Fonterra's Strategic Management: International Opportunities and Entry

This report provides a strategic analysis of Fonterra, focusing on its international expansion. It begins with an executive summary and introduction, followed by a discussion of the Australian agribusiness sector. The report identifies international opportunities for Fonterra, specifically in Bolivia, and analyzes various international strategies, including multi-domestic, global, and transnational approaches. It then examines different modes of market entry, concluding that joint ventures are the most appropriate entry mode while exporting is the least suitable. The report offers recommendations for Fonterra's future strategic direction, suggesting expansion into Bolivia and the establishment of a production unit to serve the South American market. The report is structured with a table of contents, and references are provided using the Harvard referencing style, demonstrating a strong understanding of strategic management principles and their application to a real-world case study.

Strategic Management
10/3/2018
Fonterra

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Executive Summary
The aim of the report is to understand and implement the strategies of the company that was
selected in the previous assessment. The company that was selected is Fonterra and the
discussion related to the chosen company is done in the report. The report includes the
identification of the opportunities for the company in the international market that has been done.
It is found that the company has the opportunities in Bolivia where it is not operating currently
and it is the neighbouring country of Chile. Further, the discussion related to the international
strategy that is followed by the company is done which include multi-domestic, global and
transnational. Along with this, the report includes the discussion related to the mode of entry in
which the appropriate and inappropriate mode of entry has been discussed which include joint
venture and exporting respectively. Moreover, the future strategic actions to the company for the
chosen market have been suggested.

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Contents
Introduction......................................................................................................................................3
Australia Agribusiness sector..........................................................................................................4
International opportunities for Fonterra...........................................................................................5
International strategies.....................................................................................................................6
Multi-domestic strategy...............................................................................................................6
Global strategy.............................................................................................................................7
Transnational strategy..................................................................................................................7
Mode of market entry......................................................................................................................7
Most appropriate mode- Joint venture.........................................................................................8
Most inappropriate mode- Exporting...........................................................................................8
Recommendations..........................................................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

Strategic Management 3
Introduction
Strategic management includes the formulation and implementation of the major goals and
initiatives that top-level management on behalf of the owners of the company. This gaols and
initiatives are taken keeping the resources and assessment of the internal and external
environment in mind. The aim of the report to understand and appreciate the strategy
implementation on the corporation selected in the Assessment 1. In the assessment 1, the
company that has been selected is Fonterra, New Zealand. This is the fact that the company is
situated in New Zealand but it has a huge presence in the Australian market. Along with this, the
company falls under the agribusiness section. The report includes the details related to the
Australian agribusiness sector with the international opportunity available for the Fonterra
Company. The different international strategies that are suitable for the company are discussed.
In addition, the market where the company can expand the business operations is discussed with
the appropriate and inappropriate model of entry. In the end, the recommendation for the future
strategic direction of the selected Food-focused Agribusiness in the international market has been
done.

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Australia Agribusiness sector
Australian Agribusiness sector is highly diverse and due to which it involves the agricultural
services and products across the food supply chain (Australian Government, 2018). Agribusiness
sector of Australia is on the mature phase of its lifecycle. The industry value of the sector is
expected to rise at an annualised 2.5% in the 10 years from 2022-23 (IBIS World, 2018). In
addition to this, the agribusiness sector of the country is able to occupy the important place in the
economy with the strong track record for attracting the international investment throughout the
agricultural supply chain. This is found in the research that Australian agribusiness and food has
remained an iconic part of the identity (Williams, 2017). The industry is estimated as a $256
billion dollar and it continues to grow the GDP and economic prosperity of Australia. This is
found that 2017 is considered as the year of challenges and opportunities for the Australian food
and agribusiness sector (Minter Ellison, 2018).
1. The farms of Australia produce enough food which is used by them further to feed more
than 80 million people which reflects that they have the opportunity to export in the
overseas market.
2. The rise in the food safety regulations is one of the challenges. This is found that food
safety/purity is important to the food and agribusiness section and due to which it is the
fundamental value proposition for the exporters of Australia (PWC, 2018).
3. Ag Tech is considered an important part of the Australian agribusiness directions in the
near future which takes place through apps, sensors, GPS tracking and many others.

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International opportunities for Fonterra
Fonterra Company is one of the leading dairy producing companies and its consumer products
offered by the company represented 12% of production output. Fonterra’s increase the sales in
the seven places which include the Asia Pac and Latin America (Euromonitor International,
2017). The company has the vast opportunities in the overseas market due to which they can
expand its business operations in other countries. Fonterra is breaking the new ground in the
South Asia which is a rapidly growing market of dairy in the foreign market. The company is
involved in the joint venture with the many other countries and this is the only way through
which they are able to manage their operations in different areas across the world. Currently, the
company has the vast opportunities in the market where they are still not able to reach.
According to the research, this has been found that the company has the opportunities to expand
their business operations in the market of Bolivia. The company offer the different products
which include milk, cream, butter, yoghurt and cheese (Fonterra, 2018). This has been found that
Cheese in Bolivia is expected to record with a retail volume of CAGR of 6%. In addition, it is
expected that the currently the availability of the international brands in the cheese continues to
be limited because there are import regulations. This will make the company expand their
production units. Fonterra Company can easily meet the needs of customers related to the milk
and cheese because they have the operations in the neighbouring country of Bolivia that is Chile.
Fonterra has the opportunity for the drinking milk as it is expected to record a retail value of
CAGR of 4% with the constant price of more than the expected period. Along with this, yoghurt
and sour milk products are predicted to record the 5% retail value of CAGR at the similar and
constant prices of the year 2017 (Euromonitor International, 2017). In addition, the other
predicted to record a retail value of CAGR of 3% at the 2017 prices. Fonterra Company can avail

