Overview of Agribusiness in Australia
Agribusiness in Australia has and will always be one of this nation industry pillars. There are many local and global forces getting increasing attention and where retailers, traders and processors have all seen changes in their markets (Purves, Niblock and Sloan, 2015). Agribusiness Australia’s inclusive industry approach enables the industry to be a coherent association and support rural communities and contribute significantly to the national economy.
The competition is continuously increasing in the agribusiness of Australia and to survive in this competitive market, an organisation needs to adopt strategic management practises. With proper strategic planning, an organisation can recognise their ability and competitiveness in extent with both long and short term goals and then identify the necessary decisions and actions that need to be taken to attain those goals.
Considering a global organisation, Fonterra cooperative company is selected for this assignment which is owned by 10000 farmers and united by a fundamental belief in power of dairy to make a difference (newsie.co, 2018). The headquarter of the organisation is situated in New Zealand. The company was founded in 2001 and currently employs more than 21000 employees to lead as a massive dairy exporter. In 2018 the company generated total revenue of $18,934,257,000 including sales and other revenue (Ibisworld.com, 2018). Moreover, they have various strategic alliance at international level that helps the company to become an international exporter of dairy products. Fonterra also has various subsidiaries including Mainland Cheese, Anchor and Soprole. The company summarise their philosophy to produce great dairy products and build a long-lasting commitment with the consumers.
This work extends towards external business environment of Fonterra which build up the internal competitiveness of the company and help in identifying and executing their competitive advantage in the whole industry. In last, necessary recommendation is being made in relation to management and operations of Fonterra in Australia and at global level.
In Australian agriculture market, Fonterra comprises of various numbers of businesses in respect with serving both consumer and industrial needs. Their portfolio of well-known brands includes Anchor, Anmum, Anlene, NZMP and Farm Source inclusive of supplies of dairy ingredients. All are made using trusted processes with highest quality natural dairy and are loved by consumers in Australia and around the world. Hence, the company provide many sorts of offerings to its diverse customer segment. For instance, the consumer good section and product portfolio include Western Star butter, Perfect Italiano ready to make meals, Bega cheese and Anchor milk. Fonterra also supplies dairy ingredients to many food manufacturers globally and in Australia and in this way industrial needs is also being fulfilled.
Introduction to Fonterra cooperative company
Fonterra earns major portion of their revenue from the customer division and it also heavily determined the brand value of Fonterra (Walker, 2017). The company also have a food service division by which Fonterra provides various range of branded dairy products to Café, restaurants, fast food outlets and other identical businesses. In addition, this division works strictly with caterers and Chefs to produce more tailored products.
For analysing the company external environment, PESTLE strategic tool will be used to identify various factors that significantly impact the firm macro environment. Changes in business macro environment impact the firm in shaping strategy and competitive landscape (Bouhali et al, 2015).
- Political aspects- The present governance system in Australia has served its purpose for a long time and play a critical role in policy making and regulations in Australia. Fonterra gains many benefits from the Australia government (Friel et al, 2016). Livestock sector is being promoted by Australian government to meet the increasing demand for dairy and meat. In addition, Fonterra can effectively export their business products to other countries due to positive association of Australian country with other nations all around the economy. Though in future, if the government make stringent policies in support of meat production, this may hamper the Fonterra business to a great extent.
- Economic aspects – The business performance of Fonterra is closely linked with the economic performance of Australian economy. Increase in dairy products demands shows positive interactions towards Fonterra exports. Though many other agribusiness brands are entering in Australia and this will impact the business potential of Fonterra. On the other hand, Australian taxation policy is getting more complex and this will lead to increase in product prices by Fonterra.
- Social aspects – The society of Australia is different from the home market of Australia and the company is required to develop a local team to understand the societal norms to effectively serve the customers of Australia (Zheng et al, 2015). One of the major trends is consumption of veggie foods in Australian society that will directly reduce the demand for dairy products of Fonterra. However, In Australian cuisines, the demand for cheese is rising and this is positive for Fonterra business. In addition, many customers of Fonterra are also concerned about greater fats in the dairy products and it requires the company to update its product portfolio. Moreover, due to presence of large number of suppliers of dairy products, the customer is becoming more expertise and the company need to undertake several strategies to satisfy the rising customer expectations.
- Technological aspects – In Australia, both government and private players are spending various resources in developing new solutions and creating disruption in the market. Fonterra has also adopted technological advancement trend in its breeding and manufacturing operations. Fonterra production is full automotive that gives the company a competitive edge over the competitors. Though, the company is required to meet the rising demands of the customers by investing more in research and development.
- Environmental aspects – Australian environmental standards are very tight due to prevailing issues related to air and water pollution. In addition, Greater awareness among customers has also put environmental factors at the centre of Fonterra core strategy. This requires Fonterra to sustain its business as per those set standards as the company already faced several issues in its home country i.e. New Zealand. Fonterra fined $170,000 for Rangit?iki River pollution, which the local regional council says is a significant taonga for iwi (Cook, 2015).
