Strategic Management Capstone Ethical and Social Considerations

Question: Discuss about the Strategic Management Capstone. Answer: Introduction Dairy industry of Australia is one of the biggest in the world that contributes lot to the global dairy business. Australian dairy industry is dedicated to provide quality with competitive pricing to enhance the competitive advantage. Bulla dairy is one of the major players in the Australian dairy industry, which is quite capable to influence the overall dairy market. Australian Dairy market has lot of domestic and international players who are operating in a profitable manner. The dairy market includes lot of products like milk and milk associated products that are dependent directly on the milk production. Ice cream, cheese, yoghurt like products are therefore influenced by the production of milk, which regulates the pricing and quality (David David, 2016). The report is focused on the several strategic aspects of the organization that is important for the business. Several strategic issues are identified within the organization that hinder the growth of the organization and need to solve in an urgent basis. While identifying the strategic issues of the organization the report also focus on the strength and limitations of the organization. This report focuses on building awareness of about ethical and social considerations to become more relevant in the global context. To understand the above aspects of the organization this report has emphasized on several theories, concepts and models like value chain analysis, PESTLE analysis, SWOT analysis, VIRO analysis and Porters five force model that will help to diagnose the actual problem and find out solutions for them. Analyzing the organizational issues and several theories suitable recommendations are provided to improve the current performance of the organization. Background of the Organization Bulla dairy is one of those companies that are 100% owned by the Australian families by last 100 years. The company is operating their business in the dairy segment that includes manufacturing of ice cream, cottage cheese, yogurt, sour cream, table cream and imitation cream under various brands that are marketed in the global market. The business of Bulla Dairy was established in the year of 1910 that successively became a partnership business among three Australian families. Bulla Dairy acquired two companies Colac Ice Works and Regal Cream in 1930 and emphasized to expand their business in the global market. The company has greater acceptance in the Australian market however; they are not able to get success in the global market and expand their business ("Bulla, made with care and shared with love | Bulla Dairy Foods", 2016). The business objective of the company is to provide quality product to their customer that also concern about the health and wellbeing. Apart from that, the company is supporting the dairy farmers so that they provide better raw materials to the organization that will ultimately help to produce quality product for the customers. Apart from manufacturing of dairy products, the company also markets their product directly in the market and through wholesaler and franchise business. The unique marketing strategy of the company is associated with emotion of the 100% Australian owned therefore they are not able to expand their business in the global market. Because of that, the growth of the organization has become very slow because Australian market is already saturated and many competitors are present in the limited area (Hill, Jones Schilling, 2014). Strategic Issues of the Organization Operating a business in any segment will always have some issues regarding many aspects and Bulla Dairy is not any exception to that. Bulla Dairy also has lot of strategic issues in their organization that are hindering their business process that are discussed below. The first issue of the organization is the procurement of the raw materials from their supplier. The company is highly concerned with the quality of their product and they face several challenges to that. Different supplier provide different standard of products to the company and they have to evaluate the standards each time they procure their products (Hitt, Ireland Hoskisson, 2012). This type of operation in procurement involves wastage of time and affects the manufacturing process. Production becomes slow that directly affects the profitability of the organization. The second issue of the organization is the marketing of their products that is highly associated with the Australian sentiment. Due to the single direction of the marketing strategy, the company is unable to make business in the international market. Bulla Dairy also lacks to decide the target market in the global scenario. The third issue of the company is to create the competitive advantage as compared to their customer. The company is operating in a saturated market where many global brands are also competing therefore it is becoming difficult for them create a price advantage or process advantage (Cloutier, LeBaron Whittington, 2015). The forth strategic issue of the organization is the distribution system. The company has their own distribution system, which is not able to supply products in every corner of the country. Therefore, Bulla Dairy is depending on the third party logistics to make their product available. The company is unable to arrange the logistic plan because of area allocation problem. The fifth issue of the organization is the low productivity due to lack of capacity utilization. Due to the low productivity, the organization is losing the profitability as well as the market share, which is a threat to the business. Value Chain Analysis Figure 1: Value chain analysis of Bulla Dairy (Source: Siegel, 2015) Primary activity Value chain analysis of Bulla dairy is associated with the business performance of the organization at current situation that signifies the market situation also. The value chain analysis is mainly supported by two major activities. The first one is the primary activity and the second one is the support activity that determines the profitability of the