International Strategic Management Report: A2 Milk Company Analysis

This report provides a comprehensive strategic analysis of the A2 Milk Company, examining its position within the dairy industry. The analysis begins with an overview of the company's background, including its establishment, product offerings, and global presence, with a focus on its operations in Australia, the US, UK, and China. The report then delves into the macro and microenvironments affecting the company, utilizing the PEST framework to assess political, economic, social, and technological factors, and identifying key suppliers, customers, and competitors. A key focus is the A2 Milk Company's competitive advantage, particularly its differentiation strategy based on the unique A2 protein milk, which is assessed through the VRIO framework. The report explores the company's generic strategies, highlighting its cost focus approach, and analyzes its growth strategies using the Ansoff matrix, specifically its market development strategy. Finally, the report concludes with strategic recommendations, including investment in new technologies, e-commerce expansion, new organic product offerings, increased CSR activities, and expansion into Asian markets.

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INTERNATIONAL
STRATEGIC MANAGEMENT

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Table of Contents
Introduction................................................................................................................................2
Macro and Microenvironment....................................................................................................2
A2 milk Competitive advantage.................................................................................................4
A2 milk Generic strategies.........................................................................................................6
A2 milk Growth Strategies.........................................................................................................7
Strategic Recommendations.......................................................................................................8
References..................................................................................................................................9

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Introduction
In Australia, more than 6000 dairy farmers are responsible for producing nearly 10 billion
litres of milk annually. At present, Australia hold for milk production through the globe at
2% and is top in distribution of dairy products.
In 2000, the A2 Milk Company was founded and known for making infant formula and also
publicly listed in ASX 200. The company headquarter is situated in Sydney, Australia. It
produces dairy products supplied both domestically and globally and majority of its activities
are conducted in countries like US, UK, China and Australia. The company already gained
exceptional growth and now planning to move with launching new product line consisting of
nutritional and organic products. The company earned net revenue of A$337.3 million in the
year 2016 (fortrade.com, 2018). In response with the growth plan, the company will continue
to tap various international markets to ensure its sustainability in long term.
Macro and Microenvironment
In relation with A2 Milk microenvironment, the first environment factor is supplier. There
are 28 qualified milk dairy farms produces natural and pure a2 milk from specifically selected
cows right throughout Australia. In 2011, the a2 Milk Company also develops a joint venture
with a major British milk supplier i.e. Muller Wiseman Dairies to process market and sell its
A1 protein free products in Ireland and Britain (Sampson, 2016). In relation to the customers,
the enterprise are serving to the people of Australia, China, New Zealand, Malaysia, Hong
Kong, Singapore, USA and UK. Other than this, the increasing presence of intermediaries
and milk brokers in raw milk acquisition markets also has the potential to promote
competition. In relation to competitor, it includes Fonterra, Dairy Farmers, Fonterra and Pura.
A2 Milk Company macro environment can be addressed by using PEST Framework –
 Political Factors – In Australia, the dairy organizations were permitted to set their
own farm gate prices hence allowing adequate supply of milk. In addition, the
government policies were in favour of A2 Milk business such as rivalry policy as it
will reduce unrealistic competition. In addition, A2 Milk organisation will also able to
sell its premium milk brands in the Australian supermarkets and grocery stores.

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 Economic Factors – Purchasing power is one of the factors that is highly influencing
the dairy industry. As intake of dairy products is high in Australia, purchasing power
will also be high. Moreover, A2 Milk Company can still get huge success in the
market due to rise in demand for milk from China. It was also identified that A2 Milk
share went up to 190% when it noted in ASX (fnarena.com, 2018). This is a good sign
for the company.
 Social Factors – When it comes to food consumption, Australian consumers are more
intended towards consumption of healthy products. In 2017-18, it was founded that
two third of Australian adults (67%) were obese or overweight. In extent with new
development, this health perception force producers to sell low fat dairy products.
Offering nutritious and natural milk serves as an advantage to A2 Milk, however,
there are various rivals offering quality dairy products and may significantly impact
future sustainability of A2 business.
 Technical Factors – In dairy industry, one of the technological advancement can be
seen in fat testing introduction which allow various organizations to test the fat levels
in the dairy industry. However, A2 Milk organisation sustains on 100% natural milk
taken out from particular cows that do not include genetic engineering and
technological process (Satyanarayana, 2018).


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A2 milk Competitive advantage
The company gained competitive advantage with the help of differentiation strategy as the
producers of premium A2-based milk are very few. In addition, the A2 milk is serving to
niche market where the company targeting particularly middle-upper class customers (Pal et
al, 2015). In comparison with the competitors, the company also providing e-commerce
platform that allows the customers to reach their product in an effective way. Their
competitive advantage can more understand with the help of VRIO framework –
VRIO Exploration
Resource and
Competencies
Valuable
(Yes/No)
Rarity
(Yes/No)
Inimitability
(Yes/No)
Organizational
Support
(Yes/No)
Competitive
Implication
28 certified
dairy farms
across
Australia
Yes No No Yes Competitive
Parity
Commitment
to invest in
training the
teams
Yes No No Yes Competitive
Parity
Responsible
marketing -
complies with
MAIF
Agreement
Yes Yes No Yes Temporary
Competitive
Advantage
Extensive
responsibility
to the
Yes Yes No Yes Temporary
Competitive