- Legal aspects – The Australia legal policies are very much strict and Fonterra is following the primary processing and production standards. In many nations, the company products are being exported and each countries business law is different. This requires the company to positively adhere to each country laws.
It includes internal competitiveness of Fonterra, identifications of the capabilities, Fonterra core competencies and the company competitive advantage in extent with VRIO framework.
The internal competitiveness of Fonterra can be evaluated with the help of resource-based view that recognises Fonterra has both tangible and intangible resource. The tangible resources of Fonterra include its machinery, manufacturing facilities and human resource. In dairy industry, these productive tangible resources help the company to achieve competitive edge. On the other hand, the intangible resources of Fonterra include its market brand value, exposure in different markets and economies, and quality attribute that benefit the organisation to be distinct in the marketplace (Lees and Lees, 2018).
Fonterra capabilities build with their innovative learning and development programmes. One of their significant capability is linked to their approach with human resource management where the organisation consider emotional intelligence as a management tool to deal with employees effectively. The company organisation structure is also flexible in extent with their internal process and practices that help Fonterra to proactively react with the change in environmental factors and this help the company to be less impact with the industry corporate practices. Considering their internal capability, market orientation is also one of their major business practice that helps Fonterra to meet up demand in align with increased expectations of customers (Fayezi and Zomorrodi, 2015). Fonterra always does one step ahead of market competition due to an effective correlation between their internal and external capabilities.
Fonterra built their expertise on the legacy of the thousands of farmers who have made New Zealand a world leader in dairy. The company expands into several countries such as Australia, UK, US and China. This composes the Fonterra core competency as a global presence in the world. In addition, the organisation have also made many joint ventures and acquisitions so as to attain economy of scale and fulfil more market expectations of customers. With this, Fonterra also gets a global recognition all over the world and this benefit the company to introduce its new products effectively in those markets. The company competency can also evaluated with its broad product portfolio that is fulfilling the needs of both industrial and customer sectors. Fonterra approach of dairy cooperative also reflects their other core competency as unlike their key competitors, the company source milk directly from farmers and eliminate intermediaries to give effective supply of its raw materials (Leslie, et al 2018).
External Environment Analysis with PESTLE Tool
VRIO analysis of Fonterra comprises value of the resources that Fonterra Dairy has, rarity of those resources, how easily the resources can be imitated by Fonterra Dairy competitors, and how the firm is organized – technology implementation, organization structure, processes, policies, culture etc. to make optimum use of the resources in order to sustainable competitive advantage (Knott, 2015).
- Valuable– Fonterra brand value represents its key valuable resource that helps the brand to raise its brand awareness in most of the countries in the world. This indirectly raises profitability when the company introduce new products in the market. In addition, the position in technological implantation in its production is also considered as a competitive advantage as this help Fonterra to have less average cost of production as well as in keeping updated production.
- Rarity – The company gain access to the local farmers in form of cooperative and with them, they supply pure milk to both consumer and industrial sectors with removing of various intermediaries. Many in the industry does not have this advantage and this benefit Fonterra in extent with good quality and lower cost of raw materials.
- Inimitability – In terms of inimitability, Fonterra competitive advantage is in relation to their approach towards HRM as the company follow broad employment management strategies that are not identified by anyone (Johnstone and Wilkinson, 2016). This gives them competent and diverse employees that help the organisation in achieving its strategic goals.
- Organisational capability – Fonterra is able to effectively operate in the comprehensive market due to its number of capabilities inclusive of its business units and product lines. It helps the company to fulfil the diverse needs of the customers.
Fonterra is doing well in terms of agribusiness in comparison with its competitors. However, in respect with foreign countries, the organisation should have cooperative mode of business as this will benefit Fonterra to gain competitive edge in the Australian market.
Fonterra needs to also focus on their product development and should introduce various dairy-based products in the marketplace such as Ice-cream, curd and buttermilk. This will not only increase the sales but also attracts more numbers of customers towards the brand.
Fonterra needs to focus on environmental sustainability standards as earlier the company was fined heavily in New Zealand in relation to environmental degradation. This will directly improve their brand identity in the market.
The company is required to focus upon market development strategy by targeting various developing countries having positive growth rates and market opportunities. This will lead to the organisation to attain economies of scale.
Conclusion
Fonterra has maintained a strong global presence and market competitiveness with offering of both consumer and industrial products. The company philosophy of being a leader of dairy foods is fulfilling in the right way and also effectively organised by the groups of farmers.
Fonterra is a dairy giant of modern world as they offering many sorts dairy products such as butter, milk powder and cheese. Wide selections of brands are linked for packaging, marketing and distribution of these products. A large number of high-class healthy brands such as Annum, Anchor, and Tip Top are spreading commodities across the globe.
In future, the company need to proactively react with the changing market needs and environment variable in order to achieve competitive advantage in the industry.
References
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