Strategic Management Analysis of Fonterra

This report provides a strategic management analysis of Fonterra, a multinational dairy cooperative. It discusses the Australian food-focused agribusiness sector, international opportunities for Fonterra, international strategies implemented by the company, appropriate and inappropriate modes of entry to international markets based on Porter's Diamond Model, and recommendations for future strategic direction.

Running head: STRATEGIC MANAGEMENT ANALYSIS OF FONTERRA
STRATEGIC MANAGEMENT ANALYSIS OF FONTERRA
Name of the Student
Name of the University
Author Note

1STRATEGIC MANAGEMENT ANALYSIS OF FONTERRA
Table of Contents
Introduction....................................................................................................................2
Discussion of Australian food focussed agribusiness sector..........................................2
Identification of international opportunities for Fonterra..............................................4
International strategies to be implemented for Fonterra................................................4
Appropriate and inappropriate mode of entry to international market for Fonterra
based on Porter’s Diamond Model.............................................................................................6
Recommendations for future strategic direction of Fonterra company.........................7
Conclusion......................................................................................................................8
References......................................................................................................................9

2STRATEGIC MANAGEMENT ANALYSIS OF FONTERRA
Introduction
Fonterra Co-operative Group Limited is a multinational dairy based co-operative that
has its operations in New Zealand. The co-operative is mainly owned by more than 10,000
farmers of New Zealand. Fonterra is mainly responsible for around 30% of the total dairy
exports in the world with the revenues that exceed 17 Billion NZ Dollars (Fonterra.com
2019). The organization has been able to gain the topmost position in the industry with
respect to the amounts of revenues that have been earned. Fonterra had started its operations
in the dairy industry of New Zealand in the year 2001 after the merger of two of the biggest
dairy based co-operatives namely, Kiwi Cooperative Dairies and New Zealand Dairy Group
(Fonterra.com 2019).
The report will be based on the analysis of the agribusiness based sector of Australia
in which Fonterra operates. The international opportunities that have been gained by Fonterra
in the years of its operations in the dairy industry will also be analysed in the report.
International strategies that have been implemented by Fonterra in order to maintain the
operations is considered to be an important part of the analysis that will be made in the report
(Fonterra.com 2019). The country that can be taken into consideration for the study is India.
The environment in India will be analysed with the help of the Porter’s Diamond Model.
Recommendations will be provided based on the ways by which different strategies can be
implemented by Fonterra in order to maintain the operations (Azavedo and Walsh 2018).
Discussion of Australian food focussed agribusiness sector
Agribusiness is considered to be an important factor that is able to provide major
levels of contribution to the economy that has been developed in Australia. The political
condition of the country and media is able to affect the operations of organizations that are a
part of the agribusiness sector. The local as well as the global players have increased the

3STRATEGIC MANAGEMENT ANALYSIS OF FONTERRA
levels of attention that are provided to the agribusiness based operations of different
organizations. The rise that has been noticed in different Asian countries is also able to affect
the development of organizations that are a part of the Agribusiness Sector (Barber 2018).
The levels of involvement of the customers is highly important for the operations that are
developed by the agribusiness organizations in the industry. The levels of competitiveness in
the industry have also increased due to the increase in demands of consumers. The changes
that have taken place in the industry are able to affect the traders, processors and the retailers
as well. The growth of demands in the industry is affected in a huge manner by the food
demands that have increased in the countries like China and India (Clune 2019).
The development of open markets in the industry has provided major levels of support
based on the formation of new technologies and proper creation of jobs as well. The market
based opportunities that are offered to the organizations in agribusiness industry are related to
the international competitors that exist in the country. The adoption of latest levels of
technologies has been able to play a major role in the development of operations of
agribusiness organizations. The government of the country has also stared providing major
levels of support based on the use of low cost based labour in order to maintain the operations
of agribusiness organizations (Dowling 2018). The cultural and financial values that have
been gained by the agribusiness organizations are related to the unified nature of Australian
agribusiness sector. The diversity levels in the agribusiness sector of Australia are high and
the operators who are involved in production activities and agricultural services are a part of
the entire food chain that is developed. The operators mainly consist of processors,
wholesalers, the producers of agricultural commodities and the manufacturers as well. The
weather based patterns of Australia have an impact on the organizations which are a part of
the agribusiness sector (Hunter et al. 2019).

4STRATEGIC MANAGEMENT ANALYSIS OF FONTERRA
Identification of international opportunities for Fonterra
Fonterra has developed different types of dairy based products for more than ten years
and are currently shared with more than one billion customers in different parts of the world.
The dairy based ingredients are supplied by Fonterra to different leading food organizations
in the world. The bulk products that are offered by Fonterra include, cheese, whole milk
powder and bulk butter. The organization also produces advanced types of ingredients that
are able to support the superior levels of performances of the research process and innovation
activities as well (Johnson 2016). The ingredients or products are highly advanced in nature
and include different functional proteins, high quality based whole milk and medical-grade
lactose as well. The foodservice products are supplied by Fonterra in more than the 50
countries in the world with the aim of developing a leadership position in the industry
(Krause 2015).
The three global brands of Fonterra that are able to provide huge product portfolio to
the customers are mainly, Anlene, Anmum and Anchor. The international growth based
opportunities of Fonterra are huge and the company can further enhance the levels of
revenues with the help of high levels of international presence in different parts of the world.
The products of Fonterra have been able to play a major role in maintaining the international
reputation of the brand (MacDonald 2018). The increase in demands of different dairy based
products in various developing countries have led to the international growth based
opportunities that are offered to Fonterra. The organization can aim at improving the ways by
which it can maintain its operations in the agribusiness sector of Australia (Mark, Griffin and
Whitacre 2016).

