Global Strategy and Sustainability Assignment Sample
PART A – BUSINESS REPORT
Introduction
Global strategy is considered as a strategy that is adopted by an organisation for entering the global market for enhancing sales rate through achieving its expansion goals. This report is focusing on strategy upgradement for Fonterra which is leading multinational publicly trading dairy cooperation in New Zealand. The Board of Directors (BoD) of this company is reviewing the global strategy of Fonterra for making growth into Europe, Africa, the Middle East, and Asia. This company is intending to make business growth in UK.
Task 1 -The External and Internal Environment
External environment analysis: PESTLE
| Factors | Aspect | Impact | |
|---|---|---|---|
| Political | Political stability value of UK remain at 0.50 (The Global Economy, 2023) | Stable political condition of UK offer scope to dairy industry to UK to generate global terms strategy. | Positive |
| Economic | Inflation rate of UK remain 7.31% in 2023 that declined to 2.01% in 2024 (Statista, 2024) [Referred to appendix 1]. | Buying capacity of customers increased during the decline phase of inflation as company drive down the product price due to low inflation period. | Positive |
| Social | Unemployment rate of the UK increased by 0.2% in 2024 (Statista, 2024) [Referred to appendix 2]. | Rise of unemployment rate diminishes employee morale and reduces economic output of the dairy industry. High unemployment creates a financial burden on employers. | Negative |
| Technological | Robotic Milking assists in managing the milking process automatically as well as measures milk production according to cow basis (Weyers, 2024). | Robotic milking machines help dairy producers to make important decisions regarding dairy cattle nutrition, which offer scope to dairy industry in maintaining quality of dairy products. | Positive |
| Legal | As per “The Dairy Products (Hygiene) Regulations 1995” dairy products need to have a “health mark” in an easily visible place over the package (Legislation, 2023). | Dairy industry need to implement the mentioned act for maintaining hygiene while selling product. | Neutral |
| Environmental | According to “Environment Act 2021” provide Ammonia permits, which is emitted from dairy herd and agriculture (Ahdb.org, 2021). UK Government has set 2 air quality targets that include reduction of “fine particulate matter (PM2.5) in ambient air. These fine particulates are produced from Ammonia that is emitted in dairy herds. | Applying this act, dairy companies need to check the dairy production process for controlling ammonia production for execution of sustainable practices. | Neutral |
Table 1: Macro factor analysis of dairy industry of UK
(Source: Created by Author)
Internal analysis: VRIO Analysis
| Resources | Value | Rare | Imitable | Organised | Aspect of competitive advantages |
|---|---|---|---|---|---|
| Presences of in-house science team | Yes | No | No | Yes | Partial competitive advantage |
| Plethora application | Yes | Yes | Yes | Yes | Sustainable competitive advantage |
| Use of Azure | Yes | No | No | No | Competitive disadvantage |
Table 2: Internal factor analysis of Fonterra
(Source: Fonterra, 2023)
Fonterra partnered with Beta solution for working with an in-house science team, which offered value to their dairy production operations as this team tested the quality of milk. This resource is not rare as Beta Solution is another company, which is already using a science team of different expertise such as Mechanical design (Beta solutions, 2023). Partnering with Beta Solution any organisation can imitate these resources. Presence of structured prototype of Beta solution offer scope to Fonterra regarding usage of this science team in an organised way, which delivers partial competitive advantages. Plethora applications support Fonterra in terms of developing connections with staff and shareholders (Putt, 2021). Simplification and standardisation are key aspects of this technology, driving sustainable competitive advantage as global supply chain partners are connected in a bespoke and custom way.
Determination of Fonterra’s current source of competitive advantages
Based on a case study, Fonterra is one of the top six dairy companies such as New Zealand Barenbrug NZ, DairyNZin New Zealand, which is famous for supplying bulk ingredients such as milk powder, butter, and cheese to the international market. Fonterra has enhanced in-house capability through employing 20,000 people among them 250 people are included under IT determinant, which has offered scope to this organisation in digital transformation (Putt, 2021). According to a case study, competitive advantages increase in this company by including 10,700 owners–suppliers, which helps in processing bulk commodity products.
