Strategic Analysis of Fonterra: MGT5STR Report - [University]

This report provides a comprehensive strategic analysis of Fonterra, a major dairy producer and exporter in Australia. It begins with an introduction to Fonterra, its operations, and its position in the global dairy market. The report then delves into an analysis of Fonterra's business units, product lines, and revenue streams, with a focus on its consumer, food service, and ingredient supply divisions. A detailed examination of the external environment follows, covering political, economic, social, technological, environmental, and legal factors impacting Fonterra's operations. The internal competitiveness of Fonterra is assessed using the resource-based view, evaluating its tangible and intangible resources, capabilities, and core competencies. The VRIO framework is applied to identify Fonterra's competitive advantages. Finally, the report offers strategic recommendations for Fonterra's future, including expanding its market base, introducing new dairy-based products, and ensuring sustainable practices. The report concludes by summarizing the key findings and recommendations, emphasizing the importance of adapting to changing market dynamics and leveraging internal strengths for continued success.

Running Head: FONTERRA 1
Strategic Management

Running Head: FONTERRA 2
Introduction
Fonterra is the biggest dairy producing business of Australia. It is also one of the
biggest exporter of the dairy products. Due to the increasing competition and growing
presence of several new players, importance of strategic management has grown over the
time. In the recent time, organisations are required to effective formulate the strategies
despite of their size and scale. Inn Australia, agriculture business is growing at a huge scale.
Several business organisations are also able to gain huge profit and success (Baker, Gill,
Friel, Carey & Kay, 2017). In the recent time, several opportunities are also developing for
the agriculture business due to the increasing demand of these products. Fonterra is also
proved the best and leading firm of agribusiness in Australia. It also has huge market
presence in the Australian market. Fonterra has it’s headquarter in Auckland, New Zealand.
Fonterra has started its operation in 2001 in the agriculture business of Australia.
across the world, it come on the number six in dairy firms. It also has different subsidiaries
including Cheese, Anmum, Mainland, Anchor, and Saprole. In order to grow widely, it has
also done partnership with different companies. The major aim of the Fonterra is to lead in
the dairy firms and attain the competitive advantage based on this.
In the report, discussion has been done on the internal as well as external business
environment of Fonterra. At the time of carrying out discussion on this, competitive
advantage, core competencies has also been discussed. In the end of the discussion, several
recommendations are provided to the Fonterra so that it can gain more market base and
thereby increase its revenue and growth (Harris, 2016).
Business units and products lines
Fonterra has various business units in the market of Australia that includes the
consumer sector under the brand of Fonterra. It also has food service supplies under the dairy
ingredients and Anchor food. It has wide range of business units that assist it in satisfying the
different customer segment. The wide number of consumer products includes the Anchor
Milk, Bega Cheese, Mainland butter and cheese, and Perfect Italino. By undertaking the
diverse products, it tends to target the large number of customers in the dairy sector. From the
above discussed products, Bega Cheese of Fonterra has the highest demand in the market.

Running Head: FONTERRA 3
With the NZMP Australia, it is supplying the ingredients of dairy to the food manufacturers
across the globe (Collins, Gray, Reid, Shadbolt & Dooley, 2018).
Among these, the major revenue earning business unit for the Fonterra is the food
supply division, consumer division and ingredient supply division. The biggest revenue
business unit for Fonterra is the consumer good division. Fonterra also have the major market
share from the Australian market due to its high demand of products.
External environment analysis of Fonterra
Political factors: the business unit of Australia get the positive help from the government of
Australia. Besides this, it is also seen that the Australian government also promotes the
livestock sector for increasing the demand of dairy as well as meat. In terms of positive
aspect, Australia also have the positive relations from other emerging nations across the
globe. It helps the Fonterra in exporting the Australian products. it can also get negatively
affected if government started favouring the production of meat.
Economic factors: Australian economy is positively booming that increases the potential OF
Fonterra to again more customer base. By taking the provision for export, Fonterra gets the
increase in demand for the dairy products. in the recent time, several International brands are
also taking entry that tends to increase the competition for Fonterra in the market of
Australia. However, taxation is one such problem that si faced by Fonterra in Australia. this is
one such reason that put pressure on Fonterra to sell products in the higher amount.
Social factors: in the social factor, Fonterra is getting negative social impact due to the
increment in the consumption of Vegan in the Australia. It might also be possible that the
Fonterra will see the decline in the demand of its dairy product. The positive side is that the
significance of cheese in the cuisine of Australia is increasing the demand of Fonterra cheese
products. it is true that the dairy products contain several fat contents that directly affect the
potential of Fonterra. This tends to force the Fonterra to give emphasis of its healthy content
in the products.
Technological factors: it is the most significant factor that puts the higher emphasis on the
current agriculture business to invest huge amount in the technological innovation. It is seen
that the Fonterra is the biggest dairy industry by doing several technological advancements in
the manufacturing and breeding process. For the entire production process, it has done the
automation. It helps the Fonterra in gaining competitive advantage (Markus, 2014).

