Fonterra's Sustainability in New Zealand: A Comprehensive Report

This report analyzes the sustainability challenges faced by Fonterra, a dairy company in New Zealand. It explores the company's vision, which involves providing high-quality dairy products globally, while addressing environmental concerns like greenhouse gas emissions and waste management. The report proposes lean management as a key approach to enhance sustainability, recommending strategies such as integrating local farmers, aggressive global expansion, expanding the product cycle, and implementing Total Quality Management. These recommendations aim to improve operational efficiency, reduce environmental impact, and achieve economic sustainability. The report further outlines a milestone chart for Fonterra, detailing a timeline for achieving operational efficiency and sustainability goals, including financial strategies, market analysis, product development, market entry, and environmental initiatives. It also discusses the organizational changes required to implement new product strategies and achieve sustainability milestones, such as investing in new production plants and recruiting new staff. The report emphasizes the need for simultaneous implementation of these strategies to achieve long-term environmental and economic sustainability within a 10-year timeframe.

Running head: SUSTAINABILITY IN A DAIRY COMPANY IN NEW ZEALAND
Sustainability in a Dairy Company in New Zealand
Name of the Student:
Name of the University:
Author Note:

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SUSTAINABILITY IN A DAIRY COMPANY IN NEW ZEALAND
Task one:
1. Company vision:
The vision of Fonterra Group Co-operative Group Limited is to provide its
customers all round the globe with high quality dairy products. The environmental
analysis of the cooperative organisation shows that it faces sustainability challenges. The
firm has introduced sustainable methods of waste management but is still under the pressure
to reduce its carbon output in the environment (fonterra.com, 2017).
2. Choice approach:
Fonterra can adopt lean management as the chosen approach to gain higher degree of
sustainability. The firm can use lean management and streamline the decision making process
to take quick decisions on business operations. The cooperative can empower the middle
level managers to take decisions to take advantage of market opportunities which would
enable the firm more profit. Thus, application of lean management would make the firm
financially more sustainable.
3. Justification of choosing lean management approach at Fonterra:
The adoption of lean management at Fonterra would enable the cooperative to gain
sustainability in several forms which justifies the adoption of the approach at the cooperative.
The apex management of Fonterra should adopt lean management which means, they would
require empowering and training the middle level managers to take business decisions. The
middle and lower level managers are more in direct contact with customers and are in better
position to understand profit opportunities. Hence, adopting lean management would enable
these mangers to take quick decisions to take advantage of market opportunities which would

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enable the firm to earn more profit. This would enable the firm to gain financial sustainability
and become more profitable. Secondly, these mangers would be able to take prompt decisions
to deal with recycling of waste and low grade materials to direct them towards further
production. Thus, this would enable the firm to manage wastes more efficiently and gain
sustainability. Moreover, recycling wastes to produce energy would enable the firm to reduce
its energy expenditure and become energy efficient. Thus, it can be justified that adoption of
lean management as the chosen approach would enable the firm to become more sustainable
and energy efficient.
4. Recommendations:
The following are the high level recommendations can one can make to the organisation
regarding optimising its operations to tackle this pressure of sustainability and achieving its
vision with:
Recommendation 1: Integrate local farmers in obtaining sustainability:
Fonterra must integrate farmers in not only producing milk but also ensuring
sustainability. The previous discussion shows that the cooperative suffers from environmental
issues like emission of greenhouse gases and unsustainable waste management practices. The
firm must train the farmers to manage the cows in more scientific ways which will minimise
the emission of the greenhouse gases (Clark et al., 2016). The cooperative can aim to set up
greenhouse gas plants which would utilise the gases released from managing the cows. The
cooperative can utilise this energy from its own greenhouse plants to meet a portion of its
energy requirements. Moreover, the cooperative should allocate funds to set up windmills
which would again generate energy for its use (Vanlauwe et al., 2015). Fonterra as a result
can use this strategy in the long run to produce its own energy and reduce its operation
expenditures, thus becoming economically sustainable.