Task 2 – Strategy in the Global Environment
Critical evaluation of motives for Fonterra’s international expansion
Uppsala international model
Figure 1: Aspect of Uppsala international model
(Source: Influenced by Abrantes, 2020)
Uppsala model focuses on the changing scenario of a firm due to volatility, uncertainty, complexity and ambiguity in business operations. As reported by Abrantes (2020), this model has two variables that include state and change. The changes in variables focus on the evolutionary process over time. However, state variables shed light over capability and performance of a firm (Schweizer and Vahlne, 2022). Main motive of business expansion of Fonterra in UK is to developed long term strategies regarding expansion of its food service business. Market knowledge of UK would allow this firm to generate resources allocation through generating commitment decisions. Linking with previous context, the presence of stable Government and economic condition of UK would support this firm to make a commitment to food expansion in Europe.
Another motive for market expansion in the global market is to gain a consumer base, which would facilitate gaining competitive advantages. Apart from this, Fonterra is aiming to be a sustainable leader in the global market through focusing on sustainability activities as a decarbonising footprint. This company solves methane challenges by executing activities of pasture-based model, animal welfare standards (Fonterra, 2023). Compared with the previous context, sustainable practice can be conducted by Kingcott Dairy through investing over innovation, which can offer motive to this firm of becoming leader in dairy innovation. However, motive for increasing the brand reputation of Fonterra can be possible through improving the confidence level of consumers. Offered products improve health and wellbeing of consumers and that becomes possible by executing activities such as partnering with beta solution, which support in maintaining health and wellness trends of UK market.
Impact of motives on overall company strategy
Main motive of Fonterra is to become a sustainable leader in the global market and this motive creates impact over cooperative strategy, which sheds light over enhancing the lives of people’s health. This company needs to invest in innovation so that they can achieve a net zero target by 2050 so that their manufacturing capability increases. Product innovation is another motive of this firm and that becomes possible through investing over “Active Living portfolio”, which may create a positive impact over cooperative strategy (Fonterra, 2023). Gaining a strong consumer base is another motive which creates a positive impact over another strategy of this company, which is to increase “Continue momentum in the Consumer channel”. This motive creates a positive impact over strategy “certified carbonzero” in terms of performing sustainable practices that help in retaining loyal customers. In addition, sales value can be increased by this organisation through shedding light over this strategy. Consumer health gets improved by the application of this mentioned approach.
Identification of strategic option of internationalism that assist Fonterra to enter in global market
Liberal internationalism model
Promote liberal democracy and facilitate cooperation are main concept of this model. Strategy conception activities of Multidomestic Strategy, which sheds light over local as well as global requirement of market help an organisation to use the principle of Liberal internationalism model. Environmental problems can be solved by using this model through a cooperation beta solution with Fonterra. Carbon emission can be reduced by using certified carbonzero strategy, which reduces environmental impact and that would support Fonterra in making poverty sustainable a leading position in the market. Other than this, the strategy of this company is shedding light over delivering “Carbonzero milk”, which supports the environment (Fonterra, 2023). Motive of becoming a sustainable leader can be achieved through g focusing on renewable energy programs that support and sustain in the global market.
Three entry strategy application
| Entry strategy | Description |
|---|---|
| Exporting | Direct exporting is a process of selling product to international market without involvement of third party (Vissak et al. 2020). Fonterra may use direct exporting for exporting product to Europe, Asia, Africa and middle East. |
| Joint ventures | Joint venture is another market entry strategy that is used for developing partnership with foreign companies for earning more revenue (Leonard et al. 2020). Fonterra can use the joint venture process by developing partnerships with dairy companies in the UK such as Arla UK. |
| Greenfield investments | Greenfield invests focuses on buying land and resources for building facilities internationally (Nguyen, 2023). Linking with previous context, Fonterra does not require sharing their profit to partners instead they could use their profit for making further investment over product development to achieve international market growth goals. |
Table 3: Market entry strategy
(Source: created by Author)
Task 3 – Corporate Strategy
Application of corporate strategies for improving Fonterra’s supply chain
Horizontal integration
Horizontal integration is used by an organisation for acquiring other company’s similar areas of logistic operation. Manufacturer of Fonterra can use this approach for acquiring a competing dairy manufacturing firm such as Arla UK, for enhancing its logistical output. Logistic operation of this company improved through including UK labour forces as well as equipment. This approach supports an organisation to diversify their logistic department through hiring of UK employees. As supported by Saragih et al. (2020), integrated supply chain is the main concept of this Horizontal integration that increases operational competency. Inclusion of advanced manufacturing technology that is used in dairy industry in the UK can be used by Fonterra through adopting this approach.
Vertical integration
Vertical integration focuses on direct ownership of supplier, distributors and retail location, which deliver more scope to an organisation in making high profit through grabbing the attention of more customers. As per view of Freije et al. (2022), quality if final product gets increased through receiving more control over acquired company logistic operations, quality standard gets improved through application of this mentioned approach. Fonterra can use this approach for reduction of company cost through offering greater control over product quality.
