RMIT Strategic Management: A2 Milk Company Report, Semester 1, 2019

This report provides a comprehensive strategic analysis of A2 Milk Company, examining its resources and capabilities through the VRIO framework to determine its competitive advantages and disadvantages. It identifies the company's current generic business strategy and proposes a new strategic marketing mix initiative. The report evaluates the suitability of this initiative based on the external environment, strategic capabilities, and existing business strategy. Furthermore, it develops a detailed strategic implementation plan, including required changes, management strategies, and an action plan. The report also outlines methods for measuring the strategic initiative's success, utilizing a balanced scorecard and strategy map to assess performance. The findings highlight A2 Milk's strengths in financial resources and distribution networks, while also pointing out areas for improvement such as cost structure and research and development. The analysis concludes with actionable recommendations for achieving sustainable competitive advantage.

Strategic Management

Running Head: Report
Contents
Summary..........................................................................................................................................2
Introduction......................................................................................................................................3
Resources and capabilities of A2 milk company (VRIO framework).............................................4
Generic strategies.............................................................................................................................9
New Strategic Initiation: Marketing Mix......................................................................................12
Product.......................................................................................................................................12
Pricing........................................................................................................................................13
Suitability of new strategic initiative.............................................................................................17
Strategic implementation plan.......................................................................................................19
Required changes.......................................................................................................................19
Implementation and management of changes............................................................................20
Action Plan.............................................................................................................................21
Measurement of a strategic initiative.............................................................................................23
Balanced Scorecard....................................................................................................................23
Strategy map..............................................................................................................................25
Conclusion.....................................................................................................................................27
References......................................................................................................................................29
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Running Head: Report
Summary
This report is compiled to analyze the strategic capability analysis of the organization named as
A2 Milk. The research also involves proposing a new strategic initiative for the organization that
helps in achieving a competitive advantage. On the basis of all the findings of this report, an
actionable strategy implementation plan is prepared and evaluated for the purpose of achieving
success. The implementation plan that prepared in the research is very realistic and achievable.
The main purpose of conducting this research is to demonstrate about the key strategic initiative
and a plan of strategic implementation that assists A2 Milk Company to achieve the sustainable
competitive advantage and evaluate the plan by following some measures such as balanced
scorecard. The report includes the identification of the resources and competencies of the
organization by using the VRIO framework. On the basis of the strategy statement and value
chain activities, the current generic type of business strategy implemented by A2 milk is also
discussed in this research project. A new strategic initiative for the organization to implement is
proposed and this initiative is a functional initiative related to the marketing of the company. The
evaluation of strategic initiative is done on the basis of the external environment of A2 company
its strategic capabilities and current business strategy. An implementation plan that going to be
developed is focusing on the need for strategic initiative and how to manage and implement the
proposed changes. At last, the main focus is given on how the proposed strategic initiative
measured by using the set of key measures and strategy map is drawn.
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Running Head: Report
Introduction
Any organization working in the market conditions is affected by many external factors which
affect the performance of the organization. With the changes in the market conditions, the
success of the organization is dependent on the ability of the company’s resources to evaluate the
internal and external conditions and a new strategic initiative to implement that shape the future
of the organizations. The good performance or successful competitive advantage is only
achieved through the continuous improvement in the organizations. Every organization has set
objectives for the future and to achieve those objectives, the strategy is used as an action plan.
The strategic planning and the operation is a new management process that organization adopts
in time to the changes in the external environment by effectively utilizing its current capabilities
and potential.
This report is compiled to analyze the strategic capability analysis of the organization named as
A2 Milk. The research also involves proposing a new strategic initiative for the organization that
helps in achieving a competitive advantage. On the basis of all the findings of this report, an
actionable strategy implementation plan is prepared and evaluated for the purpose of achieving
success. The implementation plan that prepared in the research is very realistic and achievable.
