A2 Milk Company: Strategic Management and Business Units

This article discusses the strategic management and business units of A2 Milk Company. It explores their revenue units, external environment, and determination of internal competitiveness. The article also provides recommendations for growth and profitability.

Running Head: Milk 0
the a2 Milk company
Strategic Management
3/30/2019

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Contents
Introduction................................................................................................................................2
Business units and product lines.............................................................................................2
Business revenue units...........................................................................................................3
External environment.................................................................................................................3
Political factors.......................................................................................................................3
Economic factors....................................................................................................................3
Social factors..........................................................................................................................4
Technological factors.............................................................................................................4
Environmental factors............................................................................................................4
Legal factors...........................................................................................................................4
Determination of internal competitiveness................................................................................5
Resource Capabilities.............................................................................................................5
Core Competencies.................................................................................................................5
Competitive advantage...........................................................................................................6
Recommendation........................................................................................................................6
Conclusion..................................................................................................................................7
References..................................................................................................................................8

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Introduction
Agribusiness is a major sector in Australia with contributing a substantial amount in the
international investment and gross income of Australia. Dr. Corran McLachlan, who was one
of New Zealand’s richest men, founded the A2 Milk Company in 2000. The organization was
formerly known as A2 Corporation Limited that commercializes intellectual property
associated with a2 milk products such as infant formula. It was later renamed as A2 milk
company that an ASX 200 public listed company. They operate its activities in several
countries such as Australia, the United Kingdom, China, and the United States. They are
more concentrating on nutritional products, experience strong growth through sales
capabilities, and has expanded the U.S. market (Esty and Fisher, 2019)
Their main vision is to be a smart and innovative choice for daily nutrition. They maintain
consistently high quality branded products that are diversified into Australia fresh milk into
nutritional products. Their ambition is to be the most attractive nutritional company, which
fulfills their developing digestive health needs. It has been recognized that the company is
achieving substantial gains in revenue and earnings in the 2017 financial year at $300
million. They are continuing their growth capabilities and planning to broaden its
organizational capabilities into other global markets (Pal et al., 2015). In the following, an
effort has been made to discuss the business units of the A2 milk company. In addition, the
discussion has been made on the external environment and determination of internal
competitiveness of A2 Milk Company.
Business units and product lines
It is stated that A2 Milk Company is having a broad number of business units in the
Australian market involving food supplies under the A2 premium fresh milk brand, consumer
section under Australian infant formula brand with 32% market share, and daily ingredients
supplied through A2 protein. They are diversifying their market business units, which are
assisting them in catering to a different assortment of consumer segments.

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(T1 2016 MPK732 Marketing Management, 2019)
As per the figure above, it has been stated that sales of A2 milk in Australia has increased by
48% as compared to 2011. It is also noted that sales have been increased by more than 90%
in these subsequent two years.
Under the section of consumer segment, A2 Milk Company is delivering a wide assortment
of products such as A2 MilkTM Full Cream, A2 MilkTM Light, A2 MilkTM Full Cream Milk
Powder, and Premium A2 MilkTM powder with Manuka honey, which is completely free of
A1 protein. This denotes that A2 Milk Company is targeting diverse customer needs in the
agriculture sector with its different product portfolio. Among all their products, Premium A2
MilkTM powder is the largest selling brand in the Australian market (Mucchetti and Zambrini,
2017).
Business revenue units
The major revenue units for A2 Milk Company are their food supply, consumer, and
ingredient supply distribution. The largest revenue units are consumer division, which is due
to the reason that the infant formula brand is attaining a great percentage of market share and
continues to grow its market position (Banerjee, 2018).

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External environment
The PESTEL analysis of A2 Milk Company has been described below to understand the
bigger picture of the market environment.
Political factors
It is stated that government regulations and policies are said to be an influence on the
decision of farmers. Various government regulations could be in favour of A2 Milk
Company. In 1986, the ministry of government supported the new market schemes that are
utilized to make the A2 Milk Company. From the era of 1986 to 1992, support of export was
carried down to 22% form 45.6% as they were facing the issues of competitive parity. By late
2000, every state had achieved regulatory arrangements that could permit them to develop the
A2 Milk products in the market. In addition, A2 Milk Company was allowed to set its own
prices by enabling an adequate supply of milk. This also stated that the state was given the
power of set price as well as negotiate the quotas in order to ensure that the supply is reliable.
They should give the capability to control the prices with the dairy industry. The Australian
Industry Council and the leaders of dairy farmers claimed that deregulation has assisted in
increasing the production of milk. It did not meet the expectations of customers as it brought
down from 6.4 million tonnes to 2.5 million tonnes (Kian and de Souza, 2017).
Economic factors
The economic factor which affects the A2 Milk Company in Australia, is the purchasing
power. It is quite evident that it is milk, which is a vital part among Australian consumers and
makes purchases irrespective of their economic situation. As the consumer of Australia has
high purchasing power so the price of A2 Milk products is also high. The trends of
consumption per capita income have been constant in Australian economy irrespective of
preferences of the customer. There is also the fact that there is high purchasing power and
developing demand in Australia as a comparison to the China market. The A2 Milk Company
still succeed in the market irrespective of the fact that demand is growing rapidly. In 2012, 48
billion liters of milk has been consumed by China’s consumers as they take milk products
from Australia. It is to be stated that after A2 Milk Company was registered on ASX its share
gone up to 200% and stock prices up to 650% (Duarte-Vázquez et al., 2018).
Social factors
The social factors have also a major effect on the A2 Milk products. The consumption trends
of Australia consumers are rapidly changing as their tastes and preference are evolved. The