organization. Support activity Support activity is the several operational and technical activities that the firm generally do to improve their performance. Infrastructure of the firm Bulla Dairy is one of the oldest organizations that is operating their business from last 100 years. Therefore, from longtime the company has built their infrastructure that is quite good in these days. The company has two factory for production and own logistics facility to distribute their product to the market (Petroni, Venturini Verbano, 2012). Human resource of the firm Three Australian families who are dedicated to their business own the Company. Apart from that, the company recruit good and young talent from the local market therefore they provide lot of support to the business in terms of operation as well as from the awareness. Bulla Dairy values their employees properly and they try to enhance the employee retention to enhance the profitability of the organization. Technology development Bulla dairy has developed their business through the proper implementation of technology. The company has enabled the boiler and other process to achieve the automation as much as possible to ensure the continuous production performance in any condition. Lot of effort has been putted to production line to enhance the manufacturing process (Jenkins et al., 2015). Procurement The Company is facing one issue with the raw material procurement, which is very serious now. The procurement process involves the standard monitoring process to maintain the quality, which incurs lot of time and slows the production process. Primary activity Primary activity of the organization is associated with the basic and mandatory activities for the business. The company never compromise with the product quality and they try to sustain their business through this. Some of the primary activity of the organization is facing some issues that which is evident in the value chain analysis. Inbound logistics Inbound logistics of the organization is associated with the issues like slow process due to quality check during the procurement process. Most of the raw materials are standardized so that lesser time is expected to take. Operations Every department of the company is working well because of the smooth process between the departments. The delay of the process only happens due to the procurement issue otherwise every department performs well (Starik, Kanashiro, 2013). Outbound logistics Outbound logistics are the part of the business. the company has several trucks for the outbound logistics and they found it difficult to supply every corner of the country. The company has taken an initiative to improve the distribution system by involving third party logistics. Marketing and sales Marketing and sale of the company is not up to the mark because they are not adopting the current trend of the market. The company is selling only with the Australian sentiment, which is inhibiting the growth in the global market (Hair et al., 2012). Services The local customers are getting the service through the direct store and through mall. The mobile van of the company also sells their product in different parts of Australia however; the company has little concern to provide benefit to the global customers. Due to huge competition in the market Bulla dairy is not able to increase the cost therefore the profit margin on every product is very low (Ayag, Samanlioglu Bykzkan, 2013). Analysis of the Organization Pestle PESTLE Analysis Political The political environment of the business in Australia is good therefore; the company is able to operate their business with a sustainable manner. The international market does not have the same stability. However, Bulla dairy has to choose those countries for their business where political stability is better (Glover et al., 2014). Economical The economic environment of business is moderate in Australia. The economy of the country is stable and improving in terms of gross domestic product. The incidence of recession has affected the country badly however Australia has a great tourism market that ensure the business for Bulla Dairy. Social Social and cultural aspect is highly motivating for the business because Australians are very cooperative and support good activities. The international market has the diversity though it will support the business of Bulla Dairy. Technological The company has implemented various modern technologies in their manufacturing unit to enhance the quality and productivity. The automated machine of boiling and mixing has increased the speed of the production line. The company is also trying to reduce the procurement time through better technology (Henderson, Cheney Weaver, 2015). Legal Bulla Dairy is operating their business in a sustainable manner, which has helped them to operate their business in a legal way. Environmental Environmental factor has lot of impact on the Dairy business that directly affects the milk production. Several diseases inhibit the milk production and company has to bare the loss. Bulla Dairy is operating several animal health activities to increase awareness among the farmers. The company is also emphasizing to reduce the carbon footprint in their production process. Figure 2: PESTLE analysis of Bulla Dairy to (Source: Created by author) SWOT SWOT analysis Strength Bulla Dairy is one of the most renowned companies in the dairy industry who are operating their business for long time. Huge product range has enabled to grab good number of market share. 