Strategic Analysis: Dairy Production Costs vs. Returns in Australia

This report examines the financial performance of the Australian dairy industry, focusing on the relationship between production costs and sales returns over the past year. It highlights regional variations in production, with Victoria being the largest producer. The analysis identifies rising labor expenses, feed costs, and environmental factors as key drivers of increased production costs. The report presents a table comparing production costs and returns for various dairy products like milk, cheese, and skimmed milk. It also assesses the competitive position of Australian dairy producers against global competitors, such as China. Despite facing challenges, the report emphasizes Australia's competitive advantages, including efficient packaging and high-quality standards, which have helped maintain market share in countries like Japan, Singapore, and Indonesia. The study concludes by highlighting the importance of customer satisfaction and the demand for diverse dairy products in both domestic and export markets.

Strategic Management 1
STRATEGIC MANAGEMENT
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Strategic Management 2
Production of Dairy Products in Australia Versus the Return on Sale of the Products
For the past one year, there has been a crisis in the cost of producing the dairy
products and the returns that are evident from the sales of those products. Different regions
in Australia has different experience on the production and marketing of dairy products. For
instance, Victoria is the largest producer of dairy products with over 60% production level in
Australia. The cost of production has been too high for the last three years from 2014 to date
because of some conditions. The labour expenses have gone too high that farmers are
spending a lot of money on feed per cow. When we compare the level of feeding, animal
health care, packaging and industrial processing factors, the cost to produce a litre of milk
into other dairy products becomes very high (Gollnow et al., 2014, p.31).
The environmental factors and unpredicted conditions of weather has affected some
parts OF Australia where the green pastures for feeding the animals have gone low. For
instance, New South Wales and Western Australia has been with difficulties in accessing
feeds for animals due to poor weather and draught for this matter (Pembleton, 2016, p.1131).
These factors make the cost to produce dairy products higher.
Table showing the relationship between the cost of production verses the returns
of dairy products
Product Av. Cost of
production
Av. Returns (%) Amount of the
product 2016/2017
Milk $823,874M 11-13 42M Litres
Cheese $567 673M 5-6 34 %
Skimmed Milk $392,792M 5-6 24%
Whole Milk Powder $97,830M 7-8 11%
Butter $56,283M 6-7 3%
Others $76,548 7-8 3%

Strategic Management 3
Competitive position of Australian dairy producers with offshore competitors
(2016/2017)
country Countries of export
India Pakistan, Afghanistan, UAE, Nepal
USA Mexico, Saudi Arabia, Taiwan and China
China Russia
Australia Japan, Singapore, Indonesia
There has been a stiff competition in the dairy products for Australia producers and
the offshore competitors. Australia still hold a position in the dairy products globally.
Australia had been producing about 9% in the global dairy products until 2016 where the
trend has gone too low. Countries such as China has been able to beat Australia because of
the new technology in Agriculture and keeping of Hybrid cows.
Competitive Advantage of Australia in Dairy Products Market
However, Australia has been in a position to compete with its competitors in the dairy
production. One of the reason is through the use of efficient packaging of the milk products.
The packaging process has captured many customers. For instance, Japan, Singapore and
Indonesia has been the main market providers for Australia products (Wheelen and Hunger,
2017, p.74).
Another thing that has helped Australia to gain competitive advantage is the quality
and satisfaction of the customers. The Australian dairy factories have held high quality
standards in processing milk and other dairy products. For this reason, there has been a
competitive advantage for Australia (Wagner and Hollenbeck, 2014, p.10. The consumer
satisfaction has been as a result of being provided by the products such as cheese, butter,
pasteurized whole milk and powdered milk of the customer’s interest and therefore an
established market demand both domestically and for export.

Strategic Management 4
References
Gollnow, S., Lundie, S., Moore, A.D., McLaren, J., van Buuren, N., Stahle, P., Christie, K.,
Thylmann, D. and Rehl, T., 2014. Carbon footprint of milk production from dairy cows in
Australia. International Dairy Journal, 37(1), pp.31-38.
Pembleton, K.G., Cullen, B.R., Rawnsley, R.P., Harrison, M.T. and Ramilan, T., 2016.
Modelling the resilience of forage crop production to future climate change in the dairy
regions of Southeastern Australia using APSIM. The Journal of Agricultural Science, 154(7),
pp.1131-1152.
Wagner III, J.A. and Hollenbeck, J.R., 2014. Organizational behavior: Securing competitive
advantage. Routledge.
Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. pearson.