New Zealand's A2 Milk Company: International Market Analysis

This report examines the international market analysis and expansion strategies of the A2 Milk Company, a New Zealand-based firm. It focuses on understanding global markets, cultural environments, and identifying favorable foreign markets for expansion. The report considers four emerging markets where the company can potentially increase revenues and profits. It explores market selection decisions, analyzing various entry strategies such as simultaneous entry, diversified and concentrated market approaches. The report emphasizes the importance of screening markets based on characteristics like business climate, competition, distribution logistics, and trade barriers. The paper also analyzes the company's background, the benefits of A1 protein-free milk, and market distribution across various regions, including the UK, US, Australia, and China. The analysis aims to provide insights into effective business development in international markets, considering market structures and competitive conditions.

Running head: INTERNATIONAL MARKET
INTERNATIONAL MARKET
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Purpose
New Zealand is a highly developed free market economy, which ranks among the 53rd
greatest economies in terms of purchasing power. The economy has grown over the years due its
improved service and manufacturing sectors that drives huge amount of goods and services. It
has a well-established export market that is driven by technological capabilities. New Zealand
wants to expand its market in several sectors that is crucial for its growth and development due
to increased efficiency and performance.
The paper tries to focus on the understanding of the global markets and cultural
environment that is effective for business development with respect to global market
opportunities. This is done by choosing a favorable foreign market that is effective for
expansion. For this, four emerging markets are considered New Zealand can effective expand its
revenues and extract super normal profits. The impacts can be either positive or negative.
Therefore, it becomes important to understand and compare the business opportunities in
different countries where New Zealand can effectively operate and extract huge revenues.
Background
The background of the paper gives the setting of the paper with respect to the
organization that will expand its business in other markets. The chosen company is The A2 Milk
Company which is a part of ASX 200 public listed company. The company was also known as
A2 Corporation which deals in the commercialization of intellectual property that is related with
A1 protein-free milk. The products produced by the company are sold under the a2 and a2 milk
brands. The company also makes infant formula that provides huge revenues. It has an annual
revenue of 337.3 million dollars. The firm does not need much labor as goods are produced by

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capital intensive techniques. It operated with an asset value of about 210.15 million that is
crucial for business and organizational development.
The A2 Milk Company is followed by A2 Corporation that was established in 2000. The
impacts of A1 beta-casein has been researched by Dr Corran McLachlan. The company
undertook a genetic test to denote whether cows are able to produce milk with a1 protein. The
goal of the A2 Corporation was to make dairy products that is free of A1 protein milk. The
company organized several dairy farm breeding programs to establish the goals. However, the
launch of such products were delayed due to operational objectives and it was not made. Instead,
A2 products were made in the market. The company made huge profits with a year of its
establishment with the creation of effective policies and maximized output.
Gallons of milk has been produced by the company that is encouraged the firm in
generation of huge revenues. About 40 liters of free milk were produced by the company in 2010
and extracted huge revenues and marginal proficiency. A1 protein free milk and yoghurt were
supplied to Queensland. By 2012, the company came under the New Zealand Stock Exchange
that created a brand name for the company. The A2 corporate created infant formula and sold it
to several market. It increased its milk business over United Kingdom and United States that
enabled huge sales. Thus, it can be seen that it follows a diversified market strategy due to
expansion of businesses over wider area. The name of company has been hanged in 2015 after
the firm started marking huge profits by expanding its business ventures in the developed
countries. However, businesses are now flexible in emerging markets where foreign firms started
shifting their business in a place that is abundant in resources. This has enabled to firms to
produce goods at a much lower cost the increases their sales and profit percentage. The firm has
a sustainable market as it delivers milk that is enrich in protein. A1 proteins are termed as

