RMIT BUSM3125 Strategic Analysis Report: A2 Milk Company

This report provides a comprehensive strategic analysis of A2 Milk, an Australian dairy company, specifically focusing on its infant formula division. The analysis begins with a brief overview of A2 Milk's background and mission, highlighting its focus on A2 protein and its key markets. The core of the report involves a detailed macro-environmental analysis using the PESTEL framework, examining the political, economic, social, technological, legal, and environmental factors impacting the company. Following this, the report applies Porter's Five Forces model to assess the competitive dynamics within the industry, evaluating the threat of new entrants, the bargaining power of suppliers and buyers, the threat of substitutes, and the intensity of rivalry among existing firms. The report concludes by synthesizing the findings from both analyses to offer insights into A2 Milk's strategic position and future growth prospects within the competitive landscape of the infant formula market.

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Contents
Introduction......................................................................................................................................3
Macro analysis - PESTEL analysis..................................................................................................4
Political factor..............................................................................................................................4
Porter’s Five Forces Model.............................................................................................................6
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

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Introduction
A2 MILK COMPANY is situated in New Zealand and it was founded by DR.CORREN
McLachlan after the scientific discovery. He started this business when he was studying at the
Cambridge University and he learned that the proteins present in the milk impact the individuals
differently. The activities of the company are operated and managed in Australia, New Zealand,
China, US, UK and also in Asia. The mission of the company is to pioneer the scientific
understanding of the A2 Protein type and also to maintain the nutritional goodness that is present
in the natural milk (A2 Milk, 2019). The tagline of the company is to “Feel the difference”. A2
Milk is considered as the leading premium milk brand that is present in six major supermarkets
of Australia.A2 Milk can be considered as the large firm that deals in offering Milk in the
different market areas (Esty & Fisher, 2019).
In this paper the in-depth analysis will be done on the A2 Company. The discussion will be made
on the macro environment analysis that will be highlighted by PESTLE ANALYSIS. The next
phase of the report will consider PORTER 5 FORCES MODEL that will help to assist the
competitive advantage. The last phase of the report will be based on the entire summary of the
paper which will be stated as the conclusion part.

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Macro analysis - PESTEL analysis
Political factor
There are some political factors that impact over the strategy of Infant Formula Industry. In the
context of importance of local governments in Australia, the role of the local government has
significant value in making policies and regulations in Australia. A2 Milk has to intimately
follow the states and territories it has existence in rather than planning nation-wide policies in
Australia (Bodnár, et. al., 2018).
It is required by the organization to manage diverse regulations in the number of markets it is
existence in (Van Eeden et. al., 2018). It has been found that the changes in the economy of
Australia have amended regulations not only market entry but also how firms in livestock/fish
can run in local marke (Tan & Carrillo, 2017). There are no forthcoming threats to Australia
from the disruption in the environment of the business due to terrorist threats and military
policies and other instability of political.
Economical factor
The economic performance of Australia will remain stable in next 5-10 years. The government
of Australia has developed the investment in creating core infrastructure to help and develop
business environment from which, Infant Formula Industry can access the ongoing infrastructure
to develop growth in Australia (Pal, Woodford, Kukuljan & Ho, 2015). With respect to inflation
rate, easy liquidity in the market post the huge recession of 2018 will produce to developing
inflation in the Australia economy. Growing liberalization of trade policy of Australia can
facilitate Infant Formula Industry to devote further into the regions which are off limits to the
organization.

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Social factor
Due to increasing liberalization, the attitude towards health and safety are getting lenient. It
would be threat for Infant Formula Industry and it is required by the organization to stay away
from these kinds of attitudes as the cost of failures is too high in Australia. Australia’s society is
various from the home market of A2 Milk. It should endeavor to develop a local team that
comprehends the societal norms and attitudes to provide the customer in Australia.
The preference of local people of Australia is towards the experiential products rather than
traditional value proposition in non-cyclical sector. Infant Formula Industry can provide leverage
this trend to develop products that offer increase customer experience.
Technological factor
The product life cycle gets shortened due to technology and it has helped suppliers to quickly
improve new products. This strategy put pressure on Infant Formula Industry on marketing to
focus on the suppliers’ desires by developing diverse range of products. It has included to the
cost of operations of the A2 Milk (Nystrom & Winston, 2016). A2 Milk should close eye on the
development of user experience with developing speed and access. This can entirely modify the
customer user experience in the livestock industry. By taking consideration of customer sector,
there is no effective culture of technology transfer and companies often are unwilling to divert
technologies for the fear of developing competitors out of collaborators.
Legal factor
There is health and safety norms in Australia that need to consider by Infant Formula Industry at
the time of developing the services in the Australia. Along with that they should consider norms

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and factors that contribute in meeting those norms. The role of the data protection laws is not
limited up to giving protection to the privacy issues but also it is applicable in intellectual
property rights. Infant Formula Industry has to believe whether Australia have a robust
mechanism to prevent against data breaches or not.
Environmental factor
Renewable technology is appealing area for A2Milk. It can influence the trends in this sector.
Australia is offering subsidies to empower in the sector of renewable. It is the agreement that put
real targets for the government of Australia to adhere to. This can outcome in huge scrutiny of
environmental standards for Infant Formula Industry in Australia. Waste management majorly
for units close to the urban cities has taken amplifying importance for players like Infant
Formula Industry. The government of Australia has come up with definite norms for waste
management in the urban areas.
Conclusion from pestle analysis
It can be concluded from pestle analysis that Infant Formula Industry should focus on norms and
policies in order to get future growth in a significant manner. In the context of the overall impact,
it can be said that each factor of pestle analysis has different contribution in the growth of
Australian Infant Formula Industry. Due to strong position of Australian’s economic position,
adoption of renewable technology and clear view of legal aspect, this industry can grow in
future.
Porter’s Five Forces Model
Threat of new entrants (weak)

