization includes co-operative spirit, challenging boundaries, rightful
thinking and planning through contingencies (Siddiqui & Ahmed, 2016). As per the current
reports the culture of the organization will help in tackling the poor performances of the
company together with the issues related to the capital spending problems and the success of
the business in the competitive dairy market of the world.

6BACHELOR OF APPLIED MANAGEMENT
Learning outcome: 6
Questions 3.
a)
The company Fonterra is mostly an organic in structure as the organic structures are used in
organization where dynamic and unstable environments are faced. In this form of
organization, there is a need for adaptation at quick stances. The company less of mechanic
structure as the organization is a not much of a bureaucratic structure that is not firmly based
on a network that is formal and centralized. It is for the distribution that the company is
mechanic in structure.
b)
The centralization of an organization is basically the concentration of power to the higher
level of the organization (Cooper, 2015). The power is given only to the higher authorities
and not the people working below a certain level. The Fonterra Company has a centralization
of powers as the top management are the ones retaining the maximum authority. Therefore,
the organization is not of decentralization nature as authority is not divided systematically in
every level.
c)
The organization is hierarchical or deparmentalised is important to consider organization’s
depends largely on adaptation of any one form of structure (Agostinho, 2015). The Fonterra
Company is mostly towards the deparmentalised as division of work is done as per the
department. It allots individual positions into departments and larger units to form hierarchy.
Existence of hierarchical structure is very limited.
d)

7BACHELOR OF APPLIED MANAGEMENT
Span of control is the number of people report to one person preferably the manager
(Keeling, 2018). The Fonterra has a wide range of people working under one manager. Being
one of the largest dairy firm it has branches all over the world which makes the role of the
manager and senior manager challenging. The company has recently added new Fonterra
management team in the office (NZ Herald, 2017).
Question 4.
a)
For a large operating company such as Fonterra, a divisional structure would be a suitable
form of structure. In this form of structure each division would be able to work independently
along with independent freedom. It would be convenient to work in a workplace where there
is no requirement of direct supervision from senior manager. It also improves the full
utilization of resources. Divisional management is a way of improving the use of resources. A
lot of time get saved which results to timely and effective decision making.
Apart from divisional, functional structure can also be a suitable option for the form of
organization. Due to high number of distributers, branches and expansion to overseas it is an
organization with high workloads. It is a high productivity structure that helps in specializing
and accuracy.
b)
A mechanistic model will help the organization in achieving high levels of production and
efficiency. It will achieve the high production and efficiency through extensive use of
procedures and rules, centralized authority and specialized labor.

8BACHELOR OF APPLIED MANAGEMENT
The organic model of the organization will help in achieving the same goal with limited use
of rules and regulation, decentralized authority and very less degree of specialization.
Although the goal is same the approach for achieving the goals are different.
4c) Span of Control
The span of control refers to the number of employees who are governed directly by a
manager. Previously it was not weird to see a 1:4 span of control. Latter, corporate leadership
was flattened by causing the average spans to come closer to 1:10 (Grayson and Hodges,
2017). The inexpensive information technology have made it possible for the companies to
achieve this gap. The need for span of control is reflected in the words of the director Scott,
St. John. The operations of the internal market have experienced an intense lack and
accumulated high debt and the profit margins have been very tight. The market sales team
have not been able to manoeuvre the on field team properly and that is why the company is
running on a low sales margin. Owing to lenient span of control this issue have been waged.
Now, in order to replace the deficit in the ongoing, the company have appointed an interim
chief executive. This would allow more space to the chief of market operations and the
activities of the field executives would be on check also (Shaw, McMaster & Newholm,
2016).
4d) Benefits of centralised as well as decentralised organisational structure
The centralised structure would benefit the company if the export activities of the
organisation are handled from a single domain. This would help in keeping track of the
business accumulated as an impact of the already existing sales contracts. The apprehended
sales volume of the export business can be mapped as an outcome of this. Again, on the
contrary, the market distribution and the sales target management department is decentralised
structure is followed in this case. In case, if the different territories are segmented and

9BACHELOR OF APPLIED MANAGEMENT
allocated to the different business heads and based on that the company prices the outcome of
business, it would result in better sales volume.
Learning Outcome 7
5. Role of the leadership and stakeholders in the company
The higher management of the company is always attentive to share the best interests
with the shareholders of the company. The basic motive of the company’s leadership is
provide a transparent management of the organisation so that directors can scope the
performance of the management and organisation as a whole in order to assess the
performance. The company leadership also ensures that a dedicated group of marketing team
is always focused up on determining the market risks that the company face in domestic retail
sector. Other than the Shareholder’s council of the company, executive head, Miles Hurrell is
the fundamental guide to the formulation of the foreign expansion strategy of the company.
Mike Cronin is another head of the risk and reputations management. The entire council of
strategies rest up on him and he is liable for monitoring of the foreign markets like China
where majority of the exported products of the company goes. Other than that, the
stakeholders generate value towards the organisation by meeting the respective objectives
and working to the best of their skills.
6a) Bribery issues and reflection
Recently Fonterra was issued a warning to denominate to a case of arbitration tribunal
in Singapore. The company was liable to pay an award for the compensation to cover recall
costs that French company DANONE suffered in 2013 (Schleper, Blome & Wuttke, 2017).
Fonterra alleged that the company was engaged in the supply of infected whey proteins. It
was later proved that the allegation was an absolutely false alarm and because of that the
French company had to undergo a major loss. They had to retract their business from eight

