Case Study On Dairy Industry Of Australia - Myasignmenthelp.Com

Question: Discuss About The Case Study On Dairy Industry Of Australia? Answer: Introduction: Business based on the dairy is one of the major and cost effective businesses in Australia. A certain percentage of economy of Australia is determined by the sale of dairy products (Regulations 2013). The dairy industry of Australia has marked its place in the competitive market in terms of global perspective. Dairy production in Australia has always been in the first position comparing to the other countries business in the same industry and certain portion of the world economy is depended on it. There are many other international competitor companies that has been a threat to the dairy companies of Australia after the beginning of the crisis. The dairy crisis of Australia has been making headlines for the news over the last one year in the international context. The crisis of the dairy industry began few years back with the initiation of the globalization. The production of the dairy products started to fall and in the last year. The production was the lowest comparing to the last twenty years of dairy production. As the result of the crisis the competition with the international companies has been remarkably increased and impacting the dairy companies of the country. The Background: The background of the crisis shows the injustice to the farmers by the dairy companies. It was in the end of April 2016, when one of the biggest milk processor of Australia, Murray Goulburn, reduces the price of the milk solids per kilogram, from $6 to $5 (Adams 2016). The reduction of the production cost of the milk set the stage of the crisis in the dairy industry in Australia. The whole incident suggests that he farmers had to face the loss as they were being paid less than their production cost (Becker 2017). In addition, the farmers also had to pay back the differences, approximately $200 million between around 2.500 farmers. There was no way the farmers could pay back the bills, But selling their cows to the slaughters. It was only the beginning of May 2016 that around 700 dairy cows were in the slaughterhouse, which means the production of the milk had been lessened (Abs.gov.au. 2017). Consequently, the production of the dairy products also had to face the crisis. Soon after t he announcement of the price cut off by the Murray Goulburn, the dairy firm of New Zealands biggest dairy company Fonterra also cut off their price even further, which resulted into the spread of the crisis throughout the nation (PIDDOCK 2017). The Crisis: The dairy crisis had affected the farmer of Australia mostly. Not only they were paid less according to their production cost, but also they had to sell their dairy cows, which were the main source of earning for them. The farmers were left with a huge number of debts by the announcement of the price cut off. For many farmers, it was the end of dairying. Apart from the farmers, the suppliers and the consumers of the dairy products are also facing the crisis (ABC News. 2017). It was not only the economical impact that affected the farmer and the farmers as well as the global trade, but also there is an emotional impact that affected the farmers deeply. The selling of the cows was not easy for the farmers, as they are into this profession for over the generation. The cut off by the two biggest dairy companies has not only made the country face the crisis over the dairy products, but also the same have impacted the national as well as the global economy. Both the domestic and the global economy have been affected by the dairy crisis. The two major dairy companies have shown their lack of understanding of the global economy based on the dairy industry by lower paying their farmers (Eastwood et al. 2016). The companies that the low price is the cause of the short-term oversupply from China and Russia blame it. The cost of the various dairy products has also been high due to the inadequate supply of the milk from the farmers. The price index fell 9.3 per cent, on the Global Dairy Trade, due to the crisis (Stojkov, Noy and Sa?lam 2016). Prices are found to be the lowest in the history of the trading. It was the result of the crisis that the production of the milk has been lessened, and consequently the dairy farmers warned the dairy companies that the Australia is in the verge of importing milk to fulfill the growing demand of the consumers. This further affected the economy of Australia. Moreover, the consumers would not agree to pay higher price for covering up the debts of the farmers. The break down was of the milk production was around 18 percent in terms of total volume, and as milk is the prime capital of the dairy products, the total dairy production had also been falling (Byrne 2016). The crisis in the dairy industry of Australia is setting the background for the external rivals entering the industry of the country. The customers of the dairy products are tending to depend on the external supplier to fulfill their demands (Ulubasoglu et al. 2016). The crisis had made the situation of the dairy industry in the verge of serious