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Executive summary

The dairy business of Fonterra is a well-segmented dairy business and is an internationally recognized one being headquartered in New Zealand. The business goals of strategic management of the dairy business in terms of better suppliers of dairy milk by respective business processes are dependent on low priced based leadership norms. The leadership norm is encapsulated in terms of better change management processes based on corporate social responsibility linked and sustainability linked criteria of the global dairy business of Fonterra. The strength of stabilized supplies and the threat of resource-based structuring constraints have differential impacts on the dairy business of Fonterra. The policies of top down and bottom up approaches have been imbibed by Fonterra to make suitable changes in terms of dairy business development in its strategically managed policies and programs.

Table of contents

1. Introduction 3

1.1 Description of Fonterra 3

1.2 Objectives of Fonterra 3

2. Findings 4

2.1 Strategic management processes of Fonterra 4

3. Analysis 7

3.1 Performance based on the leadership of Fonterra to manage organisational change 7

4. Recommendations  to address performance gaps 9

5. Conclusion 11

References 12

6. Appendices 15

Appendix 1: Fonterra data 15

Appendix 2: New Zealand pay out 15

1. Introduction

1.1 Description of Fonterra

Fonterra is a renowned dairy industry in New Zealand.  It operates on a global scale and has the huge market for global trade based on export potentials beginning its outsourcing activities from the capital cities of New Zealand. With around 21000 employees consisting of 10000 farmers Fonterra presently rules the roost of dairy farming in New Zealand with a revenue of NZ $19.232 billion respectively(fonterra.com,2018). The current report focuses on the holistic scenario of the strategic management process of Fonterra used by it to gain fruitful business outcomes and the strategies or measures adopted by it to improve it.

1.2 Objectives of Fonterra

The mission and vision of Fonterra are to produce quality dairy products and to do it by following the sustainability norms and CSR norms of management relevant to the production and sales of dairy products.

The main objectives of Fonterra are:

a. To promote globally recognized dairy product services and commodities of top-class variety based on high nutritional compositions.

b. To promote sustainability in business in terms of strengthening the supply chain management process of business.

2. Findings

2.1 Strategic management processes of Fonterra

The strategic management process of Fonterra is hugely dependent on supply chain based management processes. It relies upon on multifarious innovations based dairy investment norms based on the goals of corporate social responsibility and sustainability concepts.  Use of V3 strategy along with the use of means to process raw milk and produce dairy products in the global arena by use of good corporate strategies are the main strategic management based fundamentals of the dairy industry (Honggowati et al. 2017). Focussing on the high value of customer service business in terms of elegant and well-formulated food services and delivery strategies based costs are the most essential strategic innovations in the dairy market. Besides this targeting, the prices of standardized origin are the prima facie components of the strategic management process of Fonterra in New Zealand. In addition to this diversified patterns of services are imbibed by the dairy organisation to incur increasing returns in lieu of sales of the global standards to both domestic New Zealand and overseas nations which are also included in the strategies of management in Fonterra (Wilhelm et al. 2016). This process is executed or rather implemented with the incorporation of hierarchy based high profile managerial guidance along with suitable subordination bodies to improvise the modifications in the criteria of the strategic management process respectively. This is brought about strict processes of supervision and expert administrative guidance.

The return to sales and production services in Fonterra are being achieved by low price based maximum sales maximisation strategy. This low pricing strategy forms the quintessential component of its change management strategies. This has helped it to achieve sum amounts of both operating and business revenues in specific amounts in the current year of 2016-17. It earned a revenue of around $ 6.53 per kg of dairy products supplied by it in 2106-17 and is estimated to generate future dividends of around $7.20 per share in 2018 (morningstar.com, 2018). Similarly, the total delivery of quality and processed milk production stood around 1526 m kgM in the year around 2016/17 (morningstar.com, 2018). Such high figures of dairy production attribute or interlinks with the norms of standardised strategic management objectives as being followed in a regular fashion in Fonterra in New Zealand. (Refer to appendix 1)

Figure 1: Dividends per kg of dairy production in Fonterra

(Source: morningstar.com, 2018)

These handsome figures of dairy production and export stem from the fact that Fonterra did its best as per achievement of its dairy-based marketing objectives to cope with the challenging issues of business to gain success in the dairy industry in positive terms. It maintained its business marketing strength by following strategic management process based on the business ideologies of trust maintenance, globalisation and value creation in production in terms of supply chain management procedures (Henderson, Cheney & Weaver, 2015).  It is done by producing diverse varieties of dairy products based on both quantitative and qualitative attributes.

