Mgt5Str : Strategic Management : Assessment Answers

Identification of international opportunities for Fonterra 

At present 27% of Fonterra’s milk is obtained from overseas. Australia, Chile and China are the biggest supply sources. Fonterra is earning from the exports about 20 to 33%. It is somewhere between $2500 and $4000 for every person in the New Zealand. The export income supports internal economic activity (Sassen, 2016). Fonterra also processes and markets milk in large quantity that has nothing to do with New Zealand. For the international expansion, Fonterra can produce its products in the existing markets where these are not available. It can introduce Anchor Yoghurt which differentiates for kids and young. Yoghurts are not that famous in India. Fonterra can promote yoghurts by explaining its health benefits. The introduction of wide range of yoghurts in India gives the opportunity of bringing product in an international market. This kind of strategy is best for the expansion of the business (Lee, Biglaiser and Staats, 2014).

Anchor is a sub-brand of Fonterra which offers range of butters, cheeses and yoghurts. The yoghurts are popular products and comprise Greek Yoghurt and Anchor Uno. The Anchor Uno is provided specially for the kids. It offers great taste, high quality, dairy nutrition for the people at all the stages of life.

Suitable international strategies 

The strategies can be used by the Fonterra at the time of introduction of new products in the international market are:

Multi domestic strategy

A brand using multi domestic strategy has to sacrifice proficiency in favour of highlighting approachability to the local requirements within its markets. Similarly, Fonterra can match the local preferences of India by offerings the flavours desired by them. The changes can be made by the company as per the citizens of the country. Such efforts can make company a version of its yoghurt. For the introduction of Fonterra in the target market of India has to understand their taste and accordingly it can make changes in the yoghurts (Swoboda, Elsner and Olejnik, 2015).

Global strategy

The global strategy is totally opposite of the multi domestic strategy. It includes the minor modifications to the products in the various markets. There is no need to make major changes in the products. The global strategy focuses on the need of gaining economies of scale by proposing essentially the same products or services in the targeted market. Fonterra can make attempt to gain efficiency by creating global brands (Katarina, Ilan and Yi?it, 2018). This strategy is effective when products are largely hidden from the view of the customers. The modification in the local preferences is not much important for such kind of firms.

Transnational strategy

The transnational strategy strives for ground between both the strategies multi domestic and universal. Fonterra can try to balance the aspiration for efficiency with the need to regulate local preferences in several countries. The company can try to make balance between the desire of both local and the international customers. This strategy is successfully adopted by the multinational corporation to launch products nationwide.

Appropriate entry to the international market 

Strategic alliance 

It is a type of co-operative agreements between various companies to sale products and services and attains common business objectives. The strategic alliance is a encouraging relationship between 2 companies which upturns revenue and industry grasp. It is a long term value creating relationship. A strategic alliance the modern form which is becoming popular day by days. It contains the characteristics such as forming new products and technologies rather than allocating the prevailing ones. These are formed on the basis of the short terms. These are formed on the basis of non-equity based agreement in which companies are separated. The strategic term basically defines a series of different relationships between companies that market globally. The companies can provide strength to each other. It is helpful in developing new products with the help of two or more companies (Bettis, Ethiraj, Gambardella, Helfat and Mitchell, 2016). The strategic alliance meets the challenges of technological revolution.

The strategic alliance has important role in developing competitive advantage as the purposes are openly shared. There is little chance of future competition in the strategic alliance. It also creates strategic alliance by improving current operations and changing competitive environment. The current operations can be improved by economies of scale from successful strategic alliances. The cost and risk is equally shared between the partners (Hitt and Duane Ireland, 2017). The technology standard can be created as it help to set standard in the competitive environment. It is also a low cost entry as well as low cost exit from the industries.

Joint venture 

Joint venture can help Fonterra for the global expansion. It is a prescribed agreement between an international enterprise and foreign enterprise to implement a particular business. The joint venture is basically used when two or more companies have common objectives and want to expand international operations. It is a wide process of entering in the foreign market, set up production and conduct marketing facilities (Hernández and Nieto, 2015). Fonterra can have an equity position in the foreign market. Fonterra as a global firm can better controller over operations and access to the local market information. The five elements are included in the joint venture such as market entry, risk sharing, combined product development, technology sharing and imitating to the government guidelines. It includes advantage of technological competence, optimum use of resources and the partners can learn skills from each other (Bettis, Gambardella, Helfat and Mitchell, 2015).

Fonterra has roots in New Zealand but it continues to use milk mainly from New Zealand dairy farms. The company has become global due to its export operations and willingness to form joint ventures with the help of the strategic partners. The investment in the partnerships and joint venture has helped company to expand into new regions comprising South and North America along with South Africa. It includes partnership of the company with the companies like Nestle, Dairy farmers of America, Friesland Campina and Clover Industries limited. It can help company in gaining expertise in milk procurement and processing (Barrick, Thurgood, Smith and Courtright, 2015). The Nestle can help company in providing portfolio of brands and the distribution network. The most recent expansion of the Fonterra is acquiring Friesland Campina’s pharmaceutical lactose business.

Inappropriate entry to the international market

Acquisition

The acquisition is the one way to grow business by buying other business. The idea behind the acquisition is to increase revenue by acquiring a company which contribute to the income. Along with this, acquisitions can present difficulties and put a company at disadvantage. Acquiring a company can create conflict between the companies because of different management styles. The culture creates conflict as the acquired company has relaxed view of delivering work. The acquisition can cause duplicity of functions. It can also result in the excessive payroll expenditures and reduce motivation among employees. The acquired company can also have different objectives than the other company. If the money is borrowed to obtain company than the debt goes on the books of the original company (Doz, 2017). The revenues are required from the service company in order to service that debt. Mostly companies become target of acquisitions because of lacking financially. The financial problem of the acquired company can become problem for generating income as it need to pay debt.