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SUSTAINABILITY IN A DAIRY COMPANY IN NEW ZEALAND
Recommendation 2: More aggressive global expansion:
The cooperative should aim in the long run to expand its global presence. An analysis
of the global markets of some of the top competitors of Fonterra like Nestle points out that
these companies have presence in more than a hundred countries. Fonterra in comparison to
competitors like Nestle is present in Oceania, a small part of Asia and some parts of South
America (nestle.com.au, 2017). The company has weak or no presence in the profitable
markets of Europe and North America. The management of Fonterra should consider of more
expansive global expansion in the long run (fonterra.com, 2017). This will enable the
cooperative to diversify its risks and losses over a huge market that will earn it financial
sustainability.
Recommendation 3: Expand its product cycle:
The next strategy which the apex management of Fonterra can take to gain
sustainability and optimise its operations is expanding its product cycle. The cooperative,
according to the first strategy should gain environmental sustainability, should install
greenhouse gas treatment plants and windmills to curb use of non-renewable sources of
energy (Sattari, et al., 2014). This installation of windmill would require immense investment
which requires the cooperative to expand its revenue base. Fonterra should expand its product
line into other food products like noodles and chocolate bars. This will allow the cooperative
to earn higher revenue and support its long term vision to gain sustainability by selling its
new products to a huge base of customers. Moreover, the third recommended strategy of
expanding into new markets would allow Fonterra to sell its existing and new products in
new customer bases and generate more revenue (Styles et al., 2015).
Recommendation 4: Total Quality Management:
The apex management of Fonterra should emphasis on aligning manufacturing of
products with the expectations of the customers to achieve total quality management. The

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production manager should use the information about customer preferences to form product
strategies. This would ensure that the raw materials like milk and cream are utilised
efficiently. This in turn would minimise wastage of resources and save the company from
spending exorbitant amount of money to manage wastes (Bourlakis et al., 2014). Thus, the
cooperative using this strategy of aligning production with customer requirement would be
able to achieve TQM which ensure that customer get high quality products according to their
expectations. An analysis of the outcome of this strategies shows that the cooperative would
be able to again both environmental and economical sustainability by adopting this strategy.
Discussion of the recommended strategies:
The aims of these recommendations are to gain operational efficiency to become more
sustainable and solve environmental issues within the next ten years. The first strategy
around involving the local farmers towards gaining energy efficiency and reduce energy
costs. The second strategy is entering new markets to generate more revenue to support the
energy efficiency strategy. The third strategy is expansion of product cycle to serve more
customers and generate more revenue to support this operational efficiency objective. The
fourth strategy is to achieve TQM by aligning production with customer expectations
(Wilhelm et al., 2016). An analysis of these four strategies clearly show that gaining of
environmental and operational sustainability has to aligned with gaining of business
expansion and economic sustainability. The apex management of Fonterra should adopt the
policies of TQM and Kaizen to achieve these two aspects of sustainability. This will enhance
operational efficiency because continuous inflow of financial capital by adopting the second
and the third strategy would ensure fast installation of windmills and greenhouse gas plants
(Bonneau et al., 2014). Thus, the four recommended strategies have to be dealt with
simultaneously to achieve operational efficiency within 10 years.

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SUSTAINABILITY IN A DAIRY COMPANY IN NEW ZEALAND
Task Two:
Part (a)
Particulars Particulars
Nos Milestones Predecesso
r(s) 1 2 3 4 5 6 7 8 9 10 Nos Outcomes
Sucesso
r
mileston
e(s)
M1 Float more shares and arrange for
financing to raise capital. 0 O1 Generation of huge capital from
investors
M2 PESTEL M1 O2 Knowledge about external
environment and new markets
M2(SW
OT),
M3, M4
SWOT M1, M2 O3 Formation of strategies M3, M4
M3 Form new product strategies and
introduce new products
M1, M2,
M3 O4
Generation of higher revenue,
strengthening of brands and
generation of more investments
O1
M4 Enter new markets M1, M2,
M3 O5
Reveneue generation of new
customer bases, strengthening
of brands internationally and
attract more investment
O1, M3
M5 Installation of greenhouse gas plant
and windmills M2 O6
Gaining environmental
sustainability and become
energy efficient
M6 Become public limited company and
list on more stock exchanges M3, M4, O5 O5 Generation of more capital M1
Years
Ten years milestones for Fonterra
Figure 1. Milestone chart for Fonterra
(Source: Author)
The figure above presents a timeline which the apex management would follow to
achieve operational efficiency and sustainability. The cooperative should set six milestones
and aim to achieve specific outcomes some of which would go beyond 10 years.
The first milestone or M1 is to float fresh shares in the primary stock market and
subsequently in the secondary stock market. The cooperative should keep on releasing
shares to ensure generation of continuous capital to supports the subsequent or successor
milestones. The outcome of this milestone would be generation of capital for achievement
towards achievement of successor milestones.