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consumers by
providing
healthcare
education
Advantage
Long-term
partnerships
with dairy
partners
Yes Yes Yes Yes Sustained
Competitive
Advantage
Ideagen cloud-
based software
solution
Yes Yes No Yes Temporary
Competitive
Advantage
Capable of
producing
milk with A1
protein-free
and only
contains A2
protein
Yes Yes Yes Yes Sustained
Competitive
Advantage
Diverse
workforce
leads to
creative ideas
Yes No No Yes Competitive
Parity
One of the
most
innovative
companies
Yes Yes Yes Yes Sustained
Competitive
Advantage

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A2 milk Generic strategies
The company A2 milk is a well-known organization present in the dairy market of Australia.
The organization is successfully growing in the target market using cost focus strategy. Cost
leadership is a strategy of Porter’s generic strategy that is used in the target market to attract
customer by providing products at income friendly prices in the target market (Tanwar,
2013). This type of strategy is used to fight against tough competition and grow by providing
product at low prices to the customers in the market. The company A2 milk increases the
customer base by providing them products at low prices which act as a competitive advantage
for them in the external market. The high degree of competition influences the organization
to attract customers by supplying them products at low range and increasing their level of
satisfaction as well (Block, et. al., 2015).
Resulting in which, the brand identity of the company has formed as company that provides
qualitative products at optimum rates in the market. The company cannot create
differentiation in the products, as it can be risky for them, so they applied cost leadership
strategy to attract a wider target market and increase revenue as well. Resulting in which, the
revenue of the company increased by 68% in the year 2018; the company made focus on the
pricing strategy so as to eliminate high level of competition and sustain a positive image in
the minds of customers as well (Pash, 2018). Thus, the cost leadership strategy of Porter’s
framework helped the business to increase its effectiveness in the target market.

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A2 milk Growth Strategies
Growth strategies of the organisation include the strategy of the enterprise related to the
investment decision of the company. According to the growth strategy matrix presented
below, alternative strategies for the company are based on two key factors that are products
and services that the company is offering to the market and the target market. The alternative
strategies include Market penetration, according to which the company strategies to target the
existing or the current market with existing products. The company includes promotional
activities to do so. Product development strategy includes targeting current market with new
products; market development strategy that is targeting a new market with existing products
of the enterprise. Another strategy is diversification strategy that would include targeting new
market by the company with new products.
(Source: Hussain et al, 2013)
Considering the above-discussed matrix the growth strategy that A2 Milk Company adopts
include market development. The company is expanding in the international market with high
rate. This can be reflected in the past strategy decision of the company. For instance, the
company is serving the Asia Pacific region and the company has entered into the Chinese
market with the objective to increase the sale of the organisation. Moreover considering the
product strategy of the enterprise includes providing best quality milk in its purest form and
key major objective of the company while expanding in the Chinese market was to make

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available best quality cow milk to the residents and children of the international market
(nab.com.au, 2018).
Strategic Recommendations
The first strategic recommendation is to invest in new technologies to raise efficiency in
production. With the aid of digital technologies, data gap in dairy farming can be bridged. For
instance, using wearable sensors to monitor individual cow health. In addition, the company
needs to expand its business operations more on e-commerce platform other than its own
website, as it will give them accessibility competitive advantage. A2 Milk can also introduce
new organic product portfolio offering various other dairy products as it will directly boost
the sales of the company and they can also achieve economy of scale in the dairy farming
industry.
Indulging into more CSR activities and practices will help the company to boost its brand
image as well as impact on consumer mind positively. In addition, the company can also
expand its footprint into Asian markets such as India as these have huge market potential in
terms of dairy products.

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References
Block, J.H., Kohn, K., Miller, D. and Ullrich, K. (2015) Necessity entrepreneurship and
competitive strategy. Small Business Economics, 44(1), pp.37-54.
fnarena.com. (2018) Have You Been Paying Attention? [ONLINE] Available from:
https://www.fnarena.com/index.php/2018/03/14/have-you-been-paying-attention/ [Accessed
29/05/2019].
fortrade.com. (2018) The a2 Milk Company Limited [ONLINE] Available from:
https://www.fortrade.com/products/the-a2-milk-company-limited/ [Accessed 29/05/2019].
Hussain, Sajjad & Khattak, Jamshed & Rizwan, Arshad & M Latif, Adnan. (2013) ANSOFF
matrix, environment, and growth-an interactive triangle. Management and Administrative
Sciences Review. 2. 196-206.
nab.com.au. (2018) A2 MILK'S MARKETING FORMULA FOR EXPANSION IN CHINA
[ONLINE] Available from:
https://www.nab.com.au/business/moments/grow/international/a2-marketing-strategy
[Accessed 29/05/2019].
Pal, S., Woodford, K., Kukuljan, S. and Ho, S. (2015) Milk intolerance, beta-casein and
lactose. Nutrients, 7(9), pp.7285-7297.
Pash, C. (2018) a2 Milk is about to post a 68% lift in full year revenue [ONLINE] Available
from: https://www.businessinsider.com.au/a2-milk-full-year-revenue-2018-7 [Accessed
29/05/2019].
Sampson, A. (2016) The a2 Milk Company’s intriguing journey [ONLINE] Available from:
https://www.weeklytimesnow.com.au/agribusiness/decisionag/the-a2-milk-companys-
intriguing-journey/news-story/5adcbcc4302d626ffefc2f6e58383bb7 [Accessed 29/05/2019].
Satyanarayana, KV. (2018) The hype over branded A2 milk [ONLINE] Available from:
https://www.thehindubusinessline.com/opinion/columns/the-hype-over-branded-a2-milk/
article23605826.ece [Accessed 29/05/2019].
Tanwar, R. (2013) Porter’s generic competitive strategies. Journal of business and
management, 15(1), pp.11-17.

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