EXECUTIVE SUMMARY
This essay utilized Fonterra Cooperative Company as the model organization to review its present global shocks and how they dealt with critical situations. From the analysis, key trends in the operations management of Fonterra Cooperative Company were then identified, how they worked and their effectiveness in dealing with critical situations was ascertained. The paper then moved on to assess these global shocks with regard to their impacts to critical situations, during which the internal capabilities of these global shocks in relation to the strategy being followed will be determined also. An overall analysis of the performance and effectiveness of the Fonterra Cooperative Company was also conducted to assess and compare the capabilities of their management strategies with those of others. Gaps in the management capabilities and environment were then identified.
Finally, several choices of strategies to negate the impacts of global shocks in Fonterra Cooperative Company as effective means in critical situations were recommended and evaluated in terms of appropriateness to the issues reviewed, feasibility in carrying out the options and acceptability within the key stakeholders and decision makers. Several key implementation issues related to managing strategic change will also be addressed as well.
INTRODUCTION
The Fonterra Cooperative Company of New Zealand over the years has developed an efficient and effective process of implementing the policies and tasks necessary to satisfy its consumers and management of companies and organizations. There has been a recent focus on the careful management of the processes involved in the production and distribution of luxury products and services within the industry.
More often than not, the Fonterra Cooperative Company in New Zealand does not really have the capabilities to implement operations management. Instead, these companies engage in activities that various schools of management typically associate with operations management. These activities include the manufacturing of products, product development, production and distribution.
New Zealand Dairy Industry SWOT Analysis
Strengths:
- has products that boast of a very powerful retail. This includes a reputation for value of money, convenience and a wide variety of products
- has grown significantly over the years, and has experienced global expansion.
- main competence lies on the use of information technology (IT) to fully support its international logistics system. Therefore, dairy companies in this industry can see how their individual products perform within New Zealand for instance, or even at stores at a glance.
- is able to deliver good customer care, as the limited amount of work would mean plenty of time to devote to customers.
- Products have established a strong reputation within the market.
- Offers little deficits and overheads. Therefore the companies in this industry can offer good value to customers on a consistent basis.
Weaknesses:
- is one of New Zealand’s largest industries but has a weak control of its empire, despite its IT advantages. This could lead to a decrease in productivity in some areas where it has the least control.
- Since companies in this industry sell dairy products across many sectors, they may lack the flexibility that some of its more focused competitors possess.
- operates globally, but its presence is located in only relatively few countries worldwide.
- Some dairy products in New Zealand lack market presence or reputation
- The dairy companies in New Zealand and their cash flow are unreliable especially in the early stages of a new dairy product development.
Opportunities:
- Taking over, merging, or forming strategic alliances with other dairy companies while focusing on strong markets like Europe or the Greater China Region.
- Dairy companies in New Zealand operate only on trade in a relatively small number of countries all over the world. Thus, this would open the opportunities for future businesses in expanding various consumer markets, such as those in China and India.
- The opening of new locations and branches offer dairy companies in New Zealand the opportunities to exploit market development. This could lead to the diversification of the company’s branches from large super centers to local-based sites.
- Opportunities exist for dairy companies in New Zealand to continue with their current strategy of establishing large branches worldwide.
- The industry is continuously expanding, with plenty of future opportunities to exploit for success.
Threats:
- Being number one means that the dairy industry of New Zealand is the target of competition, the industry to beat, both locally and globally.
- Being a global retailer means that dairy companies might be exposed to political problems in the countries where the company has operations.
- The production costs of most dairy products have the tendency to fall because of lower production costs. Production costs fall because of outsourcing to low-cost regions around the globe. This phenomenon could lead to competition in prices, which in turn would result in the deflation of prices in various ranges. Intense price competition must definitely be considered a threat.
A. Organizational Environment
The Fonterra Cooperative Company of New Zealand is one of the world’s leading dairy companies in terms of profit and sales volume. The company has also the widest presence among all international companies. This is made possible through a positioning strategy of global networking of distributors.
The Fonterra Cooperative Company uses the name of both the company and its mainstream dairy products, and this strategy has allowed the company to pursue an integrated marketing approach directly related to the company name. There are also a variety of Integrated Marketing Communication (IMC) tools available that Fonterra could make use of in order to control all of their promotional activities. These tools include a combination of advertising, branding and personal selling. When used appropriately, these IMC tools will be able to help the Fonterra Cooperative Company to consistently disseminate the valuable information that they want to convey to their valued consumers.
