Bega Cheese Ltd Analysis - Case Study Example

Bega Cheese Ltd Analysis (Name) (Institution Affiliation) (Date) Table of Contents Table of Contents 2 1.0 Introduction 3 1.1An overview of Australia’s cheese industry 3 2.0 Company overview 4 3.0 Open Systems Theory 5 3.1 Political 6 3.2Economic 6 3.3 Social 7 3.3 Technology 7 3.4 Legal Force 8 4.0 Competitor analysis 8 5.0 Strategic and organizational capabilities needed by Bega Cheese Ltd 9 5.1 Product 9 5.2 Price 9 5.3 Promotion 10 5.4 Place 10 5.5 Corporate Social Responsibility 10 6.0 Management functions of planning and organizing 11 6.1 planning 11 6.2 Organizing 11 7.0 Conclusion 11 1.0 Introduction For any new strategy to be implemented in a firm, the organization’s operating environment should be analysed in order to understand the competitive as well as challenging environment (Fayol, 1954). As such, this paper will examine Bega Cheese’s specific and general operating environment applying the open systems theory. The paper will also highlight Bega’s political, social, economic, technological as well as the social forces that may affect the firm in its operation. Moreover, the paper will look at the strategic as well organizational capabilities Bega can use to grow its market share. 1.1An overview of Australia’s cheese industry Though a small milk producer, Australia is the third largest producer of dairy products in the world as it exports fifty percent of its total production. The dairy industry is ranked third in the Australian rural industry, behind wheat and beef with a gross value of over $4 billion (Ibisworld.com.au, 2014). This accounts for approximately 10% of the total gross value as far as agricultural production is concerned. Moreover, the industry is known for producing milk, cheese and butter, yoghurt as well as milk powder (Abs.gov.au, 2014). Notably, most of the Australian farms are found in the southeast Australia with Victoria being the largest producer. The Victorian production accounts for 62% of the Australia’s dairy industry and most of the dairy produce comes from the eastern part of the state. The Queensland as well as the New South Wales states contributes to 21% of the industry, and in third place is the Tasmania state with 7% (Abs.gov.au, 2014). Apparently, the industry faces uncertainty due to the new water policy as the industry’s success relies heavily on water. Additionally, the industry has about 6800 farmers, who produce approximately 9.6 billion litres of milk annually. Moreover, the dairy industry employs over 43,000 Australians directly and about 100,000 Australian indirectly. According to the Australia Bureau of Statics (2013), the industry in Australia often produces approximately 312, 400 tonnes of cheese annually. However, the industry experienced a decline of 9% in 2012 due to drought that hindered major parts of Australia (Australia, 2013). The production volumes of cheese in Australia have significantly decreased compared to the last decade as the production of milk has decreased over time. The industry in Australia has in the recent past focused on the international market much more than its local market thus exporting more and selling small quantities locally. Over the past decade, the production of the cheddar cheeses has been minimal thus; the market is typical of the non-cheddar cheeses currently. The production of non-cheddar has steadily risen from 28% in the last two decades, to 46% and now at 53% (Abs.gov.au, 2014). Statistics from the Australian Bureau of Statistics depict that companies get almost half of their domestic cheese sales from major supermarkets in Australia. On the other hand, a significant amount, mostly the specialty cheeses, is often sold through the small retailers of predominantly specialty food stores as well as delicatessens. The remainder of the cheese production is often used in the food processing application and the food service sector. Cheese production plays a big role in the Australian dairy industry as it contributes up to A$ 1.8 billion of the domestic sales and exports sales amounting to A$765 (australia.com.au, 2014). 2.0 Company overview Established in 1889 as a co-operative, Bega Cheese Limited is a listed company and is currently ranked among the top companies in Australia. In fact, Bega Cheese Ltd is the second largest company in the Australian cheese industry and is domestically owned. The company is known for its two largest cheese cutting, processing as well as packaging plants in the world. The commonly known brands are Bega and Kraft. Located in New South Wales, the company commands 15% of share equity in Warrnambool Butter and Cheese and owns over 45% of shares in Tatura Milk Industries. Bega Cheese Ltd produces large amounts of various products including whey protein concentrate, cream cheese, infant nutritionals, and a wide variety of natural and processed cheese as well as butter. The company’s exports to about fifty countries, currently generates revenue in excess of $71 million each year. The firm’s main export destinations include Singapore, Middle East, Japan, Malaysia and Japan. According to the IBIS World report (2014), Bega Cheese Ltd generated total revenue of over $1.1 billion in 2014, which includes sales as well as other income. With $445 million worth of assets, the firm produces an estimated 91,000mt of naturally processed cheese annually for retail, industrial use as well as food service. The company also produces more than 13,000mt annually for export only. In addition, Bega Cheese Ltd often produces approximately 100,000mt of other products, of which 75,000mt is exported. The Company currently employees 17000 workers dispersed across its various subsidiaries. 