10BACHELOR OF APPLIED MANAGEMENT
major countries including China. According to the press releases, it was later publicised that
Fonterra had done this as an outcome of market rivalry. DANONE had been becoming a
major export market competitor of the company. Sources say that DANONE had launched a
major compliant against Fonterra in the New Zealand high court. However, as some of the
media articles questions, Fonterra had bribed the national intelligence bureau to get out of the
case without any major allegation. Hence, the complaint was internally manipulated.
However, as an outcome of this, the shares of the company detoriated and this stable fall in
turn raised questions regarding the sustainability of the business in the foreign market. The
company had alleged that Fonterra had breached the Fair Trading Act of the country.
However, the readily activism that was shown to close down the case made the CSO of
DANONE comment that trust, transparency as well as foundations was missing in the way
the court handled the case of the Fonterra Company.
6b)
About 27 cases of Botulism were recorded in UK in the recent few day and it was
alleged that the consumption of Hazelnut butter was the cause of this. Researches unfolded
that the Hazelnut puree that the company used, had been manufactured from nuts that were
nurtured in a condition that mostly favoured the culture of C Botulinum. Now Fonterra is one
of the premium brands of peanut butter in the country. This issue impacted the sales of
product. This was a call for the company to exhibit that they were not involved in unethical
production of any of the products and that they valued customer’s safety highly. In order to
show that, the company launched an official disclaimer stating that if any customer had a
doubt regarding the way in which the Fonterra product was manufactured, they could visit
any of the production plants of the company. The company also published a report that stated
that in tests conducted by three of the most sampling companies of the country and also in the
national accreditation test, the product had passed.

11BACHELOR OF APPLIED MANAGEMENT
In this context, the ideals of ethical behaviour can be highlighted. A primary
component of workplace ethics is that the company is showing a basic integrity of behaviour,
being absolutely honest with the customers with the external stakeholders and taking the right
step to justify the actions that the company undertakes in the context of external market
operations. In this context, it can also be specified that the two most feasible viewpoints that
cam justify the ethical aspects of the market behaviour of the Fonterra Company during this
crisis are integrity of behaviour and taking the most justified step to define their action. These
two steps defines that the company have a definitive integrity with their action that they had
undertaken at all crucial points of their business. At the time when the crisis arose, the
company made the right decision to restate that all allegations that was made against them
were all invalid. However, they could not avoid the negative market impressions owing to the
fact that the company did not make any direct confrontation to claim the purity of the
products that was suspected because of its quality. In terms of taking the most justified
decision to establish their ethical viewpoint, the company exhibited that the sampling results
after tests were conducted by the National accreditation bureau of the country and two other
neural agencies. These test were enough to foster back the belief in the hearts of the people
that the products of the company were absolutely safe.

12BACHELOR OF APPLIED MANAGEMENT
Reference List and Bibliography
Agostinho, O. L. (2015). Proposal of organization framework model, using business
processes and hierarchical patterns to provide agility and flexibility in
competitiveness environments. Procedia engineering, 131, 401-409.
Bell, E., Bryman, A., & Harley, B. (2018). Business research methods. Oxford university
press.
Boddy, C. R. (2014). Corporate psychopaths, conflict, employee affective well-being and
counterproductive work behaviour. Journal of Business Ethics, 121(1), 107-121.
Bourke, J. F., & Lucadou-Wells, R. (2015). Teaching Business Law: Some Ethical
Dimensions from Australia.
Bourke, J. F., & Lucadou-Wells, R. (2015). Teaching Business Law: Some Ethical
Dimensions from Australia.
Cooper, R. (2015). Formal organization as representation: remote control, displacement and
abbreviation. In For Robert Cooper (pp. 188-206). Routledge.
De Witt, M. (2017). Discretion in Decision Making: The Fonterra Case (Doctoral
dissertation, University of Waikato).
Dooley, A. E., Shadbolt, N. M., Khatami, K., & Tauer, L. W. (2017). Application of the
Adjusted Weak Axiom of Profit Maximization to New Zealand Dairy
Farming. Journal of Applied Farm Economics, 1(2), 4.
Grayson, D. and Hodges, A., 2017. Corporate social opportunity!: Seven steps to make
corporate social responsibility work for your business. Routledge.
Keeling, D. (2018). Management in government. Routledge.

13BACHELOR OF APPLIED MANAGEMENT
Malisetty, S., Rao, C. B. N., & Kumari, K. V. (2018). Exploration of Employees Behaviour
and Ethical Climate in IT Industry: Using Ethical Climate Questionnaire (ECQ).
OmniScience: A Multi-disciplinary Journal, 8(1), 8-12.
Ngo, H. (2018). POTENTIAL DAIRY INDUSTRY IN VIETNAM: Case Study: Vinamilk
LTD.
NZ Herald. (2017, November 23). New Fonterra management team named. Retrieved from
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10804375
Pham Duy, Q., & Chau, T. (2015). A strategic market research for Valio LTD.: Vietnamese
powdered milk market analysis.
Schleper, M. C., Blome, C., & Wuttke, D. A. (2017). The dark side of buyer power: Supplier
exploitation and the role of ethical climates. Journal of Business Ethics, 140(1), 97-
114.
Shaw, D., McMaster, R., & Newholm, T. (2016). Care and commitment in ethical
consumption: An exploration of the ‘attitude–behaviour gap’. Journal of Business
Ethics, 136(2), 251-265.
Siddiqui, N., & Ahmed, J. U. (2016). Managing Change for Better: New Zealand Dairy
Products Bangladesh Ltd. Asia-Pacific Journal of Management Research and
Innovation, 12(1), 85-94.