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The scale of economy is quite hard to attain for A2 Milk Company in the industry. It becomes
easier for those developing large capacities to have a cost benefit. The cost would be high for the
new entrants that can make weaker force for this aspect (Mathooko & Ogutu, 2015). The product
differentiation strategy is strong in this industry, where organizations sell various kinds of
products instead of standardized product. There is a firm highlight on advertising and customer
services as well.
A2 Milk Company can tackle the threat of new entrants by focusing on innovation to
differentiate products from the new entrants. It can invest on marketing for the aim of developing
strong brand identification.
Bargaining power of suppliers (weak)
The range of suppliers is in excessive manner in comparison of buyers that depicts the supplier
having less control over prices. The products provided by suppliers are less differentiated and
fairly standardized. This develops it easier for buyers such as A2 Milk Company to switch
suppliers.
For preventing from the threat of suppliers, the A2 Milk can but raw materials at low cost from
its suppliers. Due to switching cost of low, the company can switch from one supplier to another
for making products suitable to the company (Ngo, 2018).
Bargaining power of buyers (high)
The income of buyers in this industry is low that depicts the pressure of purchasing products at
low rate, which makes lower bargaining power of buyers. The product differentiation is high

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within the industry, which refers that the buyers are not capable to search alternative
organization for developing a specific product (Fessenden, et. al., 2019).
A2 Milk can divert its focus on differentiation and innovation in order to attract more buyers.
The large number of customers can attract on that due to focusing on this strategy by A2 Milk
Company.
Threat of substitute (weak)
The range of substitute is lower in this industry that depicts low profit earning industries. Due to
few substitutes available in this industry with high quality, the rate of the products is increasing
high.
A2 Milk can go for the quality of the products in order to attract a large number of customers.
Rivalry among existing firms (moderate)
An existence of the competitors in this industry is lower that refers the organization cannot take
move without being noticed. This force makes weaker this aspect of porter’s five forces. There is
a large market share for dew competitors that help them to become market leaders.
A2 Milk should focus on differentiation of the products in order to not allow competitors for
getting attention by the customers. The supply-demand situation can be analyzed by the company
through market research.
Conclusion from Porter’s five forces
It can be concluded from Porter’s five forces that there is a less competition for the company. By
following differentiation strategy, the company can reach at maximum level of benefits within

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the industry. There is an inter-connectedness of different aspects of the competitive forces
because due to involvement of new company in this industry, the competition can be increased.
The overall impact of porter’s forces on the industry will be effective as threat of new entrants,
bargaining power of supplier and threat of substitute have weak position, which will be helpful
for A2 Milk Company to grow in future.
Conclusion
From above discussion, it can be concluded that the strategic analysis has noteworthy role for
Infant Formula Industry in order to get future growth. The discussion has been made on A2 Milk
Company for the aim of describing the importance of Pestle and Porter’s fiver forces analysis for
evaluating the opportunities and threats. They have linked with each other because macro
environment and micro environment factors are beyond the control of marketers. External
environment factors can impact the strategy of internal factors, from which the company’s
productivity can be influenced. It has been found that the growth of the company can be
expanded if they follow all norms and policies as per different country.

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References
A2 Milk, (2019). About Us. Retrieved from: https://thea2milkcompany.com/about-us/
A2 Milk, (2019). Our Business. Retrieved from: https://thea2milkcompany.com/about-us/our-
businesses/
Bodnár, Á., Hajzsér, A., Egerszegi, I., Póti, P., Kuchtik, J., & Pajor, F. (2018). A2 milk and its
importance in dairy production and global market. Animal Welfare, Etológia és
Tartástechnológia, 14(1), 1-7.
Esty, B., & Fisher, D. (2019). The a2 Milk Company. HBS Strategy Case, (719-424).
Fessenden, S. W., Foskolos, A., Hackmann, T. J., Ross, D. A., Block, E., & Van Amburgh, M. E.
(2019). Effects of a commercial fermentation byproduct or urea on milk production,
rumen metabolism, and omasal flow of nutrients in lactating dairy cattle. Journal of dairy
science, 102(4), 3023-3035.
Mathooko, F. M., & Ogutu, M. (2015). Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in
Kenya. International Journal of Educational Management, 29(3), 334-354.
Ngo, H. (2018). POTENTIAL DAIRY INDUSTRY IN VIETNAM: Case Study: Vinamilk LTD.
Nystrom, J., & Winston, D. R. (2016). A2 milk marketing and human health. Journal of Animal
Science, 94, 18-18.
Pal, S., Woodford, K., Kukuljan, S., & Ho, S. (2015). Milk intolerance, beta-casein and
lactose. Nutrients, 7(9), 7285-7297.

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Tan, Y., & Carrillo, J. E. (2017). Strategic analysis of the agency model for digital
goods. Production and Operations Management, 26(4), 724-741.
Van Eeden, L. M., Crowther, M. S., Dickman, C. R., Macdonald, D. W., Ripple, W. J., Ritchie,
E. G., & Newsome, T. M. (2018). Managing conflict between large carnivores and
livestock. Conservation Biology, 32(1), 26-34.