Strategic Analysis of A2 Milk

This report provides a strategic analysis of A2 Milk, including a company overview, macro-environmental analysis, and Porter's five forces analysis. It also identifies threats and opportunities for the company in the Australian dairy industry.

Running head: STRATEGIC ANALYSIS OF A2 MILK
STRATEGIC ANALYSIS OF A2 MILK
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1STRATEGIC ANALYSIS OF A2 MILK
Table of Contents
Introduction:....................................................................................................................................2
Company overview:.........................................................................................................................2
Macro-environment analysis:..........................................................................................................3
Political factors:...........................................................................................................................3
Social factors:..............................................................................................................................3
Economic factors:........................................................................................................................3
Technological factors:.................................................................................................................4
Legal factors:...............................................................................................................................4
Environmental factors:.................................................................................................................4
Porter’s five force analysis:.............................................................................................................4
Threats of New Entrants:.............................................................................................................4
Bargaining Power of Suppliers:...................................................................................................5
Bargaining Power of customers:..................................................................................................5
Threats of Substitute Products or Services:.................................................................................5
Rivalry among the Existing Competitors:...................................................................................5
Conclusion:......................................................................................................................................5
References:......................................................................................................................................6

2STRATEGIC ANALYSIS OF A2 MILK
Introduction:
The aim of this report is to discuss the overall business of A2 Milk which offers a type of
processed milk in Australian market. This company has been fully operating from the 2000s in
this region and had spread in the market of New Zealand, the US, the UK and China. The
products offered by this company has unique target market. Including the pregnant women and
infants who need milk proteins the most. This report will discuss the business valuation of the
company in focusing the market of Australia and compare its position in the dairy industry of the
country. It will identify the threats and opportunities of the company by analysing the macro
environmental factors and Porter’s five forces analysis.
Company overview:
The a2 Milk Company was established in 2000 by Dr. Corran McLachlan in New
Zealand. The company has a strong as well as well established market in Australia. This
company provides a leading premium fresh milk brand which is available in all the major
supermarkets of Australia. It has a grocery value market share of close to 10%
(Thea2milkcompany.com 2019). This company has launched a2 Platinum service in 2013 which
is the leading infant formula rand of the country with 32% market share. In the later part of
1980s, the founder explores that the peptides like those of casein, are created during the digestion
of the milk that have negative or positive health effects. This is the reason why The A2 Milk
Company offers a processed cow milk that lacks the forms of β-casein proteins or A1 but has
mostly A2 form in the products (Thea2milkcompany.com 2019). This type of processed milk is
found in the regions of Australia, New Zealand, the United States of America, the United
Kingdom and China.
The company has been investing extensively in the brand across 2018 financial year both
in the product development as well as in the marketing. It has invested in the highest national
brand advertising expenditure in gaining the strong editorial media coverage a in one hand and in
the infant fresh milk and other formula categories. After the launch of a2 Platinum in the 2018
financial year, the company has grown its market position with the new products launched 4
junior milk drink and Premium a2 Milk powder blended with Mānuka honey as well as a2
Platinum® Premium Pregnancy milk formula (Thea2milkcompany.com 2019). Along with the
offerings in the Australian region, the company has entered the countries like New Zealand,

3STRATEGIC ANALYSIS OF A2 MILK
China and the USA through licensing process and the customers of these region can get the
products through the cross-border e-commerce platforms. (314 words)
Macro-environment analysis:
Macro environment of the market where the company has been operating actually helps it
to identify the strengths weaknesses, opportunities of threats of the company. This is due to the
fact that these deal with the external environment of the market especially the political,
economic, social, environmental, technological and environmental factors. These macro
environment outside the industry that relates to the industry environment effecting both the
profitability and competitive position of the organisation.
Political factors:
Australia is a constitutional monarchy which is represented by the governor general at
federal level and the governors of the state level. The country has a stable and safe political
environment which has a good connection with all the neighbouring countries. The country has
less issues with the immigration policies and foreign trade regulations. However, unlike other
countries, Australian trade had been affected when the issue of Brexit created problem in the UK
region and the country has political connection with the UK suffered a lot in the tax reformation
aspects (Gray, Harymawan and Nowland 2016). These can be threatful for a2 Milk.
Social factors:
Australia is one of the most important countries to reside in terms of wealth, education,
health and quality of life. In comparison to other major economies like UK and USA, Australia
has smaller population but it is one of the most diverse countries in this world. It has histories of
indigenous people and arrival of the British settlers. The people in Australia are hardworking and
outward looking which makes a great human resource that can give A2 milk to recruit skilled
employees in the company. The Australian customers are easy to maintain as they know how to
differentiate high quality products from low quality. Hence the products offered by a2 Milk can
be popularised easily.
Economic factors:
Australia is the thirteenth largest economy in this world. This economy grew 2.4% in
2017 financial year. The business investments, inflation and household incomes are also more or
less than expectation. The industries like vehicles, mineral fuels like oil, machinery, electrical

