MGT5STR Strategic Management

Introduction 

Strategic management is important for the organizations from all the sectors due to the increase in the competition with the emergence of new players. Agribusiness is a major sector in Australia with contributing a significant amount in the national gross domestic income of Australia. Thus, opportunities are growing in the agribusiness sector of Australia and along with that competition is also increasing (Meyer, Neck and Meeks 2017). This is leading to the increase in importance for effective strategic management for the organizations operating in this sector. Among the leading names in the agribusiness sector of Australia, Fonterra is in the forefront. They are actually based in New Zealand and are the largest dairy firm there. They are also having a huge market presence in the Australian market with Australia being the largest milk pool for Fonterra outside New Zealand.

This report will discuss about the external business environment that is being faced by Fonterra in doing business in Australia. In addition, the internal effectiveness of them including their core competencies and competitive advantages will be identified. This will help to identify the gaps in their strategic intent and in accordance to that; a few recommended steps will be identified and discussed.

Business units and product lines 

Currently, Fonterra is having number of business units in the Australian market with comprising consumer goods section under the Fonterra brand, food service supplies under Anchor food and dairy ingredients supplied under NZMP ingredients (fonterra.com 2018). Thus, they are having diverse range of business units that is helping them in catering to different customer segments and types. Under the consumer goods section, Fonterra is offering wide variety of products such as Western Star butter, Perfect Italino ready to make meals, Bega cheese, Anchor Milk, Mainland cheese and butter. This is denoting that Fonterra is targeting different customer needs in the dairy sector with their diverse product portfolio. Among all their products, Bega cheese is the largest selling cheese brand in the Australian market. Under the Anchor brand, they are offering customized food solutions to the foodservice professionals. Under this brand also, they are offering cheese, butter and cream. With the NZMP Australia, Fonterra is supplying the dairy ingredients to food manufacturers around the world (fonterra.com 2018). Thus, with the diverse business units, Fonterra is catering to both domestic and industrial needs.

The major revenue business units for Fonterra are their consumer division, food supply division and ingredient supply division. The largest revenue business unit for them is consumer goods division (Adenso-Diaz, Lozano and Palacio 2017). This is due to the reason that the under the consumer brands of them, Fonterra is having the major market share in both Australian and New Zealand with having some of the best selling brands. In addition, brand value of Fonterra is heavily determined by their consumer brands.

Determination of the external environment 

Determination of the internal competitiveness of Fonterra 

Resource based view will be used to determine the internal effectiveness of Fonterra. According to the resource based view, tangible resources of Fonterra are assets such as manufacturing facilities, human resources and their machinery. Strategic location of the facilities, skill and expertise of the human resources and effectiveness of their machineries are helping them in gaining competitive advantages. On the other hand, intangible resources such as brand value, identity, market coverage and quality is helping Fonterra to stay ahead in the competition.

Identification of the capabilities 

As per the information available, there are number of capabilities being identified for Fonterra. One of their major capabilities is their approach of human resource management. According to the human resource management approach of Fonterra, emotional intelligence is given the major concentration. This helps them to deal with the employee management effectively. In addition, organizational flexibility of Fonterra is another major internal capability (Ruiner, Wilkens and Kupper 2013). This states that internal practices and processes are being designed in such a way that Fonterra will be able to cope up with the change in the business scenario. Thus, the risk being faced by the business organizations from the change in market and business scenario is less for Fonterra. Another major capability of Fonterra is their market orientation. This refers to the fact that business strategies of Fonterra are being initiated in accordance to the market scenario (Bentley, Omer and Sharp 2013). This is helping them to cater to the market effectively and offering products that will meet the requirement of the customers. Therefore, it can be concluded that coordination between the internal and external capabilities of Fonterra is helping them to stay ahead in the competition.

Identification of the core competencies 

One of the major core competencies of Fonterra is their worldwide presence. Outside of New Zealand and Australia, they are having joint ventures and acquisitions in China, United Kingdom and the United States. This is helping them to cater to the larger customer segments along with more access to financial resources. In addition, this is also helping them to position them as a global brand that is in turn helping them in pushing their new products in the target market. Another major core competency for Fonterra is their diverse product portfolio. As discussed in the above sections, Fonterra is having number of business unites with having different product range. This is enabling Fonterra to cater to both domestic and industrial customers and staying ahead in the competition. Another core competency for Fonterra is their business approach of dairy cooperative (Basu, Banerjee and Sweeny 2013). Unlike their major competitors, Fonterra source milk directly from the farmers and they maintain cooperative with the farmers. This is helping Fonterra in having seamless supply of raw materials and without having any presence of intermediaries. On the other hand, it is also helping to enhance the economic and social status of the farmers.

Identification of the competitive advantages 

VRIO analysis will be used in determining the competitive advantages of Fonterra.

Valuable 

Brand value of Fonterra is one of the major valuable resources due to the reason that it is helping them in creating identity in the market. In addition, the sales of their newly introduced products can get enhanced with the use of their brand names (Knott 2015). In addition, the technological advancement of Fonterra can also be considered as their competitive advantages. This is due to the reason that technologies and machinery are helping them to have less average cost of production and more updated products.

Rarity 

Fonterra is having the access of local farmers in the form of cooperative. This is helping them in having the supply of pure milk without having the presence of any intermediaries (Bondarenko et al. 2017). Majority of the players operating in the dairy industry are not having this advantage and it is rare and not well available. This is helping Fonterra to have advantage over their competitors in terms of lower cost of raw materials and quality.

Inimitability 

The approach of human resource management is inimitable in nature due to the fact that Fonterra maintains extensive employee management strategies that are being kept private (Espinoza and Ukleja 2016). In addition, this is helping them to have the added skills and expertise from the employees that creates their competitive advantages in the market.

Organizational capability 

As discussed earlier, Fonterra is having number of capabilities such as financial, market presence and number of business units. These help them to operate in the global market effectively and catering to the diverse customer segments properly.

Recommendations 

• It is recommended that Fonterra should have cooperative mode of business in their foreign countries also. This will help them to gain the competitive advantages that they gain from Australia. It will also help them to have the lower cost of production in the foreign countries.
• Product development is one of the major strategic intent to be considered. It is recommended that Fonterra should introduce dairy based products such as ice cream in the market. This will increase the target customer segments for them along with increase in sales revenue.
• It is also recommended that Fonterra should also initiate market development strategy by means of entering in the potential foreign countries. It is suggested that they can target the developing countries as some of the developing countries are having favorable growth rate and market opportunities.

Conclusion 

Thus, it is concluded that Fonterra is having number of positive and negative external factors being faced by them in the Australian market. In this report, the internal effectiveness of Fonterra including their core competencies, competitive advantages and resources are also identified. It is concluded that internal effectiveness of Fonterra is enough to deal with the external factors in the Australia but it is also important for them to increase their existing market share. In accordance to this requirement, there are few recommended steps are being discussed in this report that will help Fonterra to enhance their market presence and revenue in the foreign market also.

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