3.0 Open Systems Theory The open systems theory is an approach used to depict how businesses are strongly influenced by their environments. A company’s operating environment often includes economic, social, political and Technological forces; they are also referred to as uncontrollable business factors. Moreover, the environment often provides the primary resources that can sustain a company thus leading it to change in order to survive the competitive environment. The theory treats the firm largely as a self-contained unit. As such, the paper will use this theory as well as the PEST analysis to analyse Bega Cheese Ltd. Uncontrollable Business Factors refers to the natural circumstances that may affect business conditions as wells investment values more often. For example, natural calamities, political, economical and social factors. As such, the subsequent section will use PEST analysis (political, Economic, Social and Technological factors) to analyse the uncontrollable Business Factors. 3.1 Political Bega Cheese Limited enjoys the political environment as Australia has a working democracy with an efficient system .The World Bank’s Political Index rating indicates the political situation in Australia as excellent. Moreover, if constituted and approved, the cheese industry in Australia will benefit from the proposed abolishment of the payroll tax on all companies associated with dairy processing. In addition, there has been a proposal to have the energy prices reduced through scraping off the carbon tax. 3.2Economic According to the Australian Bureau of Statistics (2014), the annual GDP growth rate for Australia is 2.7 %, and has increased over the past decade. Moreover, Australian Disposable Personal Income has increased by 9.7%: from 268702 AUD million in 2013 to 269883 AUD Million in 2014 (Abs.gov.au, 2014). Moreover, the Disposable Personal Income has been increasing by an average of 4.2% annually since 2008 (Abs.gov.au, 2014). This means that Australia has a strong economy that can support any business. Consequently, the Bega Cheese Ltd will continue benefiting from the considerable spending on food as Australians have more income to spend. 3.3 Social According to Hesketh et al. (2010), many Australians love using the dairy products and more so cheese. However, there has been a 5% percent decrease in the general consumption of cheese in Australia (Euromonitor.com, 2014). This is due to the government’s commitment in discouraging the use of considerable proteins and fats. Through the ministry of health, the government argues that cheese consumption contributes largely to obesity and overweight cases in Australia. The overweight epidemic is one of the greatest public health challenges facing Australia and other developed countries (Williams et al., 2010).With over sixty percent of its adults and one out of four children being obese or overweight, Australia is one of the most obese first world countries. Over the last thirty-six years, the prevalence of obesity has been gradually increasing, up from 48% in 1980 and now 62% (Hesketh). As such, Bega Cheese Ltd could be affected by this trend in future, as many consumers will reduce their cheese intake. 3.3 Technology Just like other companies, the cheese firms in Australia are regularly engaging in studies that can help them process or produce cheese and other products efficiently using technology. A recent survey indicates that most leading cheese producers rely majorly on the current robotics in the market while Bega Cheese Ltd relies on the automatic processing lines. On the other, the Australians are techno savvy and such, would want to learn about the products online. In that light, the company is expected to improve its marketing and use the Integrated Marketing Communication strategy. In addition, Bega boasts of exceptionally high level of mechanization and automation in its four plants. The firm also has automatic de-boxers and case palletisers as well as unmanned laser-guided forklifts. 3.4 Legal Force Several laws regulate the cheese business, which falls under the dairy industry: the Competition and Consumer Act 2010 and the Produce Act 1986 (australia.com.au, 2014). The competition Act helps the cheese businesses such as Began to have an equal and fair playing ground as far as competition for the market is concerned. Moreover, the State Food Authorities is charged with licensing all the businesses, whereby they are supposed to have food safety programs that documented. 4.0 Competitor analysis Currently, Bega’s closest competitors in the cheese industry are Fonterra Co-op Group and Warrnambool Cheese and Butter Ltd (Ibisworld.com.au, 2014). The Fonterra Group, which made total revenue of more $20 billion in 2014, commands 29% percent of the cheese value share in Australia. Fonterra group has 18200 employees in Australia including various subsidiaries, which the company controls. The company is engaged in three specialities: Foodservices, Ingredients as well as consumer products. On the other hand, Warrnambool Cheese and Butter Ltd, which made total revenue of $6.1 million in 2014, controls 15% share value. Apart from cheese production, the company also produces other products such as butter and yoghurt. Whereas these two competitors have a market share as well as well loyal customers, Bega has continued to specialize in the production of its value added products in order to differentiate its brand from the competitors. Bega has managed to achieve this through the production of slices, grated, slices, and Kids cheeses in form of snacking sticks as well as processed cheese slices. Bega can stay competitive if it continues with in-house innovation and research in order to win more market share. 