4STRATEGIC ANALYSIS OF A2 MILK
machinery, equipment, medical apparatus, pharmaceuticals, plastics, precious metals and
furniture are some key imports of Australia. This country imports 22 1.4 billion US dollar worth
of goods from around the world (Rogers, Lee and Yan 2015). Similarly, iron ore, gold, natural
gas, coal, wheat, beef, copper, financial Services and educational services are some of the top
exports Australia. The government permits foreign companies to enter this market and indulge in
fair trade. This creates opportunity for A2 Milk to export its products in other countries.
Technological factors:
Australia is a technologically advanced nation. The companies along with the
government adopt new technologies faster than any other developed countries. This country has
recoded enormous growth in the technology for years. The government invests hugely in this
sector (Burritt et al. 2017). Thus, A2 Milk can get the opportunity in investing in the technology
for meeting the demands of the customers.
Legal factors:
The rules and regulations of Australia are mostly issued by the government of Britain. This is the
reason why A2 Milk gets full opportunity in working in this region by obeying labour rights,
environmental policies, consumer rights and fair-trading laws.
Environmental factors:
Unlike other countries, Australia is also facing some environmental challenges like the
country has being surrounded by oceans but it is the driest inhabited continent. Climate change is
another important issue. Water insecurity, regional conflicts over food, spread of contagious
diseases and reducing biodiversity are some of the important impacts of climate change
(Wellard, Hughes and Watson 2016). Therefore, a2 Milk gets the opportunity to use natural
resources for the production but mast fulfil some responsibilities towards the environment.
Porter’s five force analysis:
Threats of New Entrants:
Threats of new entrants is higher in the Australian dairy industry. The companies
operating in this industry mainly put pressure true lower pricing strategy, new value propositions
to the customers and reducing costs. The industry reduced any scope of Extraordinary profits for
the companies operating here. A2 milk therefore has to manage this type of challenge comma

5STRATEGIC ANALYSIS OF A2 MILK
discourage new players in this industry and build efficient barriers to safeguard its competitive
edge (Byrne et al. 2016).
Bargaining Power of Suppliers:
In Australian dairy industry the suppliers are powerful and they use their negotiating
power for extracting higher price from the companies operating in this field. Almost every
company in the dairy industry Australia purchase their raw materials from these numerous
suppliers. The suppliers are completely dedicated on whose business the firms depend upon
(Prajogo 2016). Therefore, overall result of higher supplier bargaining power can lower the
overall profitability of a2 milk.
Bargaining Power of customers:
As mentioned before the Australian population is not very high therefore the companies
cannot build a large base of customers especially the loyal ones. These byers demand to buy best
offerings but pay as less as possible (Taghian, D’Souza and Polonsky 2015). This smaller yet
more powerful customer base in the Australian dairy industry possess higher bargaining power
of customers and they have ability to demand discounts as well as offers on the products. This
can be threat for A2 milk while operating in Australian region with its diversity of products.
Threats of Substitute Products or Services:
A2 milk specialises on one particular formula of milk and has some special targeted
customer base the threats of substitute products are much lower. It understands the core need of
the customer and increase the switching cost for the customers. Thus, the competition in
Australian dairy industry does not affect the company or its popularity.
Rivalry among the Existing Competitors:
A2 Milk has built skill so that it can compete better in the highly competitive market of
Australian dairy industry. However, there are some companies which provide more or less
similar like A2 milk in the Australian region, the threat of rivalry among the competitors is not
high enough to affect the business of the company. (372 words)
Conclusion:
Therefore, it can be concluded that in operating in Australia, A2 Milk can get
opportunities more than threats. The unique products offered by the company has lowered the
rivalry among the competitors and give little scope for the customers switching the products.

6STRATEGIC ANALYSIS OF A2 MILK
However, the suppliers of this company are powerful and dominate the negotiation process and
customers ask for offers that may lower the price of the products of A2 Milk.
References:
Burritt, R., Guthrie, J., Evans, E. and Christ, K., 2017. Expanding collaboration between industry
and business faculties in Australia. Improving collaboration and innovation between industry
and business schools in Australia.
Byrne, T.J., Santos, B.F.S., Amer, P.R., Martin-Collado, D., Pryce, J.E. and Axford, M., 2016.
New breeding objectives and selection indices for the Australian dairy industry. Journal of dairy
science, 99(10), pp.8146-8167.
Gray, S., Harymawan, I. and Nowland, J., 2016. Political and government connections on
corporate boards in Australia: Good for business?. Australian Journal of Management, 41(1),
pp.3-26.
Prajogo, D.I., 2016. The strategic fit between innovation strategies and business environment in
delivering business performance. International Journal of Production Economics, 171, pp.241-
249.
Rogers, D., Lee, C.L. and Yan, D., 2015. The politics of foreign investment in Australian
housing: Chinese investors, translocal sales agents and local resistance. Housing Studies, 30(5),
pp.730-748.
Taghian, M., D’Souza, C. and Polonsky, M., 2015. A stakeholder approach to corporate social
responsibility, reputation and business performance. Social Responsibility Journal, 11(2),
pp.340-363.
Thea2milkcompany.com 2019. Our businesses - The a2 Milk Company. [online] The a2 Milk
Company. Available at: https://thea2milkcompany.com/about-us/our-businesses/ [Accessed 29
Jan. 2019].
Wellard, L., Hughes, C. and Watson, W.L., 2016. Investigating nutrient profiling and Health Star
Ratings on core dairy products in Australia. Public health nutrition, 19(15), pp.2860-2865.