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harmful and so milk produced by the company is free from A1 protein. Market distribution
hugely increased in several regions such as UK, US, Australia, Hong-Kong, America and China.
Topic 1: A market selection decision, based on a shortlist of four (4) markets and relevant
criteria.
The decision to expand a business in international markets over other countries is to
understand the impact on the profitability of the chosen firm with respect to several market
strategies. Exploring and accessing the international markets involves the comparison of several
markets with respect to their performance, opportunity, growth, revenue, sales and profit
margins. Data needs to be collected from several authentic sources that can be either qualitative
or data. Collection of this data is not easy because the data is different in each country with
respect to several outcomes. The strategy of structural approach is applied to understand the
changes in several markets by screening the core effective policies for the organizational
development with respect to several outcomes that is crucial for the business development.
Exploring a new market is based on the selection process that is reflected from the way
firms enter in the foreign market. This is judged in terms of incremental basis strategy which is
related to the decisions taken by the investors on an incremental basis. The change in the value of
balance sheets or income statements are important to understand the financial condition of the
economy. Firms take decisions on the basis of their experience on the performance of
international markets in a number of ways. This is effective for the firm to maintain the output by
using lowering resources and involving less risk in terms of exposure. However, this approach
contributes to a greater risk value and leads to a greater competitive risk from the competitors.
This is because firms can effectively analyze the performance of its rival firms and move to other
regions where companies earn huge profits.

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Another strategy that is effectively used in businesses is the simultaneous entry approach.
This strategy works on the principle of diverseness where a firm tries to enter as many markets
as possible within a shorter time span. The strategy needs a strong understanding of the markets
and marketing activities due to difficulties of operating in simultaneous markets where the
market has several successful entries. When there is a successful market entry, there occurs an
entry barriers for the other followers as the successful firm has already dominated the industry
which is known as the first mover advantage. Entry into several market normally increases the
volume f sales which helps in utilizing the capacity of each firm. Firms are able to achieve
economies of scale in production while operating in the international market. As a result,
companies use its natural resources fully that s effective for the organizational development a per
the core attributes. Simultaneous entry approach is foreseen as a resource intensive strategy that
can bring about higher operating risk. Moreover, firms has to adequately maintain its target and
use more competitrivge techniques of production and deliver products at proper time. Firms
needs to resort to several marketing strategies that can effectively improve the performance of
The A2 Milk Company in the global market.
Studying the market structure is effective before entering the market and sell the goods.
The third strategy is to see which approach will be effective, diversified or concentrated. A
concentrated market strategy is the strategy where the sale of the products are targeted towards
one set of audience or a specific segment of the consumer population that operates in a limited
markets. This strategy is effective for small business to sell products with limited financial
resources and dominate the market with their targeted audience. This enables the firm in the
creation of a distinct market niche for a particular commodity. Diversification is the opposite of

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concentrated market approach. Diversification is the process by which firms enter into new
markets by launching new products that is not focused on one set of target audience.
When firms decide to operate in a concentrated market they need to give more focus
towards the sourcing of the products in such small markets for a smaller set of audience. The
firms get benefit from exploiting the information and acquire a competitive experience. They are
able to facilitate competitive advantage by providing goods at low costs and raise its optimum
level of output that enhances producer surplus. This is because when firms can produce gods by
using less resources it lowers the production costs. Low production costs enable firms to sell the
goods at low price and attract more their targeted set of customers which raises their productivity
level. This is effective for the business ventures to communicate and extract huge revenues that
will help them get the return on the invested amount. However, they face the risk of attracting
potential customers. Since, these firms depend on only a small range of customers or operate
over a smaller geographic area, their sales might get hampered if they are unable to attract their
targeted customers. This makes the firm ignorant to the rest of the population even though the
firm has acquired fir global expansion. Thus is crucial for the business to operate in a diversified
market approach that is intended to attract several customers.
The effectiveness of such policies are dealt in the way goods area being produced and
delivered in several markets as it diversifies the risk opportunity in several market strategies. The
approach of diversification markets offers greater strategic flexibility because the diversification
strategy can be approached in several ways (Alon et al., 2016). It enables the firm to extract huge
revenues to by creating products that is innovative and efficient as per the geographical area.
Among the four strategies, the most effective strategy is the screening approach which analyzes
the markets with respect to cost effective outcomes and technologies. Screening is done on the