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the benefit of this growth in the market as this is the only way through which they can achieve
their motive to expand the business.
Along with this, the company has the opportunity in the market because they have the possibility
of the growth in the other countries which helps the company in achieving their desired mission
and vision in the market. The company will also be able to generate the profit in the market
because the demand for the products in the market is increasing that work as a factor for the
company.
International strategies
This section of the report includes the discussion related to the international strategies that are
suitable for the Fonterra Agribusiness. In the current competitive world, different companies
make use of the different international strategies (Grünig and Morschett, 2017). Similarly,
Fonterra company make use of the different strategies and the same has been discussed below: -
Multi-domestic strategy
The multi-domestic strategy is a strategy which is used by the company to attain the maximum
local responsiveness by making the offering customized so that they can match the conditions of
the nation (Rothaermel, 2015). Fonterra Company offers their brand according to the needs of
the customers, For example; currently, the company has signed the agreement with Bangladesh
because they found the opportunity for the Anchor brand. The company has decided to offer the
Anchor brand which includes the limited products and services offered by the company
(Euromonitor International, 2017).

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Global strategy
The global strategy is one of the effective international strategies that reflect that the organisation
has developed to target growth beyond the borders. This strategy is followed by the companies
with the motive to enhance the sales of goods and services in the market. This strategy includes
the three strategies which are an international, multinational and global strategy (Wheelen,
Hunger, Hoffman and Bamford,2017). Fonterra Company makes use of this strategy because
they are able to manage their business operations in more than 100 countries across the world.
Along with this, the company still have the opportunities in the markets where the demands for
the dairy products are increasing (Business school, 2018).
Transnational strategy
In the transnational strategy, the company sell the products in the different countries across the
world. In this strategy, the company doesn’t focus on the local needs of the customers they offer
the products which are their main products (Gaffney, 2018). Fonterra Company is operating the
operations in many countries where they are offering the products which are offered at every
location across the world. The company is currently offering all its products in Australia, New
Zealand, Chile, Malaysia, Japan, Sri Lanka, Indonesia, Brazil, Philippines, Thailand and
Vietnam.
Mode of market entry
The mode of market entry is one of the important factors which are considered by the company
when they take the step to expand their business in different areas across the world. There are
different types of market mode of entry are available which include exporting, licensing,
franchising, Joint venture, Licensing and many others. Out of these models, it has been found

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that the most appropriate mode of entry for the Fonterra Agribusiness Company is a Joint
venture.
Most appropriate mode- Joint venture
The joint venture is the mode of entry in which the two or more firm join together to form a new
business entity that is considered as the separate entity. The company come into the contract and
they perform the business activities together (Yan and Luo, 2016). It offers the strengths to offer
the terms of required capital. There are numerous benefits of this mode of entry due to which this
entry mode is beneficial for the Fonterra agribusiness company.
It offers the large capital funds that remain suitable for the company. The risk that the company
face in the market spread among both partners. In this mode of entry, both the company share the
skills which include technical, technology, human skills, marketing and expertise skills in the
market. These skills can be used by both the companies in the market where they are performing
their business operations (Holmes et al, 2018). Both the parties put the combine efforts which
help to achieve the business operations in the market. In the chosen market of Bolivia, the
company should make use of this model of entry only which will help them in expanding the
business effectively.
Most inappropriate mode- Exporting
The most inappropriate mode of the market entry for the company is exporting the products in
the other markets. In this mode of entry, the company need to the sale the products in abroad for
the consumption and for-profit (Stoian, Rialp and Dimitratos, 2017). This mode leads to the
chances of misunderstanding among the parties in which the deal is taking place. Along with
this, the rise in the awareness among the market considering the safety this is the fact that the

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government has brought the regulations related to the import of the products which directly
affect the exporting mode of entry of the Fonterra Company (Shen, Puig and Paul, 2017).
According to the analysis, this is found that the exporting is considered as the inappropriate
mode of entry for the company.

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Recommendations
It is suggested to the company to expand their business operations in the market of Bolivia as
this will help the company to meet its organisational objectives. For the future directions, it is
suggested to the company to set a production unit in the country and to export the products in the
other neighbouring countries (NZ Herald, 2013). This will help them in covering the major
portion of South America. Along with this, the Fonterra Company will be able to generate the
profit with the expansion in the countries. This is the fact that the company will face the
competition from the existing players of Bolivia but the Fonterra need to use the joint venture as
a market entry mode with the help of which they will be able to face the competitors by making
the appropriate strategies in the market.

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Conclusion
In the end, it can be concluded that Fonterra Agribusiness Company has already identified the
opportunities and accordingly they have taken the step to expand their business operations in the
market. Furthermore, the rise in the industry of the Food and agribusiness lead to more
opportunities for the company. The opportunities in the growing market have been determined
which shows the opportunities in the neighbour countries of Chile which include Bolivia and
Peru. Further, this has been found that it has expected that there will be a rise in the dairy, milk
and cheese products of Bolivia. Moreover, the company will not face any issues because they
can easily understand the culture of the people because it is near to Chile. All these opportunities
help the company in fulfilling their international strategies. Further, the discussion related to the
Fonterra market entry mode has been done which shows that they should select the Joint venture
for expanding the business in the market of Bolivia. The recommendations have been offered to
the company for the near future market.