QUESTION

Required:Most of this report has been completed already. In class, we were given a case study and had to identify four critical issues/questions given in the case. Please read the group case study below and following attachment (the four critical issues/questions and body of the report) and write a half page introductionfor the entire report.

SOLUTION

Introduction

Australia’s dairy industry has very well emerged form the global financial crisis after a long time and still it is standing at crossroads. This is the reason why small farmers are planning to tap the enhanced and improved international markets. The global demand growth which has been projected poses a good opportunity for Australia’s dairy industry.

Being the manager of a small dairy farm in rural parts of Victoria, where the demand of dairy products has seen downward trend in recent years because people in Australia have developed healthy eating habits (Elder, 2001). In order to increase the sales of dairy products as a manager we have decided to expand to other nations and markets where the demand for the dairy products is very strong. There are few strategies which we need to follow to globalise the diary product manufactured by the dairy farm.

Planning Expansion for Diary Products in other markets

Source: FAO (Food and Agricultural Organisation, 2009)

Figure 1: Trade Positions in Milk Trade

The global diary market over the past few years has given  positive indications , due to introduction of  fresh and new dairy products like Pro-biotic Diary Products, omega-3 fatty acids-enriched milk, A2 milk etc. and these products not just cater to the needs of health benefits , but also play a vital role in expanding the dairy market globally manifolds. The factors which are expected to fuel the global diary market growth are:

• Trade liberalizations
• Post global recession, recovery in consumption
• Continuous population growth
• Regular growth in advertising efforts
•  Rising demand for dairy products in developing countries.

This is the reason why the dairy products global market is forecasting its expansion to reachUS$494 billion by the year 2015.

Figure 2:  Per Capita Consumption of Milk

Source: Prepared by USDA, Economic Research Service using data Euromonitor International.

The figure above clearly indicates that the per capita consumption of milk is declining in the high-income countries like Australia, U.S., and Japan while it is showing a growth in the developing countries like Mexico and Singapore.

Protected industries like Dairy industries which although have the protection of trade barriers are thought to have less incentive so that they can invest in new technologies and product innovation. So in order to remain competitive in the new markets the diary industries should constantly entice and try to retain n the new consumers because the food preferences keep on changing. That is why the new dairy products have shown tremendous growth and doubled consumption worldwide between 1995-99 and 2000-04.

Strategies adopted for expansion

International firms like Nestle (Switzerland), DANONE (France), Kraft-Foods (U.S.) acknowledge the demographic factors and regional preferences in order to cater to specific customers.

Foreign Direct investment (FDI) is the best way to promote domestic diary industries as it allows the consumers to access global firms manufactured goods. Like Fonterra Co-op Group, a New Zealand diary firm is into exporting milk powders produced by U.S. Company worldwide. And it partners with other companies too to develop partnership in Australia, South Africa to cater to the diary demands in these countries (U.S. Dairy at Global Crossroads, n.d.).

Marketing Strategies also emphasises the functionality of certain dairy products in order to attract the new consumers. Milk just for drinking has become a differentiated product in its own which has been tailored by companies to specific consumer preferences and tastes. Just like an innovative manufacturer we can also capitalise the increasing consumer awareness which the specific diary components play in human vitality.

This innovative strategy has led firms to produce enhanced dairy products  like yoghurts, pro-biotic  milks and  fermented diary drinks which are helpful in providing health benefits which can be obtained from the ‘good bacteria’ (gatheru and Lumwamu, 2004). Same way we can also develop multi-flavoured milk to attract new consumer which comprises of young generation (U.S. Dairy at Global Crossroads, n.d.).

Other strategies to market all types of dairy products are:

• Appeal the organic market
• Developing new dairy products
•  Using social media networks for advertising and promotion
• Promoting the nutritional value of dairy products

The main motive of successful marketing strategy is to create the desire for the product, so we need to analyse the likes and dislikes of the new consumer in the national market for dairy products first.

Secondly marketer should know the kind of information which will convince the new consumers to buy their dairy products and what is the credible source of information for the new consumers. Like some of the marketing strategies use celebrities, experts (e.g. doctors) or fictional characters to sell their products or some of the dairy firms use single yet specific statements or some use the health claims regarding the dairy products to attract the new consumers.

So the diary marketing strategy for the purpose of globalisation should be:

• FOCUSED APPROACH
• CREATE ORIGINAL MARKETING
• WIDER SPREAD
• APPEAL TO THE ORGANIC MARKET
• FOCUSSED ON NUTRITIONAL VALUE
• INTRODUCTION OF ENHANCED OR NEW PRODUCTS

Challenges faced by Management in Dairy Marketing in Global Context

Global marketing covers a wide span of several nations where marketing activities are being drafted to cater to the varied customers through several products and services. All the firms are it small or big firms have to participate in the global expansion and that is why even we have directed our efforts to global markets for dairy products. Global issues which they have to face are listed below:

• At initial stage we will have to study the international market closely
• Selection of right arena to compete is another issue.
• Finding ways to leverage our core competencies in global scenario is a challenge.
• Firm will have to move astray from country-centred strategies and adapt according to local preferences and tastes.
• Enhance and expand coordination and integrate the production and marketing all across the national markets

The global marketing Strategy which should be adopted by Dairy Firm should follow following steps:

There will be both Macro issues as well as micro issues which a firm globally expanding will have to face.