Running Head: FONTERRA 4
Environmental factor: it is true that the agriculture business is directly linked with
environmental issues due the water and air pollution issue. It is seen that the Australia has
some of the strict rules in relation to the environmental standards. Due to this, Fonterra is
required to run its business operation similarly (Pathak, Hagare, Guo & Ngo, 2015).
Legal factors: laws are high in Australia, specially it is seen in the food and beverage
industry. this is one such reason Fonterra adhere effectively with the Processing and
Production standard for running its business in Australia. However, it has to face the issues in
some of the western country due to the strict regulations (Martinus, Sigler, O’Neill, & Tonts,
2018).
Internal competitiveness of Fonterra
It is effective to use the resource based view in order to ensure the internal
effectiveness. As per the resource based view, the tangible resource of Fonterra includes the
human resource, manufacturing facilities and machinery. Several things are helping Fonterra
in achieving the competitive advantage such as talented and skilled human resource, location
facilities as well as machinery. As compare to this, the intangible resource includes the
identity, brand value, as well as quality.
Capabilities
In case of Fonterra, several numbers of capabilities can be seen. The significant
capability of Fonterra is its human resource management approach. In the human resource
management approach, Fonterra has given the due consideration to the emotional
intelligence. The major advantage from it gain is that it deal with the human resource
effectively and efficiently. The another capability of Fonterra is the flexibility in the
organisation. It clearly states that the internal processes as well as practices of Fonterra are
designed in such a way that helps the Fonterra to effectively cope up with the changes. The
risk that is faced by business organization is the several changes occurring in the market.
Market orientation is also one such capability of Fonterra. It means that the Fonterra
strategies are being designed according to the market trend (zeller & Langa, 2018).
Core Competencies of Fonterra
The presence of Fonterra across the world is its major core competency. In addition to
the Australia and New Zealand, it also has market presence in the United States, United

Running Head: FONTERRA 5
Kingdom, and China. This is the reason it is able to gain the greater market segment. This
core competency helps Fonterra in the major way to position itself as a brand (Murray, 2017).
The diversified product range of Fonterra is also one such core competency. It has large
number of business units that helps it in satisfying the industrial and domestic customers. It
also tends to source the milk directly from the farmers and helps it in maintaining the
competitive advantage.
Identification of the competitive advantage of Fonterra
VRIO framework proves to be effective in order to identify the competitive advantage of
Fonterra.
Valuable: the major valuable resource of Fonterra is its brand value. This valuable resource
has helped it in creating the image in the market. Due to this, it is also able to come up with
new products and gained massive success. Besides this, technological advancement is also
one such valuable source of Fonterra in Australia. Due to the use of technological
advancement, it is able to lower down the cost of production (Knott, 2015).
Rare: the access with the local farmers is included in the rare resource of Fonterra. It also
assist the company in ensuring the supply of pure milk. It helps it in gaining the competitive
advantage because most of the firms are not able to fulfil this requirement.
Imitable: This approach of Fonterra tends to work toward the human resource management
that cannot be work effective in other company too easily. Due to this reason, it requires the
proper contribution on the side of management of the company. This also assist or helps the
Fonterra in getting the competent and skilled staff for carrying out the significant operation.
With the help of this, firm is effectively able to gain the competitive advantage (Viets, 2015).
Organisational capability: it is rightly discussed that the Fonterra has wide range of
capabilities in terms of market presence, finance, as well as business units. These things help
the Fonterra is operating across the world by having diversified customer segment (ortsie-
Aryee, Gabriel, Fennessy, O'Kane and Walton, 2018).