The strategic priorities of this global business based outcomes are managed by firms in terms of specific business disciplines followed in lieu of the three folded ideas of globalisation, trust maintenance and value addition based managerial and business principles in sound amounts. Based on consumer growth strategy and consumer durability based dairy products management, Fonterra has achieved supreme pioneering in dairy goods production in terms of double-digit foodservice growth and consumer relationship maintenance and consumer growth strategies as used by the dairy industry in specific order based on segmentation and sectorization of integrated business strategies (Ritter et al. 2017). Use of venture management strategies and use of superb customer relationship management norms makes Fonterra a reputed dairy industry based best popular global firm in New Zealand in the global arena in true or bona fide terms. This is the way by it manages strategic management process in dairy business. Modifications of costs and milk prices and management of downstream activities in milk production and marketing and delivery processes in enhanced patterns have made Fonterra extremely progressive and successful as a global leading agency of dairy business in holistic perspectives. This has made it able to realize its well-framed business objectives in a forefront basis with suitable business fortitude and ethical use of managerial norms in appropriate manners.

The maximum production of dairy products being manufactured in Fonterra is that of butter contributing to 109% of holistic dairy production in 2016-17 and of milk powder accounting to about 39% of the total dairy products in the same year tenure respectively (morningstar.com, 2018). Besides this Cheddar and resins are also being produced in handsome amounts in the recent year of 2016-17. A major breakthrough was observed in the dairy organisation of Fonterra when it achieved massive success in milk production and marketing business by accruing almost $ 3 billion of earnings as export revenues from overseas nations by allocating a supply price based delivery of $ 6.12 per kg of processed milk in the recent sales year of 2016-17(morningstar.com, 2018). This good figure stems from the fact that it produced good amounts of output by obediently following and implementing all the norms of its strategic management in sound amounts based on CSR (Corporate Social Responsibility) and sustainability based strategies (Cerreta  & Daldanise, 2017). (Refer to appendix 2)

Figure 2: Global milk based standardised prices of Fonterra

(Source: morningstar.com, 2018)

3. Analysis

3.1 Performance based on the leadership of Fonterra to manage organisational change

The performance of Fonterra can be presented in an effective manner based on the criteria of cultural, ethical, diversity-oriented activities along with business failures redressed norms or crisis management skills. Each of these criterions is taken into account while judging the leadership-oriented performance practiced by Fonterra to move in the path of its business objectives through strategic management norms in suitable terms. The valid well compatible business perspectives of Fonterra takes into account the elements of supply chain management and competitive advantage oriented policies of Fonterra along with scientific management policies (Mylan et al. 2015).  These can be analysed in terms of SWOT analysis and supply chain based management analysis as depicted below:

 SWOT analysis of Fonterra

SWOT ANALYSIS based criteria

Attributes of Fonterra

Strengths of Fonterra

It has a well-balanced dairy supply system based on its low priced leadership principles.

It can magnify its dairy output production based on output leadership norms.

Weakness of Fonterra  

It has the low priced strategy and hence faces issues of rivalry from high priced rivals

It has overlapping resource problems

Opportunities for Fonterra

Low priced policies of supply chain management

Clean green image strategy needs to be developed

Threats of Fonterra

Too much reliance on exchange rate policies makes it vulnerable to rivals

Certain issues of management based media crisis is also a potent threat

Table 1: SWOT analysis of Fonterra

(Source: as influenced by Mylan et al. 2015)

Strengths of the dairy business of Fonterra-Fonterra based dairy firm has the strength to supply more than maximum amounts of processed milk to the global economy or world based overseas nations along with the domestic nation of New Zealand. The strengths of being a low priced business leader make Fonterra be a stronger dairy business based international entity in comparison with its high priced rivals. It has the proper financial strength to modify and increase its business output in terms of dairy products in all categories of business platforms based on its standpoint on various business circumstances (Mylan et al. 2015).  It has the capability to add to both the quantity and quality of its products and products nature in truly compatible manner in terms of its own independent and well guidelines for the strategic management processes.