MACRO ISSUES

• Political or regulatory environmental issues
• Social-cultural issues
• Technological infrastructure issues
• Financial or economic developmental issues

MICRO ISSUES

• Competitive considerations
• Availability or non-availability of mass-media for advertising.
• Availability of local infrastructure like logistics or transport network

Mainly every Dairy Industry worldwide faces three major challenges which are:

• Requirement to increase the production( in order to feed the growing population
  )
• To produce something innovative and new ( environmental services along with handling the environmental issues)
• Production of something better ,( better quality dairy products while respecting the environment)

The main criticism which the Dairy industry has to face at both international as well as national level is regarding addressing  the environmental impact caused by it and has to face criticism because of it (FAO, World Agriculture : towards 2030/2050, 2006).The main pressuring issue is the impact of Dairy Industry on the Climatic changes because the rumen released by large number of cattle raised at dairy farms produces huge amount of methane  and along with that the rumen goes into the water bodies and pollutes them too, thus impacting the water, air, soil and  maintaining biodiversity is another major issue which they have to face (Bertrand, 2010).

Environmental Issues faced by Management (Gerber and Steinfeld, 2010)

• Largest land user in humanity: Livestock uses major largest portion of land for grazing which can cause water pollution, spoil erosion and causes land degradation.
• Gaseous Emissions and climatic changes: Green House Gas (GHG) emissions which mainly arise form the cattle feed production, transportation of animals and animal productions contributes to almost 9% of anthropogenic carbon dioxide emissions. And 37% of methane and 65% of nitrous oxide emissions (Steinfield et al., 2006).
• Depletion of major water resources: the livestock sector accounts for around 8% usage of global water and major part of this is used to irrigate the feed crops and pasture mainly in the developed countries and along with it the livestock drinking water needs are also causing depletion of water resources.
• Biodiversity Erosion: pasture expansions but cutting forest has negative impact on the ecosystem and the rangeland degradation also affects biodiversity all across the continents (Millennium Ecosystem Assessment, 2005).

In order to tackle all these issues related to global expansion of dairy products by the firm they need to create a balanced framework which rightly balances the centralisation and decentralisation. The frame work will take into consideration the dominance of local consideration and global considerations as well along with the important factors which govern global expansion that are: pricing, Distribution, Advertising and Promotion, Product development and market research. The Framework for Global Marketing is depicted below in tabular form:

Figure 3: Framework for Global Marketing for Dairy Firm (Imam, Zadeh and Rani Dubey, 2011)

This to be globally successful the dairy firm of Australia should try to reduce cost of production, provide better health care and breeding facilities to livestock, enhance the management of diary animals which will definitely result in increasing the productivity of the animals. A comprehensive global strategy should be developed to produce quality and safe dairy products with a strong legal back-up (Imam, Zadeh and Rani Dubey, 2011).

Bibliography

Bertrand, S. (2010) Bulletin of International Dairy federation: Environemntal issues at dairy farm, [Online], Available: http://www.idf-lca-guide.org/Files/media/PDF/443-2010.pdf [19 April 2012].

Elder, J.P. (2001) Behavior Change and Public Health in the Developing World, Thousands Oak,CA: Sage.

‘FAO, World Agriculture : towards 2030/2050’ (2006), Interim REport, Rome, Italy.

‘Food and Agricultural Organisation’, (FAO) Production Year Book (2009).

gatheru, C. and Lumwamu, K. (2004) State to Reform Dairy Industry.

Gerber, P.J. and Steinfeld, H. (2010) ‘The global environmental consequences of the livestock sector’s growth’, Bulletin of international dairy federation.

Imam, A., Zadeh, M.N. and Rani Dubey, L. (2011) ‘Dairy Marketing Strategies in the Context of Globalization:Issues and Challenges’, International Journal of Trade, Economics and Finance, vol. 2, no. 2, April, pp. 1-6.

Millennium Ecosystem Assessment (2005), Washington D.C. Island Press.

Steinfield, H., Gerber, P., Wassanaar, T., castel, V., Rosales, M. and de Haan, C. (2006) ‘Livestock’s long shadow environemental issues and options’, FAO, Rome.

‘U.S. Dairy at Global Crossroads’, Economic Reaserch Service, USDA.

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