The Fonterra Cooperative Company of New Zealand has grown and expanded virtually around the entire globe. This was made possible by their strong efforts to acquire smaller dairy companies and firms from other countries. Over the years and decades, the Fonterra Cooperative Company has slowly but surely established an empire, with strong segment markets established in Asia and the Middle East, the Western Hemisphere, the Europe and most recently the Asia Pacific.
In Europe for instance, the Fonterra Cooperative Company of New Zealand was able to achieve a broad market leadership through various acquisition deals over the years. The company also exerts efforts to communicate with their customers in every local culture about their products and their impressions. And this is no easy thing because Europeans have different tastes in dairy products. Therefore, their products might not really have an appeal to them. This critical information gathered by the Fonterra Cooperative Company paves the way for them to make the right decision regarding the appropriate strategies to pursue.
B. Strategic Direction
The Fonterra Cooperative Company of New Zealand has been able to maintain its reputation as one of the world’s leading fashion companies for more than 130 years now. It is able to face the challenges in many of its markets directly. This is made possible by the effective promotional and positional strategies aimed to deliver not only profit growth, but also on building down the foundation of their brands and business.
The promotional campaigns and strategies of the Fonterra Cooperative Company of New Zealand are focused mainly on driving the growth of its brands and improving the company’s financial performance. These campaigns have also helped secure significant acquisitions and partnerships. And more importantly, these campaigns have led to the release of the potentials of the company’s employees, thus building a quality performance- based culture.
The promotional strategies of Fonterra Cooperative Company’s local products are practically reinforced by the local employees themselves. These moves certainly allow the company to improve even more without the costs of introducing new technologies. These efforts have resulted in increased financial gains for the company and have allowed the establishment of distribution networks for both the local and international products.
C. The Use of Technology
The Fonterra Cooperative Company’s dedication to quality for almost three generations now has led to the satisfaction of millions and millions of its customers worldwide. The Fonterra Cooperative Company was created by a group of people who pursued the best quality and production in terms of dairy products. Their various dairy products that its customers patronize today are still being produced using nothing but the original and unparalleled raw materials The raw ingredients used in the production of dairy products are able to meet the high quality standards and specifications. The packaging materials where Fonterra products are sold are also being subjected to strict quality standards.
In line to Fonterra‘s policies in product safety, appropriate measures are taken in the production process of Fonterra and all of its dairy brands to prevent the possible contamination of the products. Their manufacturing plants implement the principles of the HACCP (Hazard Analysis and Critical Control Points) system as a testament to their dedication to quality.
D. Organizational Culture
A major factor involved in the improvement of Fonterra Cooperative Company involves the establishment and utilization of performance measures or indicators that in turn measure their customer’s satisfaction. These measures or indicators are measurable characteristics of products and services that the company typically utilizes in order to study and improve performance. The indicators that will be chosen should be able to represent the essential factors that are crucial to the improvement of operational and financial performance. Through the analysis of accurate information brought about by the tracking processes, the measures or indicators themselves can possibly be analyzed and improved to support such goals.
Global Shocks in the New Zealand Dairy Industry
Deriving from the analysis between the luxury goods industry, operations management and capabilities of the industry involved, many positive and negative scenarios would become imperative. It is therefore essential to evaluate these scenarios as to whether they are appropriate to the issues addressed, whether they are feasible enough to be implemented and their acceptability to key stakeholders.
A. The Abundance of Merger and Acquisition Deals
Since there are potentials of merging and acquisitions that could happen among the companies within this industry, there is definitely a need to reconcile both the inside-out and outside-in capabilities. While most New Zealand dairy companies’ operations management involves focusing on their core competencies with market position following their resource base, they will be put into a disadvantageous position should they choose to neglect both the macro as well as the dairy industry environment. Therefore, in ten years, it is expected that operations management changes, as well as changes in political, economic, legal and even demographic trends within the industry will occur in order to develop the outside-in capabilities of the luxury goods companies, such as market sensing, customer linking, channel bonding and technology monitoring.
A tie-up or merger with various dairy companies offers tremendous benefits in terms of access to their operations management policies, infrastructure and even its resources. However, this scenario might become difficult to achieve within the next ten years, since every company might be in danger of losing sight of its core competencies while pursuing these tie-ups. This will result in jeopardizing the image of these companies.