Fonterra suffers from typical business norms. First of all, due to its low priced business strategy, it faces competition from rival dairy firms of contemporary origin in the dairy market of global supply (Girotto, Alibardi & Cossu, 2015).  This loophole along with the fact that its faces overlapping of resources based allocative activities makes Fonterra partly weak and distorted. Similarly, some restructuring constraints also detail the smooth running of its business norms.

Fonterra faces facilities and benefits of trade negotiations with WTO that is it enjoys the deal based trade properties or facilities for carrying out a global business trade with thorough guidelines of World Trade Organisation (Fahimnia, Sarkis & Davarzani, 2015).  Secondly, based on its low-cost supply management process, Fonterra does enhance its business bounds based on value addition processes and clean image based green -trade strategy of the business. These facilities give it enough encouragements and provisions to carry its global economic trade in bona fide terms.

The threats of rivals or competitor firms always trouble Fonterra because of its excessive reliance on exchange rate policies. This along with certain challenging issues of media based management activities are chief threats in way of smooth running of dairy business by Fonterra (Fu, 2014).Leadership processes based on stringent situational leadership norms and wide-scale ethical and cultural diversity based services are seen to be the most significant agenda of dairy business in Fonterra. The cultural attributes of dairy development norms take into consideration spearheading practices in terms of modifications of pricing and output based dominant strategies of Fonterra. The genuine strategies to cater to well-developed food service development services along with the processing of food deliveries based plans in regularized and routine framework is the best option of Fonterra (Silvestre, 2015). It practices this kind of leadership to modify its market-based attributes of economic significance to maintain its reputation in terms of both performance and profitability indecent standards.

Features of talent development, accountability and probable use of procedures in supply chain management are enhanced by good sets of business development policies and strategic management norms in terms of branding and advertising strategies of dairy businesses in Fonterra.

4. Recommendations  to address performance gaps

The recommendations based on business improvements based activities undertaken by Fonterra to induce, rectify, strengthen or modify transformative business changes base change management processes in its management cum administrative sector takes place via systematic planning. It does so by the practices of suitable business leadership policies being effectively implemented in terms of its validated supply chain management procedures and relevant business tactics (Malik et al. 2018). The dairy firm poses or represents itself more in terms of its leadership criteria to bring into effect the best of its spearheaded policies to smoothen out the change management processes in bona fide terms (Silvestre, 2015).

The leadership development and change management plan undertaken by Fonterra to smoothen out its business objectives take into account the criteria of simultaneous development of both of the planning procedures to be incorporated in business planning stratagem of Fonterra. The basic facets of cultural changes to be brought into effect by Fonterra depends both on time-bound planning procedures and region based cross-sectional or spatial planning procedures respectively (Filatotchev & Stahl, 2015). Coordination of leadership management plan is a norm to be used in the business platform of raw milk resource based global dairy market fostering huge supply chain management process. The company has gaps in the cultural diversity management which needs to be addressed so as to maintain the strategic management. Hence cultural change initiative should be included in the dairy business of Fonterra to make it fight with the adversities of change management process in bona fide terms (Beukes et al. 2017). Fundamental goals of leadership management plans must be incorporated in all segments of dairy business starting from capital accumulation process to business development process ending with sales, distributive retailing and deliveries.

These should take into consideration by both the higher managerial bodies along with that of subordinate staffs and supervisors of Fonterra in New Zealand (Hay & Staples, 2016). In addition there are gaps in the present pricing of the company which needs to be addressed for better performance of the company. Recommendations to improve change management in Fonterra must be based on both trickle-down theories and spillover strategies of development where leadership norms in one segment of dairy business foster change in the pricing and output shares of other segments in a directly proportional manner. Similarly, typical actions in terms of well-framed plans are needed to be used in the vicinity of the dairy business of Fonterra to shape and size the bottom-up approach of growth in the business markets of dairy products as manufactured by Fonterra. Along with this top-down learning by doing process should be practiced and promoted in a standardized manner in lieu of round the clock service to hasten and speed up dairy based strategic management process in terms skills development criteria of employees of Fonterra (Hillerton, 2015).

Action

Time

Budget

Outcome

1.Leadership based sales development management

2-3 months

$ 40-$50 per area of development

It leads to well-guided development in strategic areas of dairy business in suitable manners.