5STRATEGIC MANAGEMENT ANALYSIS OF FONTERRA
International strategies to be implemented for Fonterra
Fonterra has depicted an intent based on the development of effective international
operations in different countries. The appropriate expansion of international expansion is
considered to be an important factor that can have an impact on the development of revenues
of Fonterra. The international strategy that has been currently implemented by Fonterra is
exporting. The products of Fonterra that are offered to the customers under the brands of the
organization are provided to customers in different parts of the world with the help of
exporting based methods (Moshin 2015). The demands based on dairy products of Fonterra
were quite high in more than 50 countries. The strategy based on exporting of the products
has been able to play a major role in the development of revenues of the organization in
agribusiness industry. The demands of the dairy based products that are offered by Fonterra
are high in the Asian countries like India (Phillipov 2016). The organization can fulfil
demands of the customers with the help of dairy products that are developed and offered by
Fonterra. The international growth based opportunities of Fonterra are high due to the
availability of a vast product portfolio that can fulfil demands and needs of different types of
customers (Purves, Niblock and Sloan 2015).
Fonterra can thereby plan to expand its operations in India in order to increase the
levels of revenues in an effective manner. The demands for dairy based products are high in
the Indian market and the organization will be able to develop a huge customer base in the
country within short periods of time. The population of India will also be able to provide a
major advantage to Fonterra so that the organization is able to maintain its levels of growth.
The customer base of that can be developed by Fonterra will be been able to play a major role
in the ways by which the organization can maintain its operations in the dairy based industry
(Ruth Sippel 2018).

6STRATEGIC MANAGEMENT ANALYSIS OF FONTERRA
Appropriate and inappropriate mode of entry to international market for Fonterra
based on Porter’s Diamond Model
The mode of entry in the foreign market is able to play a major role in the ways by
which an organization is able to develop profitable operations in the country. The levels of
investments that need to be made by the organizations are also based on the mode of entry in
the foreign market that is implemented. The strategy of exporting has been followed by
Fonterra in order to provide its products in different countries. However, for the proper
development of its operations in an emerging market like, India the development of a proper
joint venture will be able to support the entry of Fonterra in the Indian dairy based industry
(Soriano et al. 2019). The Porter’s Diamond Model can be implemented by Fonterra in order
to analyse the entry of the organization in a new market area like India. The lack based proper
presence of the suppliers or intermediaries in the country, will be fulfilled with the help of
entry that can be made by Fonterra by implementation of joint venture. Fonterra will be able
to use the resources of its partner company in order to maintain its operations in India for a
long period of time (Soriano et al. 2019). The Porter’s Diamond model analysis of India is as
follows,
Factor conditions – The huge population of India can be considered to major human
capital that is required by Fonterra in order to maintain its operations in the dairy industry.
The natural resources that are provided by the country are also huge and will support the
operations and profitability levels of Fonterra. The knowledge based resources of the country
are also high and are able to provide support to the development of a proper employee base
for Fonterra (Whitton, Baker and Mounter 2016).
Demand conditions – The demands for dairy based products among the customers in
India are high. Fonterra will thereby require to develop the product portfolio in such a manner
that will help the organization to fulfil the demand based conditions. The quality of products

7STRATEGIC MANAGEMENT ANALYSIS OF FONTERRA
that will be offered to the customers will also be able to play a major role in fulfilling
demands.
Supporting industries – The services are able to form an important part of the GDP of
the country. The quality of labour in India is higher in comparison to the other countries. The
young workforce of India will be able to offer opportunities of growth to Fonterra. The
sustainable operations of Fonterra will be based on the development of labour force of the
organization in an effective manner (Ruth Sippel 2018).
Firm strategy, rivalry and structure – The dairy based industry of India is considered
to be an important part of the economic growth of the country that provides employment
based opportunities as well. The industry is able to provide different profitable business based
opportunities and high levels of socio-economic development as well. The levels of rivalry
that can be faced by Fonterra in India will however be quite high due to presence of major
dairy based organizations that are supported by the government (Fonterra.com 2019).
Government – The government of India provides major levels of support to the
growth of dairy based organizations in the country. The support provided by government to
global organizations is also a major chance of growth for Fonterra (Mark, Griffin and
Whitacre 2016).
Chances – The chances of levels of growth of Indian economy are high and will be
able to support the future operations of Fonterra.
Recommendations for future strategic direction of Fonterra company
The major recommendations that can be provided to Fonterra are as follows,
 The development of product portfolio based on local needs.

8STRATEGIC MANAGEMENT ANALYSIS OF FONTERRA
 Development of proper advertisements in order to communicate with the
customers.
Conclusion
The report can be concluded by stating that Fonterra has been successful in
maintaining its profitable operations in the dairy industry for a long time. However, the
development of international operations will be able to provide major levels of support based
on the growth in the dairy industry.

9STRATEGIC MANAGEMENT ANALYSIS OF FONTERRA
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