Some countries might impose tariff to boost their
local milk industry. This will affect Fonterra exports and it will reflect on
Fonterra faces a lot of competition. The
competitors milk production has increased from 600 million liters in 2002 to
2.9 billion liters in 2016. Fonterra’s market share is expected to decrease
from 84% to 79% in next five years.
As per Dairy Industry Restructuring Act 2001
(DIRA), Subparts 5 and 5A, farmers can enter and exit Fonterra without
confinement or punishments (with negligible exemptions). If the farmers exit Fonterra,
there can be a decline in milk production (Ministry of Primary Industries,
The lifestyle of people changes. People demand
value added nutritious milk. This will increase the demand of Fonterra’s milk
and will encourage it to innovate and introduce new products.
Technology keeps changing. Keeping its technology
up-to-date and using new and latest technology can help it to use its resources
By entering in new markets and expanding its
business will help Fonterra to further expand its business and earn higher
Volume of milk collected depends on the climate
and ecology. This results in fluctuations in the volume of milk produced during
Fonterra merger has resulted in overlapping of
resources and infrastructure.
Since milk is a highly perishable product it
cannot be stored for too long. If it fails to collect, process and transport
milk on time, the milk will expire.
Fonterra has less control over milk yield. Fonterra
saw a small decline in milk production in January 2017 following unfavorable
weather conditions during peak milking period (National Business Review, 2017).
The Fonterra Research and Development Center
(FRDC) is one of the biggest research centers in the world devoted to dairy. It
has about 100 PhD qualified researchers and specialists.
Fonterra holds the highest market share in New
Zealand dairy market i.e. 84%. Suppliers, retailer and other distributors try
to associate with Fonterra to have continuous and stable demand and supply from
Fonterra offers its customers high quality
products. It also offers a wide range of products for all ages, right from
infants to old age people.
Fonterra has a unique and strong shareholder
relation with its farmers. This helps it have regular supply of milk.
helps a company to analyze its strengths, weakness, opportunities and threat.
It helps the company to understand its strength and weakness and minimize the
threats and take benefit of the opportunities available to them (appendix 6).
Fonterra farmers will meet up for the trial of
creative innovation that will enable them to take bits of knowledge from the
climate and bring more significant accuracy to New Zealand dairy farms.
Fonterra is working with Met-Service and BloomSky which provide real time
weather forecast. About 70 BloomSky stations will be installed all over New
Zealand and Net-Service will gather information and observations from these
devices for proper analysis (Fonterra Dairy for Life, 2017).
As technology keeps changing, Fonterra needs to
be up-to-date with the latest technology. Advanced automatic technology will
change the way milk will produce and increase the profitability of Fonterra.
Number of dairy farms are starting to utilize robotic cow milking equipment. As
per some of the dairy specialists, automated innovation is ideal for dairy
farms for precise and exact results. For a few systems, cows wear a neckline or
sensor innovation around their neck. It provides data to the farmers through a
transponder. There is no need of human involvement to monitor the process.
Communities need to be encouraged to come up with
ideas which will benefit the business and hence the economy. Fonterra aims to
sustain communities which have different ideas and initiative which will have a
great impact on their business. This fund is called the ‘Fonterra Grass Roots
Fund’ and they support over 1800 initiatives which will make a big difference
to New Zealand’s local communities (Fonterra
Dairy for Life, 2017).
Besides being health conscious, Fonterra provides
premium milk for all ages. The need to provide kids nutrition in their growth
years has helped Fonterra to identify the need of nutrition for kids. Fonterra
has come up with a program ‘Fonterra Milk for Schools’ which will encourage
kids to create healthy and lifelong habits. Primary school kids (Year 1– 6) are
qualified for this program and it covers more than 350,000 children in more
than 2,000 schools (Fonterra Milk for Schools, 2017).
Different interests of the society affect how
Fonterra understands its customers and what they do to satisfy their needs.
Dynamic wellbeing and health conscious consumers are progressively powerful in
reclassifying food culture. Fonterra offers premium and pure milk with high
nutritional value. Consumers consumption patterns are changing frequently as
they prefer healthy options. To meet the customers’ needs Fonterra needs to
carry out its research to come up with ways to improve the quality of milk with
higher nutritional levels.