2.Leadership based bottom and top-down approaches

4-6 months

$ 60-$70 per area of development

It leads to the simultaneous development of many key areas of dairy business linked with Fonterra.

Table 1: Action plan

(Source- Hay & Staples, 2016, p.151)

 5. Conclusion

The above discussion demonstrates the detailed strategic management process undertaken by a renowned business development organisation like Fonterra to meet the best of its dairy-based business objectives. The strategic management plan consists of lower-priced leadership processes and supplies chain management processes of business to give strong shape to the business linked strategic goals of Fonterra being justified in the context of its dairy-based production and delivery services. The methods of CSR and sustainability are witnessed to cater to the purpose of successful maintenance and execution of strategic management plans in the growth and progress of the dairy business of Fonterra in both domestic and international scenarios.

Moreover, the SWOT analysis conducted highlights the positive merits of Fonterra in terms of being superior and well-balanced suppliers of dairy products in terms of valid supply chain management processes. The weaknesses of overlapped resources and restructuring bottlenecks along with threats of media weaknesses of Fonterra which encourage rivals to compete with it are the chief demerits of the dairy industry of Fonterra. The strategic processes of leadership based norms of the top-down process and bottom-up processes of improvements are being discussed in the last part of this discussion in terms of signaling the future scope of development of Fonterra in global fronts.

References

Beukes, P. C., Romera, A. J., Gregorini, P., Macdonald, K. A., Glassey, C. B., & Shepherd, M. A. (2017). The performance of an efficient dairy system using a combination of nitrogen leaching mitigation strategies in a variable climate. The science of the Total Environment, 599, 1791-1801. Retrieved on 17 July 2018.Retrieved from https://www.researchgate.net/profile/Pierre_Beukes/publication/317146430_The_performance_of_an_efficient_dairy_system_using_a_combination_of_nitrogen_leaching_mitigation_strategies_in_a_variable_climate/links/5a286d3ba6fdcc8e8671b783/The-performance-of-an-efficient-dairy-system-using-a-combination-of-nitrogen-leaching-mitigation-strategies-in-a-variable-climate.pdf

Fahimnia, B., Sarkis, J., & Davarzani, H. (2015). Green supply chain management: A review and bibliometric analysis. International Journal of Production Economics, 162, 101-114. Retrieved on 17 July 2018.Retrieved from https://www.sciencedirect.com/science/article/pii/S0925527315000067

Filatotchev, I., & Stahl, G. K. (2015). Towards transnational CSR. Corporate social responsibility approaches and governance solutions for multinational corporations. Organizational Dynamics, 44(2), 121-129. Retrieved on 17 July 2018.Retrieved from http://openaccess.city.ac.uk/7163/1/Org_Dynamics_March_2015.pdf

fonterra.com (2018). fonterra.com. Welcome to Fonterra.  Retrieved on 15 July 2018. Retrieved

from https://www.fonterra.com/nz/en.html

Fu, S. (2014). The role of Chinese social media in reputation management: the case of Fonterra.  Retrieved on 18 July 2018. Retrieved from http://unitec.researchbank.ac.nz/bitstream/handle/10652/2529/Shenghan%20Fu%202014.pdf?sequence=1&isAllowed=y

Girotto, F., Alibardi, L., & Cossu, R. (2015). Food waste generation and industrial uses: a review. Waste management, 45, 32-41. Retrieved on 17 July 2018. Retrieved from https://www.researchgate.net/profile/Luca_Alibardi/publication/279733410_Food_waste_generation_and_industrial_uses_A_review/links/56adc3bd08ae28588c6080e6/Food-waste-generation-and-industrial-uses-A-review.pdf

Henderson, A., Cheney, G., & Weaver, C. K. (2015). The role of employee identification and organizational identity in strategic communication and organizational issues management about genetic modification. International Journal of Business Communication, 52(1), 12-41. Retrieved on 18 July 2018. Retrieved from https://www.researchgate.net/profile/George_Cheney/publication/270685187_The_Role_of_Employee_Identification_and_Organizational_Identity_in_Strategic_Communication_and_Organizational_Issues_Management_about_Genetic_Modification/links/54b298210cf220c63cd266cd.pdf

Honggowati, S., Rahmawati, R., Aryani, Y. A., & Probohudono, A. N. (2017). Corporate governance and strategic management accounting disclosure. Indonesian Journal of Sustainability Accounting and Management, 1(1), 23-30.Retrieved on 12 July 2018.Retrieved from http://unpas.id/index.php/ijsam/article/view/24