100% Australian owned company is the positioning statement that has helped to attached with the emotion of every Australian to prefer their brand. The company has highly skilled work force that has enabled them to produce quality product (Buys et al., 2014). Technology implementation has reduced the labour cost. Company owned distribution and sales network is the advantage for business. Weakness The company is restricted within the Australian region therefore international market remains unexplored. The market has become very competitive where most of the international brands are presence to make profit. The brand portfolio of the company is low and they do not have any diversified product. Opportunity Huge global market remain unexplored that can be tapped easily to increase the business. Economic stability has helped to increase the income level in a constant manner that has increased the buyer purchasing capacity (McDonald et al., 2014). Threat Cattle disease is the biggest threat for the company, which will cut the milk supply. Increased cost of production is a threat to the market competition. Technological problem can also inhibit the business productivity. Figure 3: SWOT analysis of Bulla Dairy (Source: Created by author) Five Force Model Figure 4: Porter's five-force model analysis to understand the strategic issues of Bulla Dairy (Source: Siegel, 2015) Threat of new Entry The dairy market is highly saturated in Australia however global market provides lot of opportunity in this business. The threat of new entrant in the market is moderate in the domestic market due to low profit margin. The segment also requires lot of knowledge and technology advancement to produce good quality product. Therefore, it is not easy to compete in this segment, which restricts the flow of new entrants (Wilhelm et al., 2016). Buyer power Buyer power is high because many options are available to them. Many companies are providing the similar product with similar quality and similar price. Therefore, company ahs to ensure that their products are available in the market to restrict substitutions (Klerkx Nettle, 2013). Threat of substitution The dairy market has become saturated in Australia and many global and local companies are operating their business with similar products. To get the competitive advantage most of the companies reduce their price therefore threat of substitution is very high in the market. Supplier power The cattle farming is good business in Australia therefore many milk supplier is available in the market however standard is not equal. The quality supplier is less and they charge high price. The capacity of the supplier is also good therefore need of multiple suppliers is also less (Gollnow et al., 2014). Since there is less number of quality suppliers, therefore the company has less option that restricts supplier substitution. The power of supplier is very high in terms of quality. Competitive rivalry The number of competitors in the market is high therefore, company is not able to increase the price. In terms of quality, most of the companies are in the same position and customers understand that. Cost differentiation becomes difficult because of the competitive pricing and low profit. Analysis of the Strategic Issues VIRO Analysis VIRO analysis Value Bulla dairy manufacture products in their own factory, which always look for quality product and then supply through their own logistics to ensure availability that creates a high value for their products to their customers. Imitation The products are easily imitable and any other company can make similar products for their customers. Most of the popular flavors are copied by the competitors and produce similar effect in the market. Rare The range of products they produce is high and many rare products are available which is rarely available to the competitors. Organization All the factories of the company is in the same location and run by the same management. Therefore, uniformity is maintained in the organization. The sales and marketing is also operated under the same corporate office, which helped to reduce the strategic issues at the early stage. Figure 5: VIRO analysis of Bulla Dairy (Source: Grunert Traill, 2012) Recommendations Bulla dairy has to change their system of procurement to maintain the speed of production. Company can easily set a unit, which will be responsible to check the standard in the suppliers premises therefore the quality checking process will become faster. The marketing of the company should change the tag line to attract more number of global customers. The marketing should meet the local requirement whereas standard will remain according to the global standard. The company is not able to increase the productivity according to the industry standard. Apart from that, the cost of production is also high. The involvement of technology and increased productivity will help the company to increase the competitive advantage in the market. Bulla dairy should do the entire distribution through third party that will reduce the cost of transportation as well as few functional departments, which will enhance the productivity. The increased responsibility on each employee will help to utilize the resources properly to increase productivity. Conclusion Bulla Dairy is operating their business for long time in the market, which has developed many strategic issues within the organization. The overall analysis of the business is good and they operate in a stable environment and economy where competition is also high. Most of the time the company face the cost advantage problem whereas international brands are gaining profit. The company also has problem in their operational activity. The improvement in the procurement regarding quality check is very important. The process is becoming slower due to delay in quality checking. The report suggests finishing this process in the supplier premises that will save the time in the factory. The other issue of the company is the distribution that needs to be done through third party to gain the cost advantage over the competitors. The repost also emphasize on the business environment where buyers power is very high because of several competitors available in the market. In spite of several issues in the organization, Bulla Dairy is operating good business that can be improved in future. References Aya, Z., Samanlioglu, F., Bykzkan, G. (2013). A fuzzy QFD approach to determine supply chain management strategies in the dairy industry.Journal of Intelligent Manufacturing,24(6), 1111-1122. Bulla, made with care and shared with love | Bulla Dairy Foods. (2016).Bulla.com.au. Retrieved 8 July 2016, from https://www.bulla.com.au/ Buys, L., Mengersen, K., Johnson, S., van Buuren, N., Chauvin, A. (2014). 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