Arla: Competitive Position in Food and Beverage Sector

This report discusses Arla's competitive position in the food and beverage sector. It includes a brief background of the company, the application of Porter's Five Force model, the combination of functional areas that contribute to its competitive position, and recommendations for achieving success in the upcoming years.

Project about Arla

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Brief background.........................................................................................................................1
Application of Porter’s five force model in the company...........................................................2
Combination of functional areas through which competitive position are attained by the
organisation..................................................................................................................................5
Recommendations to the company for performing activities for attaining success in food and
beverage sector in upcoming 2-5 years.......................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Project report is said to the document which engrosses detailed description along with overall
picture of business (Cruz, Mariano and Dorian, 2018). The present report is based on Arla which
is multinational dairy entity that has headquarters in the city of Viby, Denmark. The organisation
is well popularise for producing and supplying wide variants of dairy commodities in the nation.
It also performs the services in oversees market for the purpose of earning huge revenues and
popularity on different countries. The individual report includes brief background of company,
Porter’s value chain, combination of various functional areas that are related to it’s to
competitive position and ways it can respond in the market for gaining success.
MAIN BODY
Brief background
Arla is leading and well popular firm that operates its activities in food and beverage
industry. Its headquarters are located at Viby, Denmark since 2000. The mission of the
organisation is to safe highest values for the milk of the farmers through creating growth related
opportunities. In context to the vision of Arla, it is about creating future of dairy by bringing
aspiration addition to health to the world in natural manner. The company has attained
significant growth with merger in entities at Sweden, Central Europe as well as United Kingdom.
It is aligning with distinct organisations into one together with harvest synergies which are
created by mergers. It is taking it to the next level. Its business strategy depends on solid
foundation that is its mission, identity as well as vision. The business works for bringing healthy
as well as sustainable dairy commodities to the population residing across globe. It works
ongoing in various farms, dairies and internal administration for the purpose to improve its
footprint in the sector of food and beverage.
The company was started as diary chain that used to supply nearby locations only. With
the popularity and effective working it gained success in supplying its dairy products in more
than 50000 shops in the surrounding area (Rothaermel, 2016). With passage of time, the
company adopted some of its marketing strategies that includes full page advertising and word of
mouth strategy to promote the company. It has also faced various challenges that were boycott
and criticism from other firms that impacts its sales and supply. The company was determined
for working in the tough situation and it was the efforts of its team with the help of which it
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gained successful outcomes. At present, the company has achieved the fourth position in the food
and beverage industry through offering various items like Whipping cream, Mozzarella, Apetina,
Deli Block, Cottage Cheese, Cream Cheese, protein and hence forth. It has team of more than
19000 people that work very hard to compete in the market and achieve competitive position.
Application of Porter’s five force model in the company
Porter’s Five Force model is one of simple as well as powerful framework that was named
by Michael Porter for generating insights about competitiveness among environment of industry
in which company operates. There are various business concern that applies the analysis for
determining competition within the sector or industry. It involves five forces which illustrates the
extent of attractiveness of particular sector in context to profitability together with productivity
(Porters Five Force Analysis, 2020). With application of the framework, managers of Arla are
able to analyse, indentify and determine competitive forces which shape working of food and
beverage industry as well as helps in examining weaknesses and strength of same sector. In
context to Arla, Porter’s Five Force is as applied:
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Figure 1: Porters Five Force Analysis. 2020
(Source: Porters Five Force Analysis. 2020)
Industrial rivalry: The force explains about number of companies which confer strapping
competition to each other. In the food and beverage industry, it is seen that there is high
industrial rivalry as numerous entities works in it for making revenues (Frissell, 2019). The
competing companies in this industry are Al Safi Danone, Gps Dairy Consulting, Lactalis
International, Fonterra, Best Cheese, Parmalat and Saputo. High rivalry shows that the company
faces huge pressure from rivals that can limit its potentials related to growth and development.
Along with this, it is also seen that market players targets same population and are strategically
diverse. Despite of the high industrial rivalry, Arla plays safe and only emphasis on fulfilling
implicit requirements of targeted audiences for strengthening differentiation basis within the
industry that assist it to lead competitive position.
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Threat of new entrant: The force reflects the ways in which new players compel threats
to the current market players (Rigo Cavinato, 2018). Food and beverage industry is profitable
and only limited barriers are there for entry that attracts more players towards it and this creates
threats of new entrant on the companies that are already working in it. Within the industry
existing regulations imposed by government support new company entry, initial capital
investment is low and building network to distribute product is generally easy for the new
company that creates high entrant threat for Arla. The company has developed brand loyalty
through initiation efforts towards customer relationship management and also developed long
term relationships with various distributors which assist it to widen access and gain leading
position.
Threat of substitute: Substitute products are those products that provide similar
satisfaction to customers and are available at minimum prices (Haynes, Nunnington and Eccles,
2017). When substitute products are available in the industry or market then it creates high
substitute threat for the company. In context to Arla, it is analysed that there is high substitute
threat in food and beverage industry. There are various companies that are offering variants of
flavoured milk in place of raw milk, dairy free margarine as substitute for butter, nutritional
yeast in place of cheese, butter milk in place of yogurt, dairy free chocolates as substitute for
chocolate and many more. All these substitutes are available at cheaper prices and even at high