Malik, R., Knapman, R., Mann, R., & Director, C. O. E. R. (2018). RAPID BENCHMARKING AT FONTERRA USING THE TRADE BEST PRACTICE BENCHMARKING METHODOLOGY. Retrieved on 17 July 2018. Retrieved from https://blog.bpir.com/wp-content/uploads/2018/03/Rapid-Benchmarking-at-Fonterra_Final.pdf

morningstar.com(2018) . Fonterra Co-operative Group Ltd. Retrieved on 15 July 2018. Retrieved from http://quicktake.morningstar.com/stocknet/secdocuments.aspx?symbol=fcg&country=nzl

Mylan, J., Geels, F. W., Gee, S., McMeekin, A., & Foster, C. (2015). Eco-innovation and retailers in milk, beef and bread chains: enriching environmental supply chain management with insights from innovation studies. Journal of Cleaner Production, 107, 20-30. Retrieved on 17 July 2018.Retrieved from https://www.sciencedirect.com/science/article/pii/S0959652614009950

Ritter, C., Jansen, J., Roche, S., Kelton, D. F., Adams, C. L., Orsel, K., ... & Barkema, H. W. (2017). Invited review: Determinants of farmers' adoption of management-based strategies for infectious disease prevention and control. Journal of dairy science, 100(5), 3329-3347. Retrieved on 17 July 2018.Retrieved from https://www.researchgate.net/profile/Herman_Barkema/publication/313905116_Invited_review_Determinants_of_farmers%27_adoption_of_management-based_strategies_for_infectious_disease_prevention_and_control/links/59d69c14a6fdcc52aca7d088/Invited-review-Determinants-of-farmers-adoption-of-management-based-strategies-for-infectious-disease-prevention-and-control.pdf

Silvestre, B. S. (2015). Sustainable supply chain management in emerging economies: Environmental turbulence, institutional voids and sustainability trajectories. International Journal of Production Economics, 167, 156-169 Retrieved on 17 July 2018.Retrieved from https://www.sciencedirect.com/science/article/pii/S0925527315001772

Wilhelm, M. M., Blome, C., Bhakoo, V., & Paulraj, A. (2016). Sustainability in multi-tier supply chains: Understanding the double agency role of the first-tier supplier. Journal of Operations Management, 41, 42-60. Retrieved on 17 July 2018.Retrieved from http://daneshyari.com/article/preview/1031612.pdf

Hillerton, J. E. (2015, November). NEW ZEALAND'S JOURNEY, BOLDLY GOING WHERE?. In British Mastitis Conference 2015, Worcester, UK, 11 November 2015. 39-45. The Dairy Group. Retrieved on 18 July 2018. Retrieved from http://www.britishmastitisconference.org.uk/BMC2015Proceedings.pdf#page=71

Hay, R., & Staples, A. (2016, August). Managing noise effects from dairy factories. In INTER-NOISE and NOISE-CON Congress and Conference Proceedings, 253 (1), 7161-7172. Institute of Noise Control Engineering. Retrieved on 17 July 2018.Retrieved from http://pub.dega-akustik.de/IN2016/data/articles/001026.pdf

Cerreta, M., & Daldanise, G. (2017, July). Community Branding (Co-Bra): A Collaborative Decision Making Process for Urban Regeneration. In International Conference on Computational Science and Its Applications. 730-746. Springer, Cham. Retrieved on 16 July 2018. Retrieved from https://www.researchgate.net/profile/Gaia_Daldanise/publication/318397685_Community_Branding_Co-Bra_A_Collaborative_Decision_Making_Process_for_Urban_Regeneration/links/5983000da6fdccc3f53850dd/Community-Branding-Co-Bra-A-Collaborative-Decision-Making-Process-for-Urban-Regeneration.pdf

6. Appendices

Appendix 1: Fonterra data

(Source: http://www.infometrics.co.nz/why-is-fonterra-losing-grip-of-market-share-in-the-dairy-industry/)

Appendix 2: New Zealand pay out

(Source: https://www.interest.co.nz/rural-news/82861/fonterra-says-earnings-share-season-may-be-50c-60c-range-45c-55c-past-season)

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