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SUSTAINABILITY IN A DAIRY COMPANY IN NEW ZEALAND
The second milestone or M2 would be divided into two divisions, PESTEL and
SWOT. Fonterra should invest a part of the generated capital from milestone 1 into
conducting PESTEL analysis to gain information about the markets of New Zealand, the
countries where it is present currently and a selected number of host countries where it wants
to enter. The firm on the basis of the information gained from PESTEL would conduct its
own SWOT analysis. This information would lead to achievements of milestones 3, 4 and 6.
The third milestone or M3 involves Fonterra in forming new product strategies to
introduce new products and innovative versions of existing products from the fifth year
onwards. The achievement of M2 and the financial strength rendered by M1 fuel this
production of new and innovative goods. Fonterra would be able to sell these new products
in its existing markets, strengthen brand equity and generate more revenue. This would
earn it more revenue which in turn would fuel its next milestone, entering new markets.
The fourth milestone or M4 of Fonterra would be entering new markets like the
United States of America. The firm would use the information gained from PESTEL analysis
of the selected new markets achieved in M2 and new products achieved in M3 to enter new
markets from the 7th year onwards. The outcomes of achievement of this milestone would be
generation of more revenue and strengthening of the brand value of Fonterra internationally.
This would in turn fuel the first milestone, attracting more investments to strengthen the
operations of the cooperative.
The fifth milestone or M5 is dependent on M2 and involves installation of
greenhouse gas plant and windmills. Fonterra would use the technological advancements and
human resources to install windmills and greenhouse gas treatment plants to gain
environmental sustainability and cost effectiveness as per the first and fourth

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SUSTAINABILITY IN A DAIRY COMPANY IN NEW ZEALAND
recommendations. The cooperative should aim at achieving this environmental sustainability
milestone between 6 to 10 years.
The sixth milestone or M6 is becoming a public limited company and listing on more
stock exchanges around the world. Converting into public limited company and listing on
stock exchanges in the host countries as well is very important to strengthen the market
position of Fonterra. This would allow the cooperative to generate capital from global stock
market which would in turn promote to the outcome of first milestone which generation of
huge capital to support its subsequent milestones.
As pointed out in the milestone figure, Fonterra first must float shares to generate the
huge amount of capital required to strengthen its sustainability standards. The second
milestone would consist of conducting a SWOT and PESTEL analysis of the market of New
Zealand present host markets like China and Brazil and new markets. The third milestone
would be forming a product strategy to introduce new products into these markets and also
enter new markets with these products which is the fourth milestone. This would generate
revenue to support expensive sustainability initiatives like setting up of windmills, its fifth
milestone. The final milestone would be becoming a public limited company from a
cooperative firm. The company as a part of the final milestone should also get listed on the
stock exchanges of the host countries to generate more capital to support construction of
sustainable plants and windmills (biodieselmagazine.com, 2018).
Part (b)
The most immediate milestone which would require Fonterra to undergo
organisational changes is the formation of new product strategies to introduce new and
innovative products as shown in the figure below. The following are the operational

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changes which the organisational will need to implement to initiate the realisation of the
milestone within 4 years.
1. New production plant:
The management of Fonterra is required to install new advanced production plant to
produce new goods as per the customer preference information gained from M2. The new
production plant should be capable of producing goods by using minimum energy and
emitting lower quantities of wastes. This would allow the firm achieve Six Sigma to gain cost
effectiveness and cut down energy management expenditures (Loucougaray et al., 2015).
2. Recruitment of new operational staff members:
The first operational change namely installation of new plants to produce new goods
would necessitate the second operational change, recruitment of new operational staff
members. The new operational staff members would be skilled and trained to operate modern
manufacturing facilities. They should be skilled to use software to manage new production
projects efficiency so as to ensure high productivity by using minimum energy and emitting
low amount of wastes (Schuppli et al., 2014).

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SUSTAINABILITY IN A DAIRY COMPANY IN NEW ZEALAND
M1: Float more shares and arrange for financing to raise capital.
M2: PESTEL and SWOT
M3: Form new product strategies and
introduce new products
Operational change 1: New
manufacturing plant
Operational change 2: Recruitment of new staff
members to operate new manufacturing plant
Figure 2. Operational changes to be introduced in Fonterra to realise M3
(Source: Author)

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