Key Functions of Fonterra Co-operative Group Limited
In the modern day business environment, it has become essential for the organisations to understand all the aspects related to their business. Every company has different set of functions in it and it is essential that organisation manages these functions so as to improve the business quality. Issues in the business have also raise at very fast levels. Decision making is very essential in the modern day business so as to resolve the issues. Apart from this there are various problem solving techniques that can be used by the organisations so as to resolve the issues that are present in the organisation. It is also crucial that company understands its internal and external impact. It is also crucial for analysing the impact of these environmental factors on their business.
Fonterra Co-operative Group Limited is a dairy company that is operational in many parts of the world. It is owned by around 13,000 New Zealand dairy farmers. This report analyses the key functions of Fonterra as well as provides application of decision making and problem solving techniques. It also highlights internal and external environment factors on Fonterra. At last it also gives application of Bi-cultural nature partnership on Fonterra Activities and Relationship.
Fonterra being the largest dairy farm products company has numbers of functions in it. This is because they want to have smoothness in their various operations. Some of the major key functions of Fonterra include accounting, risk management, marketing, operations, sales and human resource (Hawking, 2010). It is essential that all these functions work in collaboration with each other so that efficiency and effectiveness can be achieved in the business process. Detailed analysis of these function are as follows:
Operations: It is the most basic functional unit within the organisation which has the role of collecting milk from 13,000 farmers in New Zealand (Fonterra, 2018). It also has the role to ensure the production of the milk products is as per the requirements of their global market. Since it is having its sale in more than 140 nations hence managing balance between production and supply is necessary. They also have the role to ensure the quality of the products so that they achieve the standards they have promised to their customers (Barboza, Myers & Gardner, 2011). Fonterra has a history of having an efficient manufacturing system. Procurement, processing and management are three basic process that operations team has to perform.
Operations
Marketing: This functional unit has the role of expanding the market base of the company at the same time ensure that there is proper understanding about the demands of the market. Since this company wants to grow its business in other parts of the world hence marketing plays a very essential role in this. In modern day business, since the number of competitors in the market is increasing hence it is essential that the Fonterra’s markets its more than 1000 products in an effective manner (McGiven, 2016). In providing competitive advantage to the company, marketing plays a very essential role. The effect of marketing is that it helps the company in making the name in the market. It also affects the brand presence of the company in any country. The better the marketing, the better the chances that it can achieve success in market.
- Accounting: In any organisation it is crucial that company has proper management of finance. Since company plans to invest in new areas hence they need to have proper accounts management team. The financial condition of the world is changing and hence their role becomes further essential. From 2010 to 2015, Fonterra noticed an increase in the stocking rates, cost structures, feed inputs etc. There is increase in the milk prices and at the same time company has to invest in improving farm assets especially the ones that are related with sustainability programs (Ragued, Wotherspoon & Ingham, 2011). They have the role of managing the overall investment and expenditures of the organisation so as to improve the growth rate of the company. Accounting effects the future business investments of the company in different fields as well as it will also shape the growth of the company. If the accounting is done properly then it will help in stopping the unnecessary expenditure of the business operations. This will have direct effect on the profits of the organisation.
- Sales: This company sells its products in 140 nations of the world hence the role of this functional unit becomes more essential (Fonterra, 2017). In order to increase the sales of the products, Fonterra is having an excellent sales team that manages effective relationship with its suppliers and distributors so as to ensure that supply and demand remains on balance (Stojkov, Noy & Sa?lam, 2016). An effective sales team always enhances the numbers of sales at the same time it also increases the customer’s retention power of the company. Sales also increase the capacity of the company to improve the relationship with the customers.
- Human Resource: Fonterra being a multinational company has large number of people working with it. Since it is a cooperative type of business the number of people associated with it increase automatically. In order to improve the quality of the team working in the firm, it is crucial that a proper training must be given to the employees. It is the role of the human resource team to manage the conflict between different stakeholders (Rao, 2013). The increasing demands of the farmers have been a problem for the company but they need to manage it so as to ensure that company achieves success in the long term. A highly skilled workforce always tends to increase the productivity of the firm at the same time it reduces the number of errors in the business operations.