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basis of company’s portfolio to attract international customers and increase their area of
operation. The competitiveness of the firm is measured by understanding the core characteristics
of the market in which they operate the markets in which they are willing to expand their
ventures.
Screening is done in two methods such as analyzing the market characteristics and
competitive conditions. Under the topic of market characteristic, firms needs to focus on the
climate, competition, distribution logistics and trade barriers. The market in each country is
differentiated in terms of their market characteristics that is effective for the long run business
development (Lester et al., 2019). The business climate of a country is important for analyzing
the way businesses perform in that market. It is influenced by factors that is effective for long
term businesses that is crucial for business operation such as external and internal factors,
political stability, consumer choice or preference, regulations and market affairs with respect to
policies that is crucial for the long-term business development (Piercy, 2016). The distribution
and logistics serves as an important factor for market analysis because the production and market
logistics needs to be linked for effective business operation. Manufacturing, modelling,
distribution, transportation, fleet management, efficient handling of materials, proper
management techniques, warehouse management and managing of inventory is enlisted under
logistics distribution. Competition in the market is measured by observing the behavior of rival
firms and their market domination.
In a competitive market structure, firms cannot influence the markets due to availability
of infinite buyers and sellers (Iyer et al., 2016). Prices are generally low or similar to that given
by the other rival firms and no one can extract huge sales until the good is highly demanded in
the market. Similarly, in monopolies there is a single firm who provides a unique product that is

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not produced by other firms and extract huge revenues and sales. This enables the firm to
influence market prices due to unavailability of other substituites products in the market.
However, provision of such products is not easy because it needs several regulations from the
government and market outcomes. Firms basically follow an oligopolistic market structure where
the products are differentiated in terms of price, design, quality, quantity and advertisements.
Firms try to follow a cartel system or try to outsource each other due to the provision of similar
goods (Yang et al., 2015. Barriers to trade serves as an important factors if there are trade
barriers then firms will not be able to trade goods in that country and extract huge sales. The
operating sales are due to a changing outcome that can lead to business development. The overall
impact can fall on the company if they are unable to supply goods due to imposition of tariffs
that raise the price of goods.
Trade barriers like tariffs or import quotas are imposed that raise the price of imported
goods that refrains people from buying the foreign products and lower the level of sales in the
market. The effective outcome can be dealt in the way goods are served and traded in the market
with respect to effective policies and outcomes (Catarino et al., 2015). The A2 Milk Company
can expand its business in four emerging markets like China, Malaysia, Thailand and India.
Emerging markets are those that has few characteristics of developed markets where goods and
services extract huge sales that raise the level of profits. However, it cannot match with all the
standards in a developed economy. The performance of these economies has effectively
improved in the past years and companies are trying to shift their business in the emerging
markets to extract huge sales and revenues. Malaysia, China, India and Thailand are known as
the biggest emerging markets where businesses have retained positive profits. The business

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environment has flourished in these economies such that they are able to extract pure economic
profits.
China is known as one of the fastest growing countries in the world due to its GDP, rise
in per capita income, revenues and improvement of service sectors. The A2 Milk Company has
already exported goods to China in 2013. The company’s famous infant formula that was made
of a2 Platinum is exported to China that has derived export led growth and income for the
company. The A2 Milk Company extracts profits from China through exports and so opening a
firm may not be profitable because the company is already deriving quality sales and profits
from the sale of the product in China (Watson et al. 2015). This country imports a great deal of
dairy products from The A2 Milk Company that is further used for production of other dairy
goods. Thus, China deals in the export and import of milk products and thus opening an unit of
The A2 Milk Company will not be very profitable. Moreover, the resources for providing milk or
other dairy products is deficient in China which will eventually increase the production cost and
raise the overall price that will lead to a sharp fall in profit margins.
India is a developing economy that has served as one of the most effective hubs for
business development though quality sales, provision of resources, export earnings, businesses
and foreign direct investment and export laid growth (Thiele et al., 2015). India is self-sufficient
in milk resources or dairy products. India is known as one of the biggest exporter of milk and
related products. Consumers are self-satisfied with dairy products that is provided at low prices.
Thus, India is self-sufficient in the provision of dairy products and related goods with the
attainment of efficiency in production capability, resource capability, human and financial
resources. This efficiency is important for the development of huge sales for India with the
exportation of dairy products. Thus, it can be concluded that dairy firms in India have successful