Meanwhile, the collaboration of dairy companies with its major competitors can be seen as a brilliant move at first. However, upon close examination, this move could pave the way for dairy companies to experience a decline in its operations management. The bottom line is both sides wouldn’t be able significantly gain in such an alliance because of copying of ideas and information leakage. For instance, a company’s strengths in dairy product development combined with the operations management capabilities of their competitors can transform them suddenly into an unbeatable force to reckon with. One possible setback, however, is the differences in the cultures of the companies involved. Another possible setback could be whether any of the company’s competitors has the need to form alliances.
B. The Consequences of Increased Revenues
The advantages enjoyed by the dairy companies in New Zealand may come in the form of increased revenues. Knowing what the market demands and the latest trends could help these companies fully exploit their research and development capabilities to come out with dairy products which are not only cost-effective but also high in quality within the next ten years. The strategic option can even be used as marketing tool where the focus is on staying close to their customers and listening to their feedbacks. On the flip side of the coin, there will be huge mobilization of resources involved, and the associated risks bestowed on the companies.
Nevertheless, the mentioned global shocker seems the most evident to happen in the wake of globalization, since there is a sudden shift towards a more integrated and independent world economy. The key stakeholders too should not have any objections so long as the industry’s core business is not threatened. By virtue of the dairy industry’s centralized control of its business, it is being expected that major barriers should not exist in carrying out such an option except additional time may be required given the scope and span of operations.
Understanding the strategic importance of operations management is something the luxury goods companies has to be familiar with. These companies normally practice a centralized and globally scaled configuration of operations and capabilities. This allows information dissemination to be retained.
Protectionism Issues
Protectionism can be an opportunity and threat for Fonterra Cooperative Company. Concentration of risks to the latter is relatively more probable for dairy companies in New Zealand. As a result, multinational dairy companies like Fonterra move to build a subsidiary in the foreign soil would tend negative risks to intensify difficulty of anticipation making it riskier venture. Even though most dairy companies in New Zealand have more than 10 years trading relationship with countries at hand, this has been limited to exportation. In addition, political and economic experiences of these companies will prove that protectionism policies have already evolved and stabilize from a decade ago.
Tax and GDP Issues
Some economists view taxes issued on Fonterras dairy products as a form of hindrance to the laws of the free market. They believe that it is not proper and justifiable toward consumers and very impractical for New Zealand to maintain a failing industry. The opposition to all unfair taxes is actually part of the free trade principle; the presence of the World Trade Organization aims to reduce taxes and to prevent countries from getting problems when applying taxes.
Quota is a form of protectionism implemented in Fonterra which sets restrictions on the quantity of a dairy product that can be imported into New Zealand in a set duration. Quotas, like other trade restrictions, are utilized so that Fonterra and other dairy producers in New Zealand’s economy gain all the advantage at the expense of all consumers of the good in that economy. Some economists say quotas result to corruption, the main cause of smuggling, and higher prices for consumers. From an economics point of view, quotas are seen to be less efficient than tariffs and therefore less economically efficient than free trade.
WTO Issues
New Zealand actively sought WTO and AFTA deliberations to enhance its FDI level. This is reflected in its five year plan that also seeks to find bilateral agreements. The country is an open economy and shifted its focus to manufacturing since 1970s. The economy continuously diversifies that includes various industries although its major produce is semiconductors and appliances. The growth was enhanced by privatizing inefficient government-owned corporations suggesting competition among local and foreign firms with minimal protection. The labor shortage in the country can be an opportunity for home workers to proliferate their expertise in the host country with relatively ease of entrance. Producers and foreign investors can exploit the concern about current account deficit by producing goods that are previously imported in nature. When they can manufacture in the local soil, they can be allowed and even hand down lucrative investments.
RECOMMENDATION and CONCLUSION
The results of the analysis carried out on the dairy industry of New Zealand indicated very significant effects, even amidst the threats of unrest. Therefore, we could conclude that the dairy industry of New Zealand could still be expected to improve faster than an average of ten years.
The review of the industry’s capabilities and resources revealed very little inconsistencies regarding its strategies. This is coherent with its traditional inside-out approach. However, the need to reconcile both the inside-out and outside-in approaches becomes imperative now for the dairy industry of New Zealand.
The analysis among the environment as well as the global shockers and capabilities of the dairy companies revealed certain gaps, most of which are biased towards the environment. However, these gaps paved the way towards determining a number of recommended strategic options to secure the competitiveness of the industry.
Also, dairy companies in New Zealand have to find a balance between adherence to internal forces within the management and to the changing forces of the environment in order to implement such strategic options.
Credit:ivythesis.typepad.com
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