- Risk management: There is considerable increase in the number of issues in the business. All these issues pose a threat to the business operations. In this environment, risk management has a very crucial role as they need to check each and every element of the business and business environment (Robb, Smith & Webb, 2013). Any mistake in the management of issues may lead to long term image failure for the company. It can be done with the help of data that is gathered in the business in the past. This risk management helps the firm in the time of any incidents, accidents or disastor. An effective risk management team must consist of members from every department so that proper understanding about the situation and the way it can be controlled can be found out. It will affect the long term sustainability of the organisation and avoid the chances of business failure.
Fonterra being a global firm has its operations in various parts of the world hence decisions needs to be made checking all the requirements of global market. In the modern day business, since the data is available through various sources hence making of effective decisions is based on the fact that how effectively the data has been evaluated (Burton & Wilson, 2012). In the past few decades the nature of the problem has become more complex. There are four techniques or models of decision making namely rational decision making model, bounded rationality decision making model, Creative decision making model and at last intuitive decision making model.
- Rational decision making model: It helps in the situation when the organisations goal is to increase the quality of their final products. Fonterra facing business challenges needs to make the best choice in terms of selection of resources (Lee, 2010). In such situations rational decision making is very effective.
- Intuitive Decisions: Fonterra faces many kinds of challenges related to the business and many of these decisions are taken on the immediate basis. Managers makes the decision under certain time pressure, changing conditions, high stake and highly visible outcomes, challenging circumstances as well as uncertainty in the business (Tipples, 2011). In such situations intuitive decision making is highly essential.
- Creative Decisions: With the nature of problems getting more complex, it has become essential for the organisations like Fonterra to make decisions that are creative. In the increasing cost structure, decisions related to cutting cost are very crucial and needs to be made with proper analysis. In this time organisations can take use of the creative decision making model (Sandhu, Smallman, Ozanne & Cullen, 2014).
- Bounded rationality: when the decisions need to be made recognising limitations of our decision making process then this model is used. Organisations choose the first option without conducting an exhaustive search for choices. This model has the tendency to satisfice, which indicates to choosing the first choice that meets the most basic criteria.
- Competition: In the dairy farm industry, there are many new firms that are emerging that too in various parts of the world. This has made the competition intense. In order to overcome this competition, Fonterra needs to work on its competencies. In order to resolve this issues rational decision making is required by the firm. An alternative for this problem is that company must find new markets so as to gain financial resources and market share (Marshall, Akoorie, Hamann & Sinha, 2010). Under this approach company can make the list of countries where they could actually go in. After the research company must find the market that is having less competition. With the help of accounting department, company can make the investments with the help of subsidiaries. The investment must be also be made in the new product development needs a long term decisions to be applied.
- Technology: The amount of technology and the advancement that are going on in the industry is increasing at much faster rate. The decisions that are related with technology needs to made for staying ahead of the rivals. In this regards creative decision making plays a very effective role. Alternative for this is that a proper industry analysis needs to be conducted so as to implement best of technologies in their working mechanism (Menguc, Auh & Ozanne, 2010). There are people that are from the For example upgrading of the data management tools need to be done based on the requirement of the firm as well as the amount of data sources present with the firm. For making of the creative decisions there are five steps that need to be applied. First is to find the problems that exist in the technology, and then gather information with the help of internal research. Then follows the incubation stage where actually no solution is found yet an effort is made to find the technology that actually works. In Illumination stage the technology that can actually make the change is found. At last continuous verification is done about the way any technology will work in the organisation hence the decision is made.
- Risk management: There are various types of risk posing the business of Fonterra. Since many of these risks are generated on the long run while some are generated on the short run hence different types of decision making is required. For the risk that is generated at the real time needs intuitive decision making process to be followed. Alternative for this is that the risk management system must be adopted within the organisation that works on the data that is gathered through various sources (Le Heron, 2011). The outcome predicting systems helps in predicting future needs of the company as well as the risks that can come to the business. For making intuitive decisions managers must scan the environment for finding the solution to the risk that may arise in the future. It must find the challenges that are actually confronting the company and may enhance in future so that plans related to risk management can be made.
- Customer satisfaction: In the increasing competition, customer satisfaction has become very essential for the firms. In this regards rational decision making can be very beneficial. This is because it will implement a series of steps for improving the effectiveness and efficiency of the operations which in turn will improve the chances of achieving higher customer satisfaction. Alternative for this is to improve the quality of the food products (Yang, Hong & Modi, 2011). By this approach a company must identify the areas which are reducing the chances of customer retention. New things that can add to customer satisfaction is found out and hence changes needs to be implemented that may enhance satisfaction of customers.