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businesses and there is no need for opening new dairy units (Li et al., 2018). Thailand is another
successful emerging market who growth is structured through an effective trade market that can
deliver quality sales at an optimum cost and profit percentage. However, this revenue is mostly
generated from the service and tertiary sectors that has developed in the economy. Thailand does
not have a good dairy industry and consumer demand is not high enough to expand business
relating to dairy in Thailand (Saebi & Foss, 2015). Thus, it be not be profitable to open a milk
business in China that serves milk free of A1 protein.
Malaysia is renowned as the center of all businesses and is known as the business hub of
Asia. The country serves as one the most effective business environment for the word class
brands. Global brands have encountered a high rate of sales and profitability by owing business
in Malaysia. The import of dairy products in Malaysia has significantly increased in the past few
years owing to a sharp increase in the demand for dairy products. Malaysia has resources to
serve the dairy products, yet dairy products are imported in subsequent proportion in Malaysia
due to the provision of the good at low price and larger amounts which is derived from the
provision of goods at lesser time frame (Meyer et al., 2018). This is effective for the firms to
extract huge revenues from the operating a dairy firm that provides dairy and other related
products. The sale of the product lies in the provision of goods at an affordable price, quality and
output that is effective for business development with respect to optimum outputs and profit
levels. Moreover, Malaysia has skilled labors and modern technologies that will enhance the
production level at lesser time. Financial resources and capability is effective in Malaysia
(Endrullat, et al., 2016).
The country does not face much of trade barriers and extension of business is flexible for
long run growth and extraction of profits. The most effective costs lies in the extraction of super

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normal profits with respect to market effective inputs and technologies that can be attained in
Malaysia (Meyer et al., 2018). The market structure for the dairy industry is pure oligopolistic
where four firms influence the market and operate at an effective price and output level. They
form a cartel while operating in the market or provide goods at similar such that each firm can
attain the same level of profit and output.
The company will be able to extract huge sales by providing the good at a price that is
effective fir quality development due to technical efficiency which is helpful for deriving the
supernormal profits with respect to effective outcomes. The firms will be able to extract huge
sales that is effective for the business outcomes in the long run due to generation of huge profits
and revenues (Mignani et al., 2016). The overall effect can be change in the quality parameters
with respect to optimum outcomes.
Topic Two: A description of the specific nature of the opportunity identified, focusing on
market size/demand estimation, competition and consumer tastes or preferences.
The demand for the dairy product was low in the Southeast Asian countries in
comparison with the developed markets. As a result, the consumption of the dairy product
remained low in Malaysia as well. The consumption of the dairy product was lower than 20kg
per capita each year in Southeast Asia. Whereas, the consumption of the dairy product was
nearly 300kg per capita per year in developed markets (Kotler et al., 2018). However, according
to the estimation, the demand for dairy products will increase in the Southeast Asia until 2020 by
3%. Therefore, the region will become the market of the largest dairy consumers worldwide. The
a2 Milk Company planned to expand its business of dairy products in Malaysian market. Hence,
the selection of the Southeast Asian emerging market such as Malaysia would help the company
to expand its business and achieve success (Klochkov, Papic, & Butkevich, 2017).

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There are various health benefits of the milk products. The awareness about the heath
benefits of the milk and its related products was less in the Southeast Asian countries. It lowered
the consumption level of milk and dairy products in the Malaysian market (Vellas, 2016).
However in recent years, the consumption of the dairy products increased by more than the
world average of 2% in Southeast Asia due to growing incomes, increasing regional awareness
and rapid urbanization. In addition, the awareness about the A2 milk also rose. Firstly, it was
only popular in the New Zealand, Australia, India, United States and China. Later, it expanded to
the rest of the countries of the world. Along with growing demand for the milk and dairy
products, the demand for the A2 milk also boosted in the Malaysia (Ghimeray et al., 2019).
The variety of A2 milk was first launched by the company a2 Milk, it also helped to
increase the awareness about the health benefits of the A2 milk in comparison with A1 milk
products. There exists some harmful proteins in A1 milk. The company mainly focused its
business on A2 milk. The people of the emerging market also shifted their preference towards
the company produced A2 milk and milk products. The market value of the A2 milk would reach
to 19324 million US dollars by 2024 (Goldfarb, A., & Tucker, 2015). As the emerging market
such as Malaysia offers huge customer base for the A2 milk. Currently, the market is also
dominated by the few players. Other than the A2 Milk Company, there are few market players
such as Pura, Jersey Diary and Dairy Farmers. Thus, it would be helpful for the company to tap
the emerging market like Malaysia. The A2 milk company is one of the largest market leader in
the field of A2 Milk Company. In addition, continuous research and development of the
company also helped it to lead the market. Though, there are many players in the Malaysian
dairy market. The market of A2 milk is dominated by the A2 milk company (Li, Cui, & Lu,