Fonterra: Taking on the Dairy World SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Fonterra: Taking on the Dairy World
Fonterra was a cooperatively owned dairy company--New Zealand's largest company and the world's largest exporter of dairy products. To maintain its leadership, Fonterra had to respond to increased competition, new consumer tastes, consolidation of its customers, and increasing subsidies on milk by developing countries. This futuristic case identifies trends that the cooperative has to take into account for its future success. It can be examined as a model for other cooperatives in other commodity systems.
Swot Analysis of "Fonterra: Taking on the Dairy World" written by Ray A. Goldberg, Jose Miguel Porraz includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Fonterra Dairy facing as an external strategic factors. Some of the topics covered in Fonterra: Taking on the Dairy World case study are - Strategic Management Strategies, Joint ventures, Mergers & acquisitions, Policy and Global Business.
Some of the macro environment factors that can be used to understand the Fonterra: Taking on the Dairy World casestudy better are - – geopolitical disruptions, technology disruption, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels,
wage bills are increasing, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Fonterra: Taking on the Dairy World
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Fonterra: Taking on the Dairy World case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fonterra Dairy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fonterra Dairy operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Fonterra: Taking on the Dairy World can be done for the following purposes –
1. Strategic planning using facts provided in Fonterra: Taking on the Dairy World case study
2. Improving business portfolio management of Fonterra Dairy
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fonterra Dairy
Strengths Fonterra: Taking on the Dairy World | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fonterra Dairy in Fonterra: Taking on the Dairy World Harvard Business Review case study are -
Ability to recruit top talent
– Fonterra Dairy is one of the leading recruiters in the industry. Managers in the Fonterra: Taking on the Dairy World are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Fonterra Dairy in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Fonterra: Taking on the Dairy World Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Innovation driven organization
– Fonterra Dairy is one of the most innovative firm in sector. Manager in Fonterra: Taking on the Dairy World Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Fonterra Dairy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fonterra Dairy has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Effective Research and Development (R&D)
– Fonterra Dairy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Fonterra: Taking on the Dairy World - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Fonterra Dairy
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Fonterra Dairy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Fonterra Dairy has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Fonterra: Taking on the Dairy World HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Global Business industry
– Fonterra: Taking on the Dairy World firm has clearly differentiated products in the market place. This has enabled Fonterra Dairy to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Fonterra Dairy to invest into research and development (R&D) and innovation.
Strong track record of project management
– Fonterra Dairy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Fonterra Dairy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Fonterra Dairy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Fonterra Dairy in the sector have low bargaining power. Fonterra: Taking on the Dairy World has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fonterra Dairy to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Fonterra: Taking on the Dairy World | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fonterra: Taking on the Dairy World are -
Interest costs
– Compare to the competition, Fonterra Dairy has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Fonterra: Taking on the Dairy World, is just above the industry average. Fonterra Dairy needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High operating costs
– Compare to the competitors, firm in the HBR case study Fonterra: Taking on the Dairy World has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Fonterra Dairy 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Fonterra Dairy has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Aligning sales with marketing
– It come across in the case study Fonterra: Taking on the Dairy World that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Fonterra: Taking on the Dairy World can leverage the sales team experience to cultivate customer relationships as Fonterra Dairy is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Fonterra Dairy has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Fonterra Dairy even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
No frontier risks strategy
– After analyzing the HBR case study Fonterra: Taking on the Dairy World, it seems that company is thinking about the frontier risks that can impact Global Business strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Low market penetration in new markets
– Outside its home market of Fonterra Dairy, firm in the HBR case study Fonterra: Taking on the Dairy World needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Fonterra Dairy is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Fonterra: Taking on the Dairy World can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Fonterra Dairy is dominated by functional specialists. It is not different from other players in the Global Business segment. Fonterra Dairy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fonterra Dairy to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Ray A. Goldberg, Jose Miguel Porraz suggests that, Fonterra Dairy is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Opportunities Fonterra: Taking on the Dairy World | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Fonterra: Taking on the Dairy World are -
Better consumer reach
– The expansion of the 5G network will help Fonterra Dairy to increase its market reach. Fonterra Dairy will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Fonterra Dairy can use these opportunities to build new business models that can help the communities that Fonterra Dairy operates in. Secondly it can use opportunities from government spending in Global Business sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Fonterra Dairy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fonterra Dairy to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Fonterra Dairy to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Fonterra Dairy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fonterra Dairy can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Fonterra: Taking on the Dairy World, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Fonterra Dairy can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Fonterra: Taking on the Dairy World suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Fonterra Dairy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Fonterra Dairy to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Developing new processes and practices
– Fonterra Dairy can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Manufacturing automation
– Fonterra Dairy can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Fonterra Dairy can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Fonterra Dairy can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Loyalty marketing
– Fonterra Dairy has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Fonterra: Taking on the Dairy World External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Fonterra: Taking on the Dairy World are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fonterra Dairy can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Fonterra: Taking on the Dairy World .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Stagnating economy with rate increase
– Fonterra Dairy can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Fonterra: Taking on the Dairy World, Fonterra Dairy may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Fonterra Dairy will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Fonterra Dairy business can come under increasing regulations regarding data privacy, data security, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Fonterra Dairy.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Fonterra Dairy in the Global Business sector and impact the bottomline of the organization.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Fonterra Dairy needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Regulatory challenges
– Fonterra Dairy needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Fonterra Dairy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fonterra Dairy in the Global Business industry. The Global Business industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Environmental challenges
– Fonterra Dairy needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Fonterra Dairy can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Weighted SWOT Analysis of Fonterra: Taking on the Dairy World Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Fonterra: Taking on the Dairy World needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Fonterra: Taking on the Dairy World is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Fonterra: Taking on the Dairy World is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Fonterra: Taking on the Dairy World is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Fonterra Dairy needs to make to build a sustainable competitive advantage.