The businesses operating in New Zealand have to consider the cultural factors relating to Maori to ensure that they respect their cultural differences. They have to implement policies to eliminate discrimination at the workplace (Firth, 2012). The companies also have to respect the connection with Maori have with their lands.
The corporations in New Zealand establish diversity committee to ensure that people who belong to different cultures are not discriminated. A good example is Deloittle who has won an award for recognising Maori organisations and supporting their economic growth (Hitchcock, 2017). Another good example is Tawapata South Inc. which is a Maori owned business which contributes to the growth of their economy by building relationships.
There are many corporations operating in New Zealand which provide services of translating the documents of companies in Maori to encourage diversity such as Straker Translations (Strakertranslations, 2018). Another example is the financial support given by Ministry of Business, Innovation and Employment (MBIE) for Maori businesses to promote their growth in the country.
Marketing
In any organisation, there are various internal factors that are affecting the business of the firm. All the business units have to make sure that they have an effective mechanism for managing the impacts of these internal factors. Some of these factors are:
- Structure: There are huge numbers of employees working in Fonterra. They have made the structure as per the requirement of the firm. They have a governance team that works in favour of the interests of the shareholders and at the same time they need to ensure transparency and efficient risk management. A better human resource management can help in bringing the smoothness to the work process (Collins, Roper & Lawrence, 2010). Since 9 members of the 13 board members are elected by the shareholders hence they need to be more transparent towards decision making process. This kind of decision making process would help the company in reaching to the top of the industry. Structure has a direct effect on the communication that is being used within the organisation. Sorted structure makes the communication process easier and the goals can also be achieved with better team work.
- Systems: In any organisation, it is essential that best of systems is used in the firm. The systems like Supply chain management system helps in improving the quality of the products as well as improves the delivery of the products and services to the clients. Other IT systems are helpful in improving the smoothness in the work process at the same time it also ensures that fewer mistakes are generated in doing activities. These systems need to be updated as per the requirement so as to make sure that they are valuable to the company. If the system quality is poor or it is underperforming then there is a chance that company may lose its market to other competitors (Khan, Grigor, Winger & Win, 2013).
- Resource: With such an extensive resource capacity of Fonterra, it can outperform any other company in the world. Its major competency is the human resource it has as they work in cooperation so as to bring the best quality milk from farms to process it and make it the best in the business. An effective decision making will be required for making the investment plans which would further require financial resources. Sustainability is very important in the modern day business especially in the companies that are dependent on the raw materials from the farming sector (Collins, Dickie & Weber, 2014). This is a big challenge for Fonterra as effective technology and system needs to be used in the company so as to use it in an effective manner. Resources need to be of higher quality or otherwise it might affect the quality of the product that is delivered to the customers. Resource also effect the sustainability of the organisation as the better quality resources always helps the company to use it for longer period of time.
- Organisational culture: Fonterra is having an organisational culture that is more collaborative. They believe in teamwork for completing any task. Since they have people working from different kinds of cultural background hence they need to manage diversity at the first priority. They believe in maintaining a suitable balance between board member functions and the interest of the stakeholders. The leadership style is also democratic that helps the company in gaining new kind of ideas in the business process (Kelsey, 2015).
External factors are those on which company has less control but produces a higher impact on the business performance. It is also to be noted that there are many stakeholders linked with the organisation and it is crucial that company does an analysis over all these factors so as to understand the impact on their business. Some of the external factors that have impact on the business of Fonterra are:
- Political: The rules and regulation made by the government of New Zealand and other governments in various parts of the world had a greater impact on the business performance. Even when the government of New Zealand support the organisation having a cooperative structure there is a negative impact of the taxes that was enforced on diary industry (Buerkler, 2013). Increased tax barrier and changing political conditions in many parts of the world has also affected the global trade. Since Fonterra works in so many countries hence the impact is much wider especially on the supply chain and distribution system. Political environment has affected on the supply chain of the company as it operates in so many countries.
- Economic: A huge economic breakdowns can be noticed in various parts of the world. The slowdown in the economic growth of European and American region is a matter of challenge for the company of the scale of Fonterra. With the amount financial resources that company has it will not be problem for the company. There is a considerable increase in the costing of the overall process and especially related to the farmers. This must be maintained by the company so as to achieve highest of profits from their operations. The impact of economic crisis will be on its business in European region.