Outsourcing
Supply chain outsourcing offers scope to include external organisation for minimising cover logistic cost and focus on core competencies of an organisation, which increases profit making scope. Customer demands are met through operating supply chain activity by involving external logistic partners (Gambol et al. 2022). For example, “Saputo Dairy UK” uses outsourcing approach meeting global demand of like product. Thus, Fonterra can use outsourcing for better resources allocation through execution of streamlined processes in logistic operation.
Strategic alliance
Developing partnership with other companies is through the development of joint investment for enhancing performance in terms of sharing resources. Higher profit can be gained by an organisation through using this strategic alliance option (Cacciolatti et al. 2020). Fonterra can achieve this sustainable goal through collaborating strategic partnership with suppliers in the UK.
Application of framework that show the way Fonterra’s can enhance profitability
Profit revenue cost framework
Profit revenue cost framework is a part of the profitability framework which focuses on the main equation (Profits = Revenues – Costs). Product or service model can be applied by Fonterra,
- Global Strategy and Sustainability Assignment Sample
where this company is involved in marketing of product so that profit can be generated. Appealing designs need to be made by an organisation so that a customer gets attracted towards that organisation for buying that product (Annarelli et al. 2020). For example, Arla UK also used this model for generating high profit, through using a content based marketing approach so that customers get exact information about the product. Thus, Fonterra can use this model for entering in UK market through sharing detailed information about the manufacturing process and product health over packaging so that customers get a scope to make decisions based on promotional messages on product packages.
Conclusion
Above study portrays that Fonterra is one of the leading dairy companies, which is intending to expand business in Europe, Africa, Asia and Middle East. External market analysis of UK, it can be identified that UK can be recommended for this company for business growth. Evaluating the internal capability of this company by using VRIO, it can be identified that unique resources of this organisation increase the competitive advantages of this firm. Joint ventures would be preferred for this company for market expansion.
References
Abrantes, B.F., (2020). Are neoclassic internationalization models enduring? A case-review of the Uppsala paradigm. Sage Open, 10(2), p.2158244020932535.
Ahdb.org (2021) Horizon blog: Environment Act 2021 – How does it impact farmers?. Available at: https://ahdb.org.uk/trade-and-policy/horizon-blog-environment-act [Accessed on: 1st May, 2024]
Annarelli, A., Battistella, C. and Nonino, F., (2020). Competitive advantage implication of different Product Service System business models: Consequences of ‘not-replicable’capabilities. Journal of Cleaner Production, 247, p.119121.
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Cacciolatti, L., Rosli, A., Ruiz-Alba, J.L. and Chang, J., (2020). Strategic alliances and firm performance in startups with a social mission. Journal of Business Research, 106, pp.106-117.
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Freije, I., de la Calle, A. and Ugarte, J.V., (2022). Role of supply chain integration in the product innovation capability of servitized manufacturing companies. Technovation, 118, p.102216.
Gambal, M.J., Asatiani, A. and Kotlarsky, J., (2022). Strategic innovation through outsourcing–A theoretical review. The Journal of Strategic Information Systems, 31(2), p.101718.
Legislation (2023) The Dairy Products (Hygiene) Regulations 1995. Available at: https://www.legislation.gov.uk/uksi/1995/1086/contents/made [Accessed on: 1st May, 2024]
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Nguyen, N.M., (2023). The effect of FDI on domestic entrepreneurship: the case of greenfield investment and cross-border M&A activities. Journal of Economics and Development, 25(1), pp.62-78.
Putt, S., (2021) Inside Fonterra’s incremental digital transformation. Available at: https://www.cio.com/article/189167/inside-fonterra-s-incremental-digital-transformation.html [Accessed on: 1st May, 2024]
Saragih, J., Tarigan, A., Silalahi, E.F., Wardati, J. and Pratama, I., (2020). Supply chain operational capability and supply chain operational performance: Does the supply chain management and supply chain integration matters. Int. J Sup. Chain. Mgt Vol, 9(4), pp.1222-1229.
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Statista (2024) Unemployment rate in the United Kingdom from March 1971 to January 2024. Available at: https://www.statista.com/statistics/279898/unemployment-rate-in-the-united-kingdom-uk/ [Accessed on: 1st May, 2024]
Statista (2024) United Kingdom (UK): Inflation rate from 1989 to 2029. Available at: https://www.statista.com/statistics/270384/inflation-rate-in-the-united-kingdom/ [Accessed on: 1st May, 2024]
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