5.0 Strategic and organizational capabilities needed by Bega Cheese Ltd Bega Cheese will need several strategic as well as organizational capabilities in order to keep up ahead of the competition. To analyse them, the subsequent section will look at five capabilities: product, pricing, promotion, Place and Corporate Social Responsibility. 5.1 Product Bega Cheese needs to specialize in all type of salt, sugar and fats levels products in order to meet the special needs of diabetic as well as other consumers who may have different problems. The firm will also need to capitalize on its traditional products such infant formula, milk powders, cream cheese, mozzarella as well cheddar through value addition. The products will need to be customized in order to meet different market segmentation. In order, to differentiate its products from the competitor’s, the firm can add ingredients such omega-3 fatty acids on the cheeses as well. The firm should also invest in the innovation of its packaging as well as processing facilities. 5.2 Price Many firms often use price to differentiate their brands from those of their competitors (Connor & Peterson, 2012). As such, Bega Cheese Ltd can offer the typical products at a slightly lower price, but raise the prices of unique products such as mozzarella to recover the deficit. Additionally, Bega can offer discounts at the seasonally. However, the discounts will only apply to the typical products. This way, customers will prefer Bega’s products to its competitors’ as they will look cheaper and of high quality. 5.3 Promotion Majority of the Australian population is techno savvy and are associated with the trendy digital technology. Thus, Bega Cheese should use the integration marketing communication approach in promoting its products. Importantly, it should use the social media to communicate with the potential customers of its range of products, and that it is offering quality and healthy cheese. The firms should also employ the use of brand sponsorship through identifying a hero or heroine in the sports arena to be its ambassador and use the sports star to promote Bega Cheese brand. 5.4 Place Bega Cheese should distribute its products across Australia in order to grow its market. Their cheese products should not only dominate the urban centres, but also the rural Australia. Moreover, the firm should also organize online bulk purchases to enable retailers in other countries to make orders as well as payments efficiently. Bega Cheese Ltd will also have to increase as well as identify permanent distribution channels to allow efficive penetration of the goods to the market. 5.5 Corporate Social Responsibility CSR has been proved an efficient marketing as well as an organizational strategy that can help promote the firms productivity and revenue. If effectively used, the CSR can unite the employees as well as all the stakeholders as they would feel part of the organization. As such, Bega should initiate community programs such as Healthy Eating in Australia to educate the community on proper and healthy feeding to avoid lifestyle diseases. Majority of deaths in Australia are often caused by non-communicable diseases, which are related to bad eating and drinking habits (Connor & Peterson, 2012). 6.0 Management functions of planning and organizing 6.1 planning The management should first come up with a schedule showing the sequence of events as well as coming up with the necessary budget and resources required. For example, the management should convey for a meeting with the board of directors with the intent of making proposals for the strategies. Bega will have to plan for the recruitment of specialists who will assist in researching healthy ingredients to be added to the new cheese products. 6.2 Organizing The management will be expected to bring together the necessary resources such as the employees as well as the needed finances and assign them different roles and budgets in order to achieve the organizational goals. According to Fayol (1954), organizing a strategy refers to bringing all the necessary ‘machinery’ needed to implement the strategy. 7.0 Conclusion The paper has evaluated Bega Cheese’s specific and general operating environment applying the open systems them. The paper has looked at Bega’s political, social, economic, technological as well as the social forces that may affect the firm in its operation. Moreover, the paper has looked at the strategic as well organizational capabilities Bega can use to grow its market share. References Abs.gov.au,. (2014). 1301.0 - Year Book Australia, 2004. Retrieved 14 December 2014, from http://www.abs.gov.au/ausstats/abs@.nsf/Previousproducts/1301.0Feature%20Article18 004 Australia, D. (2013). 2013: Situation & Outlook: Report to the Australian Industry. Australia. Connor, J. M., & Peterson, E. B. (2012). Market-structure determinants of national brand-private label price differences of manufactured food products. The Journal of Industrial Economics, 157-171. australia.com.au,. (2014). Australian Cheese Production Statistics - Australia. Retrieved 15 December 2014, from http://www.australia.com.au/Markets-and statistics/Production and-sales/Cheese.aspx Euromonitor.com,. (2014). Cheese in Australia. Retrieved 15 December 2014, from http://www.euromonitor.com/cheese-in-australia/report Fayol, H. (1954). General and industrial management. Hesketh, K., Waters, E., Green, J., Salmon, L., & Williams, J. (2010). Healthy eating, activity and obesity prevention: a qualitative study of parent and child perceptions in Australia. Health promotion international, 20(1), 19-26. Ibisworld.com.au,. (2014). Cheese Manufacturing in Australia Market Research | IBISWorld. Retrieved 14 December 2014, from http://www.ibisworld.com.au/industry/default.aspx?indid=1856 Read More