The main purpose of conducting this research is to demonstrate about the key strategic initiative
and a plan of strategic implementation that assists A2 Milk Company to achieve the sustainable
competitive advantage and evaluate the plan by following some measures such as balanced
scorecard. The report includes the identification of the resources and competencies of the
organization by using the VRIO framework. On the basis of the strategy statement and value
chain activities, the current generic type of business strategy implemented by A2 milk is also
discussed in this research project. A new strategic initiative for the organization to implement is
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Running Head: Report
proposed and this initiative is a functional initiative related to the marketing of the company. The
evaluation of strategic initiative is done on the basis of the external environment of A2 company
its strategic capabilities and current business strategy. An implementation plan that going to be
developed is focusing on the need for strategic initiative and how to manage and implement the
proposed changes. At last, the main focus is given on how the proposed strategic initiative
measured by using the set of key measures and strategy map is drawn (A2 Corporation Limited,
2012).
Resources and capabilities of A2 milk company (VRIO framework)
VRIO framework is a very useful strategic tool to analyze the internal resources of the A2 Milk
Company Limited and assess whether these resources and capabilities provide a sustained
competitive advantage. This VRIO framework also analyzes whether the resources and
capabilities of A2 Milk Company can be improved to provide a greater competitive advantage.
Valuable (V)
According to the Valuable element in the VRIO framework, it is analyzed whether the resources
of A2 milk add value to organizational success or not. Some of the resources of the A2 Milk
Company are also analyzed in the context to its value for the organization which is mentioned as
below:
Financial resources: The Financial resources of the A2 Milk Company are highly
valuable as they required by the organization to invest in external opportunities. The
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financial resources are must to grab the opportunities and also helps in combating the
external threats to the organization.
Local Food products: According to the VRIO framework, the local food products of the
company are highly valuable as they add value to customer satisfaction because of its
quality of differentiation. Product differentiation is playing a major role in gaining a
competitive advantage (Pesic, Milic, & Stankovic, 2012).
Employees (Human resource): Employees are always considered as valuable assets for
the organizations and they can contribute to achieving the set organizational goals and
objectives. The employees of A2 Milk Company are highly trained and skilled that helps
the organization to achieve high productivity levels. The rate of employee retention is
also high in the organization which shows that the company is much more capable of
retaining the employees for a longer period of time.
Patents: Patents are also very valuable resources for the company as they help the
organization to sell its products and services in a fair way and without any interference.
The patents also allow organizations to earn licensing revenue by giving these patents to
other manufacturers.
Distribution network: The distribution network of A2 Milk Company Limited is very
strong and considered as the valuable resource of the organization. The strong
distribution network is very essential to reach the customers quickly and improve the
customer services and ensure to achieve the high revenues for A2 Milk Company
(Jugdev, 2017).
Cost structure: it is observed from the VRIO analysis that the cost structure of A2
Company is not a valuable resource as the cost of production is much higher in
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comparison to the competitors. There is a need to work on the cost structure as it is a
competitive disadvantage and affects the overall profitability of the company.
Research and development: The research and development at A2 Milk Company are
very costly and does not add value to the company’s competitive advantage. The cost of
research and development is much higher than the benefits provided to the company in
terms of innovation. However, the company needs to adopt some innovative ideas for
gaining competitive advantage.
Rare (R)
The resources that only acquired by one or very organizations are said to be rare and contributes
to gain competitive advantages. All the resources and capabilities of the organization are
analyzed and evaluated. Not every organization has the strong financial resources for the
investments, but A2 Milk Company has these resources which said to be rare. Moving ahead, the
local food products of the A2 Milk Company limited are not considered as rare as they are
offered to the customers by many other competitors. Talking about human resource, then having
a skilled and trained workforce is the biggest strength for the organization as it is identified that
these resources are rarely found in many organizations. Low employee turnover is a positive
point for organizations. Patent as resources considered as rare as they are not processed by the
competitors and also not easily available. In addition, it is also very rare to find strong
distribution networks in the organizations because it requires a huge amount of investment as
well as time. There are very few companies in the industry having strong distribution networks
(John Wiley & Sons, 2012).