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health issues are a major factor as consumers have multicultural influences considering food
consumption. A2 Milk Company follow this trend as it produces with A2 milk protein and
selling skim milk products as a new development. The overweight issue in Australia has been
still high and continued to rise at a high rate i.e. 69% men and 54% women respectively. It
has been stated that A2 Milk Company utilizes nutritional milk which is pure and organic as
their competitors also give a tough fight by producing infant baby formula like A2 (Tavana,
Yazdani and Di Caprio, 2017).
Technological factors
The technological improvement like fat testing was introduced by the A2 Milk Company in
Australia and several other companies also to test the fat level in the milk products. They
have now transformed into a commercially innovative market with the changing needs of
customers. The initiation of fat testing assists them in building healthy trends so that
Australian consumers start embracing. The A2 Milk Company also deliver natural and
organic products that do not incorporate genetic engineering and technological process
(Priyadarshini et al., 2018).
Environmental factors
The environmental factors that influence the A2 Milk Company in Australia are the current
weather condition which might considerably manage the transportation of the assets and
finished product. These organizations that develop an extremely vast amount of waste might
require to manage their environmental habits and contribute to maintaining the prices as well
as quality so that more and more customer can be generated (Chia et al., 2018).
Legal factors
The legal factors affecting the A2 Milk Company is the intellectual property laws to protect
the patent of the organization. It is stated that if there is a chance of stealing data then A2
Milk can lose its competitive edge and profitability. It is also to make sure that the A2 Milk is
treated fairly and opportunities are to be given regardless of ethnicity, gender or religion.
Health and safety laws also affect the A2 Milk Company by executing the proper regulations
in order to ensure a certain level of quality to keep the customers safe (Duarte-Vázquez et al.,
2018).

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Determination of internal competitiveness
The internal organization of the A2 Milk Company is continuing to develop international
intellectual property rights as proprietary processes, patents, and trademark with respect to
A2 MilkTM products. The internal competitiveness of A2 milk company involves human
resource management, strategic location, resource effectiveness, which assist in achieving
competitive edge and profitability (Mahmoodani et al., 2018).
Resource Capabilities
It is stated that there are many resource capabilities being recognized for A2 Milk Company.
The major resource capabilities are market diversification, which refers to the fact that the
customer plays a great significance to the personalized services and traditional store so they
should develop maximum resources to open their outlets. They need to analyze the cost-
benefit analysis of each distribution channel and compared with the resource capabilities of
the organization. The A2 Milk Company need to develop an effective distribution plan and
ensure that it satisfies the market effectively and deliver the products that will meet the
preferences of the customer. Another major capability is brand awareness, which stated the
fact that the A2 Milk Company delivers an opportunity in order to interact with the customers
and establish a cordial relationship with the customers to achieve positive recognition form
them (Portillo-Tarragona, et al., 2018).
Core Competencies
The core competency of the A2 Milk Company is their diversified target audience, which is
divided into narrowly and specifically defined groups. They have diverse business units with
different product range, which allows A2 Milk Company to satisfies the customers locally
and internationally in the manner to stay ahead in the market. Another core competency is
their international existence, which is diversified into China, United States, Australia, New
Zealand, and a number of emerging markets in Asia. It further assists in developing the
position to become an international brand. The A2 Milk Company maintain the social as well
as the financial status of the farmers in order to make sure that more innovative products
could be delivered to the customers (Ormrod, 2015).
Competitive advantage
The value chain analysis of the A2 Milk Company is-
 Competitive advantage sources- It is to be stated that by evaluating the value chain
analysis of the A2 Milk Company various sources of competitive advantage could be

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recognized. They operate all the activities in a manner that shares relatedness to a
great extent.
 Inter-relationship and dependencies- The A2 Milk Company recognize diverse
internal as well as external linkages between activities with the help of the value
chain. The internal linkage is between the same organizational units and on the other
hand, external linkages are between business units of same or diverse firms.
Therefore, these interrelationships can take competitive benefit along with joint
optimization and collaboration (Nystrom and Winston, 2016).
 Improved flow of material- It is to be stated that the effective execution of value chain
analysis of the A2 Milk Company can provide new opportunities and find new ways
to attain productivity. This can also improve the flow of material due to sales
forecasting and demand of the customers. It is to be noted that customers give a quick
response with respect to product-related information, which can depict the major
significance of the competitive advantage (Ziggers et al., 2017).
Recommendation
 It is to be recommended that the A2 Milk Company should price differentiation
strategy, which is helpful for the organization so that they can charge a different price
for the milk products by majorly concentrating on quality of the milk products.
 The A2 Milk Company should also expand its milk products in diverse countries in
Asia as they adopt the product diversification strategy, which gives a better chance to
diversify business by developing a new venture.
 It is also recommended that they should majorly focussing on enhancing customer
experience and attract them through innovative products, which lead to profitability
and growth of the company in future (Bathaei et al., 2019).
Conclusion
In conclusion, it has been stated that the A2 Milk Company produces highly nutritious
products that are identified into A1 and A2 protein, which is different from cow milk. They
are dealing with various external factors in the Australian market, which assists in analyzing
the competitive advantage as well as economic opportunities. In the above, the discussion has
been made on the internal competitiveness of the A2 Milk incorporating resource capabilities,
core competencies, and competitive advantage are being recognized. It is to be stated that

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internal competitiveness helps in effectively dealing with the external factors and enhancing
the market share. Their external factors favour operations of A2 milk as high purchasing
power in order to continue its growth in the few decades.
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Nutritional Health, 2, pp.28-31.
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Chia, J., McRae, J., Enjapoori, A., Lefèvre, C., Kukuljan, S. and Dwyer, K. (2018) Dietary
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