quality that attracts huge audiences towards it. At same time, it is also seen that customers who
opt substitute commodities fails in originate same utility in context to performance and quality
from the available substitute as they receives from products offered by Arla and this helped the
company to make unique position in market.
Bargaining power of supplier: The force explains about pressure that is exerted by
suppliers on the company through adopting distinct strategies that are reducing quality, reducing
material availability, increasing prices and so on. Food and beverage industry involves wide
number of suppliers that have relative high bargaining power. When there is high supplier power
then it costs huge to business organisations. In case with Arla, it is different. As the company
acquires materials with wide numbers of suppliers and if prices are increased by one supplier
then it switches to another one and this provide low bargaining powers to suppliers. Along with
this, the dairy company has multiple suppliers in its supply chain that are located in different
locations to serve population demands and has positioned it for maintaining competitive edge in
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the sector (Kharub and Sharma, 2017). The company also has high price sensitive along with
adequate market knowledge which assists in dealing with complexities and effectively workings
towards objective fulfilment.
Bargaining power of buyers: The force indicates about the pressure that is exerted by
customers on the enterprise for getting high quality commodities at reasonable range addition to
excellent customer services. It influences abilities of business to accomplish objectives. It is seen
that strong bargaining power of customer generally lowers profits of company and makes
industry huge competitive (Piercy, 2016). In association to Arla, it has wide customer base that
provides high bargaining power to its buyers. At same time, it retains its customers for long term
and low switching rates also enhances buyer’s bargaining power in food and beverage industry.
Furthermore, customer are highly price sensitive, posses more knowledge about market and
makes purchase decision for standardised commodities in large volume that also increases their
bargaining power within the sector.
Combination of functional areas through which competitive position are attained by the
organisation
Functional areas are mentioned to the teams of manpower that have similar skills along
with expertise. In other words, functional areas are said to grouping of practices on the basis of
requirements for completing one or more operations (Moreland and Muehlhoff, 2017). In
relevance with Arla, the key functional areas of human resource as well as marketing that
combine all of the activities in such manner that assist in attaining desired state. Arla has around
19000 human resources that have competitive spirit and abilities to implement actions on time
because of which the company was successful in attaining competitive position. At same time, its
marketing strategies are unique together with effectual that attracts wide customers towards it
and also makes people aware about its products and services that plays important role in
attaining competitive position. The combination of both these functional areas in the business
played essential role in attaining competitive position in the industry. These both areas have
worked very hard as well as shared wide ideas to attract wide population and grab larger market
share through delivering information and products on time and with suitable experiences that
influenced customers to make purchase decision and this resulted in attainment of all its set
objectives as well as competing position within the industry.
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Recommendations to the company for performing activities for attaining success in food and
beverage sector in upcoming 2-5 years.
It is recommend to Arla that it can perform activities through leveraging free as well as
inexpensive marketing tools for attaining success with the pertaining sector. With the help of
such marketing, it can attract and inform wide customers towards its offerings at limited costs
and gaining huge revenues that will show success in upcoming years. Along with this, the
company is also recommended to focus on providing high quality services to customers despite
of reinventions or expansions. When the company will satisfy needs of customers for dairy
products and offer high experiences than it can grab large market share as well as huge market
segment towards it which will help it to achieve set mission in coming years. It is also
recommended to Arla Company that it should not frighten to take risks while making attempts
for bringing something fresh in dairy products that will act as huge opportunity to perform things
in different manner and discovering entirely new process or item in the field. When something
unique and different is offered in market then it increases chances of working towards success
path as well as attaining set determinations in limited durations.
CONCLUSION
As per the mentioned report it has been concluded that a company works very hard to gain
determined position as well as sustainability in the competing business environment. It goes
through various challenges and issues while performing operations within dynamic or uncertain
situations. Porter’s five force analysis states the reasons due to which various industries sustains
in distinct profit levels. The model is generally applied to a particular economic segment for the
purpose to understand competition level within it as well as increasing long term profit making
spirit of enterprise. Combination of various functional areas promotes organisational efficiency
as well as ability for achieving unique and top position in the competition that is within the
sector wherein it operates. Moreover, the company is recommended to emphasis on
strengthening existing practices and leveraging inexpensive marketing tool for the purpose to
achieve success in upcoming years.
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REFERENCES
Books and Journals:
Cruz, J., Mariano, Z. and Dorian, P., 2018. Atrial fibrillation clinics in Canada: a nationwide
project report. Canadian Journal of Cardiology. 34(9). pp.1219-1224.
Frissell, B., 2019. Nothing in this book is true, but it's exactly how things are. North Atlantic
Books.
Haynes, B., Nunnington, N. and Eccles, T., 2017. Corporate real estate asset management:
strategy and implementation. Taylor & Francis.
Kharub, M. and Sharma, R., 2017. Comparative analyses of competitive advantage using Porter
diamond model (the case of MSMEs in Himachal Pradesh). Competitiveness Review:
An International Business Journal.
Moreland, J. P. and Muehlhoff, T., 2017. The God Conversation: Using Stories and Illustrations
to Explain Your Faith. InterVarsity Press.
Piercy, N. F., 2016. Market-led strategic change: Transforming the process of going to market.
Taylor & Francis.
Rigo Cavinato, M. E., 2018. Beyond milk.
Rothaermel, F. T., 2016. Strategic management: concepts (Vol. 2). McGraw-Hill Education.
Tobias, R. M., 2016. Fifty Years of Learning: A History of Adult & Community Education in
Aotearoa from the 1960s to the Present Day.
West, R. S., 2018. The Second Admiral: A Life of David Dixon Porter, 1813-1891. Pickle
Partners Publishing.
Online:
Porters Five Force Analysis. 2020. [Online]. Available through: <
https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html>
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