- Social trends: Demands in the society has increased considerably especially related to the milk based products. Other industries like chocolate, cakes and confectionary industries have also raise the demand of milk products. The taste of the society has changed and hence a change can be noticed in the type of milk products that is needed by the society (Forney & STOCK, 2014). The demand of milk product that stays for longer time has also increased. It is essential that Fonterra responds to this demand and develop products accordingly or it might affect the business process of the company.
- Technology: In the past few decades technology has changed to greater extent and this advancement needs to be made as per the requirement of the industry. In the coming years this is going be a much bigger issue for the dairy industry as the processing technology is advancing and moving towards automation. It is crucial that Fonterra moves towards automation but at the same time it also need to ensure that interest of employees are taken care of. Company also need to invest on the data management systems that are capable of storing, processing and generating data results as per the demand of the company.
- Legal: The common laws related to diary industry have also changed which is having greater impact on their business. The consumer laws have strengthened which Fonterra needs to comply with so as to avoid any legal consequences. The legalities have also changed in terms of product quality and hence Fonterra needs to improve the quality of their food products (Gray & Le Heron, 2010).
- Sustainable management or environment issues: Governments have become very strict towards unsustainable use of resources and at the same time they are highly concerned towards the effect of business operations on the environment (Scott-Kennel, 2013). Finding alternatives for plastics is a major challenge for Fonterra as government has been very strict towards the plastic use in various parts of the world.
Fonterra being a part of New Zealand’s business community follows the Treaty of Waitangi and making the bi-cultural partnership as the part of their business. This treaty was signed between the Maori and the British crown so as to ensure equal rights to all the people. All the three core principles of the treaty namely protection, partnership and participation are included in its business. All three is used in Fonterra as people from both the cultures work inside the company at equal wages, equal opportunities is provided to them in case any vacancies gets generated within the organisation. Among the 13000 farmers, most of them are from Maori community. Everyone is paid equal amount money for their milk. Their rights and interests are protected irrespective of their culture. They work in collaboration with each other hence ensuring partnership and participation.
Two organisational policy of Fonterra that complies with Treaty of Waitangi is equal pay policy and diversity management policy. They pay equal amount of money to people that are doing same work irrespective of the cultural background they are from. They have the policy to manage diversity at the workplace which is also an integral part of the Treaty.
Apart from this company should also include equal employment opportunity to people from both the culture. It must also take use of Maori language and culture at their workplace which will encourage the employees from the Maori community to adjust easily. They must also set tribunal courts that create awareness about the settlements about the issues that are generated at the workplace. These courts must be set-up for checking the differences among the employees. Such tribunals will help in managing the employee relations.
In the coming years since the milk product demand is growing to increase hence company needs to be ready with their sustainable development plan for achieving long term success. This can be done with the help of best of technologies. It is also essential that Fonterra manages its operations through a series of plans. In the coming years, firm needs to focus on the quality of their products. This problem can be solved with the help of quality management tools like TQM. Fonterra also need to ensure that they have placed best of people at different positions in the organisational structures. This will help the company in making best of decisions which will help them in facing the challenges that are present in the industry and their operations (Schewe, 2011). It will be beneficial for the company to manage the supply chain in a better way so as to reduce the overall cost of delivery and ensuring that there is balance between demand and supply of the products.
Applications of Decision Making and Problem-Solving Techniques
The external factors are also changing at much faster rate hence the cited company needs to be ready with the long term plan for reducing their impact on their business. Fonterra needs to be ready with an economic policy so as to ensure higher profit growth in the coming years. Company also need to have an extensive research about society demands so that they can be fulfilled on time. Fonterra also need to be aware about the increasing competition so that they can make strategic plans accordingly.
According to the treaty of Waitangi, they must bring more people from different communities in their business. In the process of decision making company can take the help of all the members from different community. This will help in bringing creative ideas in the business. In the planning and development of the organisational process also a partnership approach could be used.
Conclusion
From the above based report it can be concluded that Fonterra is the biggest diary company in the whole world. With the increasing demand of the milk products Fonterra also have to be ready with their plans so as to compete in the global market as well as fulfil the demands of the consumers. There are different functions in the organisation and their roles have been divided uniformly so as to bring smoothness to the work. The decision making and problem solving techniques are used wisely so as to face all the challenges present in the business. The internal environment of the company favours the company as it has huge amount of resources to tackle the problems. It is crucial that Fonterra has a close watch over the external factors so as to make policies accordingly. Political and economic conditions all over the world is changing dramatically and hence a sustainable approach to the business needs to be ensured for achieving long term success in the business.
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