When a company is acquired it is required to have same line of business. It is also difficult to grow sales after acquisition. It is because of not having enough new customers and there is need to acquire customer base (Frow, Nenonen, Payne and Storbacka, 2015).

Greenfield investment 

As the food companies think to expand their business, it need to consider between repositioning to a Greenfield site where the existing buildings are increasing. It is crucial to update with technology and maximize success and exposure in the marketplace. It includes the ability to practice marketing partnerships and evading of the intermediary costs. It is an investment in which the parent company constructs its own subsidiary company in the foreign country. As per the Greenfield investment, the costs associated with launching a brand is always higher. It is tough to overcome the already established competition. The entry barriers are also always expansive. It comprises years in order to enter in the market (Efrat and Shoham, 2015). The MNCs can be disadvantage on the short term basis because of the government regulations. Fonterra can only use greenfield investment if there are necessary finances. The competition is difficult to overcome by using Green field investment. It is more useful in the developing countries and includes high risk. Fonterra can face problem as it is not established in the countries like India.

Recommendations for the future strategic direction 

Price differentiation strategy

Fonterra is recommended to use price differentiation strategy at the time of entering into the new market. This strategy is helpful to the company as it can charge different price from the different buyers for the products of the same quantity and same quality. The currency of every country varies in terms of the value which leads to use price differentiation strategy by Fonterra.

Business expansion

Fonterra is a recognized brand dealing in the dairy products. The company has expanded its products in many countries. Fonterra can adopt product diversification strategy for the diversification of the business. So that it can make expansion in the remaining parts of the world (Engert, Rauter and Baumgartner, 2016). The business expansion strategy provides better chances to expand business by establishing new ventures.

Enhance customer’s experience

It is the ultimate aim of the company to improve experience of the customers. Fonterra is recommended to provide superior experience to the customers at the time of selling products to the company. The experience helps not only to attract customers but to retain them as well. Such experience leads to the more sales of the products. It is the experience which leads to repetition of products from the side of the customers (Elmes and Barry, 2017).

References: 

Barrick, M.R., Thurgood, G.R., Smith, T.A. and Courtright, S.H., 2015. Collective organizational engagement: Linking motivational antecedents, strategic implementation, and firm performance. Academy of Management journal, 58(1), pp.111-135.

Bettis, R.A., Ethiraj, S., Gambardella, A., Helfat, C. and Mitchell, W., 2016. Creating repeatable cumulative knowledge in strategic management: A call for a broad and deep conversation among authors, referees, and editors. Strategic Management Journal, 37(2), pp.257-261.

Bettis, R.A., Gambardella, A., Helfat, C. and Mitchell, W., 2015. Qualitative empirical research in strategic management. Strategic Management Journal, 36(5), pp.637-639.

Doz, Y.L., 2017. Strategic management in multinational companies. In International Business (pp. 229-248). Routledge.

Efrat, K. and Shoham, A., 2015. Determinants of Entry Modes and Performance of Entrepreneurial Born-Global Firms. In Marketing in Transition: Scarcity, Globalism, & Sustainability(pp. 100-100). Springer, Cham.

Elmes, M. and Barry, D., 2017. Strategy retold: Toward a narrative view of strategic discourse. In The Aesthetic Turn in Management (pp. 39-62). Routledge.

Engert, S., Rauter, R. and Baumgartner, R.J., 2016. Exploring the integration of corporate sustainability into strategic management: a literature review. Journal of cleaner production, 112, pp.2833-2850.

Frow, P., Nenonen, S., Payne, A. and Storbacka, K., 2015. Managing co?creation design: A strategic approach to innovation. British Journal of Management, 26(3), pp.463-483.

Hernández, V. and Nieto, M.J., 2015. The effect of the magnitude and direction of institutional distance on the choice of international entry modes. Journal of World Business, 50(1), pp.122-132.

Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic management research. The Blackwell handbook of entrepreneurship, pp.45-63.

Katarina, S., Ilan, N. and Yi?it, S., 2018. The Trade Impacts of a Food Scare: The Fonterra Contamination Incident. Journal of Agricultural & Food Industrial Organization, 16(2).

Lee, H., Biglaiser, G. and Staats, J.L., 2014. The effects of political risk on different entry modes of foreign direct investment. International Interactions, 40(5), pp.683-710.

Mudambi, R., Piscitello, L. and Rabbiosi, L., 2014. Reverse knowledge transfer in MNEs: Subsidiary innovativeness and entry modes. Long Range Planning, 47(1-2), pp.49-63.

Pavlovich, K., Sinha, P.N. and Rodrigues, M., 2016. A qualitative case study of MNE legitimacy: The Fonterra-Sanlu IJV corporate milk scandal in China. International Journal of Emerging Markets, 11(1), pp.42-56.

Sassen, S., 2016. The Global City: Strategic Site, New Frontier. In Managing Urban Futures (pp. 89-104). Routledge.

Swoboda, B., Elsner, S. and Olejnik, E., 2015. How do past mode choices influence subsequent entry? A study on the boundary conditions of preferred entry modes of retail firms. International Business Review, 24(3), pp.506-517.