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Imitable (I)
This aspect of the VRIO analysis demonstrates how difficult it is for the organization to imitate
the resources. The financial resources in the organization are costly to imitate in the organization
as these resources are acquired by A2Milk Company from the longer period of time and there is
a less threat of new entrants because high financial resources are required to set up a competitive
business. In terms of the local products, it is not difficult to imitate as competitors can easily
acquire these products by investing some amount in the research and development of the
companies (a2 Milk Company Limited, 2018). Therefore temporary competitive advantage is
provided by this resource. Also, employees are not costly to imitate as other companies can also
improve the skills of their workers by providing proper training, better compensation and career
growth opportunities. Moving further, it is not legal to imitate a patented product and it is costly
to develop the same resources and getting patent for that. Talking about the distribution
networks, then it is costly to imitate. It is observed that the competitors of A2 Milk Company
need to invest an amount to imitate a similar network of distribution.
Organization (O)
This part of the VRIO framework analyzes how the resources are organized to capture value
from them. The A2 Milk Company has clearly organized its financial resources with the intent
to capture the value as the company makes use of these resources very effectively. The company
invests its money at right time and at right place. The organization is unable to capture the value
from patents as the company lacks in using the patents to its full potential. Also, the distribution
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network of A2 Company is organized to capture the value by mainly focuses on reaching out to
the customers (Pesic, Milic, & Stankovic, 2012).
Therefore, it is identified from the VRIO framework of A2 Milk Company that the financial
resources and strong distribution networks are key resources that provide sustained competitive
advantage whereas the employees provide the temporary competitive advantage. The
competitive disadvantage for A2 Milk Company is its research and development and high-cost
structures.
Key resources Valuabl
e
Rare Costly to
imitate
Organized Competitive
advantage
Financial resources Y Y Y Y Sustained
Local food products Y N N N Competitive
parity
Human resources Y Y N N Temporary
Patents Y Y Y Y Unused
Distribution
network
Y Y Y Y Sustained
Cost structure N N N N Competitive
disadvantage
R & D N N N N Competitive
disadvantage
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Generic strategies
The level of competitiveness in the infant formula industry is high but considerably lower than in
other industries. The industry is dominating by fewer major firms which influence the supply and
pricing of products. However, the intensity of competition between the existing players is still
high with product differentiation taking centre stage of marketing strategies. The current generic
type of business strategy of A2 Milk Company is the product differentiation to gain a
competitive advantage. The A2 milk company has set clear product differentiation to survive in
the increasingly competitive market. According to the porter's generic strategies model, there are
basically four strategies which can be applied by the organizations to gain the competitive
advantages cost leadership, cost focus, differentiation leadership and differentiation focus. From
the value chain analysis and strategy statement of the organization, it is analyzed that the
company mainly focusing on the differentiation strategy and less focus is given on the cost of the
production (Snape, 2016). The A2 milk company already set a competitive advantage on the
basis of differentiation. The Current differentiation strategy of the A2 milk company needs a
proper marketing strategy that focuses on the identification of the unique selling propositions. A2
Milk Company is offering protein-free milk which is the USP of the organization but the
company is lacking in marketing and maintaining the cost of production of the products.
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The differentiation strategy
The differentiation arises from creating a unique value for the customers through high quality,
superior delivery time and product features. Differentiation strategy basically involves the
production of the different products from its competitors and selling it to the customers by
emphasizing on the unique features of the products. The A2 milk company has excelled for years
because of its unique product features like a1 protein free milk which results in attracting the
maximum number of customers especially the health conscious people (Chege & Oloko, 2017).
The main focus of differentiation strategy of A2 Milk Company is on the development of brand
loyalty by offering some different and unique products. There are many ways with the help of
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which the company developed differentiation leadership such as reliability, benefits and
distinctive features of the products. On the other hand, it is also identified that the company
needs to focus on the marketing strategies as it's important to convey the USP of the organization
to its customers in order to increase the profitability level of the organization and to build the
brand image of the company. It is also observed that when pursuing the differentiation strategy,
it is essential for the organizations to create a higher value for the customers. The A2 milk
company provides various benefits to the customers by providing healthy milk products to the
customers. According to the competitive advantage model the company can develop an effective
market strategy by utilizing its resources and capabilities and leverage those competencies either
through cost or differentiation orientation (A2 Corporation Limited, 2012). This will help the
organization to create value.
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