Running Head: FONTERRA 6
Recommendations
From the above analysis, several things can be recommended. Due to this, it is also
suggested to include the cooperative mode of business in some of the foreign nations. It will
increase its market base and thereby increase the competitive advantage. it will also help
Fonterra in decreasing the cost of production.
It can also ensure the product development, it is proved be the significant strategic
intent. Due to this, it is also suggested to introduce the dairy based products. For example- ice
cream can be introduced in order to gain more customers. At the same time, it will increase
the target segment of customers by increasing the revenue and profit. Market development is
also one such best strategic option suggested to the Fonterra. This will further lead to the
gaining of opportunities and thereby favourable growth rate. Fonterra is also required to
ensure the sustainability practices in relation to the several environmental standards. This will
enhance the corporate brand identity across the market (Gaynor, 2018).
Conclusion
From the above discussion done, it is concluded that the several number of negative
and positive external factors affect the Fonterra in market of Australia. By conducting the
deep analysis in the report, internal analysis of Fonterra is done through the resources, core
competencies and competitive advantage. It is also suggested that in order to deal with the
growing external factors in Australia, internal analysis of Fonterra is not only sufficient. It is
because several external factors such as change in customer demand likely to put the great
impact on any company. In spite of this, company is required to expand the current business
as well as market segment in the developing economies in order to gain the profit from
developing nations too. By considering this, some of the suggestions are also provided in the
report. All the recommendations given will assist the Fonterra to improve its market presence
as well as gain the higher revenue from other foreign market too.

Running Head: FONTERRA 7
References
Baker, P., Gill, T., Friel, S., Carey, G., & Kay, A. (2017). Generating political priority for
regulatory interventions targeting obesity prevention: an Australian case
study. Social science & medicine, 177, 141-149.
Bortsie-Aryee, N.A., Gabriel, C.A., Fennessy, P., O'Kane, C. and Walton, S. (2018) Resource
synergies for on-farm water management: a study of New Zealand
agribusinesses. Australasian journal of environmental management, 25(4),
pp.398-419.
Brouthers, K.D., Nakos, G. and Dimitratos, P. (2015) SME entrepreneurial orientation,
international performance, and the moderating role of strategic alliances.
Entrepreneurship Theory and Practice, 39(5), pp.1161-1187.
Collins, H. M., Gray, D. I., Reid, J. I., Shadbolt, N. M., & Dooley, A. E. (2018). Accessing
and building social capital: How a farmer-led initiative influenced
environmental policy implementation. Rural Extension and Innovation
Systems Journal, 14(1), 73.
Gaynor, B. (2018) Brian Gaynor: Does big pay bring big results? [ONLINE] Available from:
https://www.nzherald.co.nz/business/news/article.cfm?
c_id=3&objectid=12023441 [Accessed 28/03/2019].
Harris, D., 2016. Policy Design and Industry Development Plans: Dairy Industry Experiences
in Asia and Australia. In CRUCIAL AGRICULTURAL POLICY: Analysis of
Key Threats to Food Security (pp. 235-271).
Knott, P.J., 2015. Does VRIO help managers evaluate a firm’s resources?. Management
Decision, 53(8), pp.1806-1822.

Running Head: FONTERRA 8
Markus, A., 2014. Attitudes to immigration and cultural diversity in Australia. Journal of
Sociology, 50(1), pp.10-22
Martinus, K., Sigler, T. J., O’Neill, P., & Tonts, M. (2018). ‘Global restructuring’two decades
on: Australia’s relational economy in the twenty-first century.
Murray, G. (2017). Capitalist networks and social power in Australia and New Zealand.
Routledge.
Pathak, N., Hagare, P., Guo, W., & Ngo, H. H. (2015). Australian food processing industry
and environmental aspect–a review. In International conference on biological
civil and engineering (BCEE-2015) Feb (pp. 3-4).
Sacks, G., Mialon, M., Vandevijvere, S., Trevena, H., Snowdon, W., Crino, M. and
Swinburn, B. (2015) Comparison of food industry policies and commitments
on marketing to children and product (re) formulation in Australia, New
Zealand and Fiji. Critical public health, 25(3), pp.299-319.
Zeller, B., & Langa, L. (2018). Contract farming: global standards or market forces? The case
of the Australian dairy industry. Uniform Law Review, 23(2), 282-297.