fall in terms of holding customers, supplying products according to the market demand and the maintaining the economical balance for the future profit. Consequently, the competition in the international market of dairy products has seemingly increased (Griffith and Watson 2016). It is the result of the crisis in the dairy industry of Australia that the traders of the dairy products were majorly affected and for not being able to fulfill the demand of their potential customers. In addition, the global dairy trading companies are taking the advantages of the condition in order to capture the Australian dairy market. Porters Five Forces effect on Australian dairy Industry: Porters five forces is one of the important and effective marketing tools to measure the competitive rivalry among the organizations belonging to the same industry (E. Dobbs 2014). Here, in this report the Porters Five Forces analysis have been used to identify the competitive business environment in the dairy industry of Australia due to the crisis. The analysis will provide a better and clear understanding of the dairy industry during the crisis period. This analytical framework is based on the five necessary components of the organization in the dairy industry to find out the external and internal capabilities and threats as the result of the crisis (Spicka 2013). The five components are as follows: Competitive rivalry within the industry: As the result of the crisis, the rivalry in the dairy industry has been remarkably increased. The companies selling the dairy products are competing with each other in order to hold their potential customers. All the leading companies in the dairy market including the Murray Goulburn and Fonterra are planning their strategies to accommodate with the current complex situations (TOM PULLAR-STRECKER 2017). In fact, the companies outside Australia are also taking advantages of the situation. Bargaining power of suppliers: The basic raw material of the dairy products is the milk and it is the farmers who are mostly affected by the crisis. Most of the farmers had sold their dairy cows to pay the debts from their production cost. Therefore, the supply of the milk has been lessened and accordingly the bargaining cost of the suppliers has been high. Hence, the bargaining power of the suppliers is high. Bargaining power of the customer: The bargaining power of the customer is accordingly low due to the inadequate supply of the dairy products. The demand of the customers is increasingly high comparing to the supply of the dairy products. As the result, the customers are ready to purchase the products irrespective of the cost of the same. Therefore, the bargaining power of the customer is low. Threats of new entries: The threats of the new entries are high since the dairy companies of Australia are presently incapable of fulfilling the growing demands of the customers (Ulubasoglu et al. 2016). The crisis has created the opportunities for the external companies to enter the dairy industry of Australia. Threats of substitutes: The threats of the substitutes is very low as the there is no actual substitutes for the dairy products. Numeric Table: The following numeric tables shows that difference in production cost and the selling cost of the daily products and the competitive position of the dairy companies belonging to Australia as well as international context. Company Revenue (billion) Production cost (billion) Murray Goulburn $5.39 $11.25 Tatura Milk Industries Ltd. $1.02 $0.55 Parmalat Australia Ltd. $0.93 $0.67 Figure 1: Table of production cost versus selling cost Figure 2: Competitive position of Australian and international companies Competitive Advantages and Disadvantages of Australian Dairy Products: As far the analytical study of the report shows that, the dairy industry of Australia has both the competitive advantages and disadvantages in terms of the production of the dairy products in Australia. The crisis in the dairy industry due to the lower production cost has limited the dairy companies to supply the products according to the demands of the consumers (Nguyen et al. 2016). The numeric table of the production versus selling cost shows that the production cost is higher than the selling cost, which is indeed the disadvantage for any business. In the market of fast and constant growing demand of the customers the companies need to higher the rate of their production, which is not possible for the due to the dairy crisis. However, this situation in other way can cause effective advantages for the Australian dairy companies. The companies can buy their raw materials from the international market, which will not only improve their product quality but also will be more consumabl e and demanding to the potential customers. In addition, the companies will be able to capture the new market of the new customers. However, there is a disadvantage too. The international companies from the same industry may disagree in providing raw materials to the Australian dairy companies. This is because it will be more profitable to the international companies to sale their finished dairy products to the potential and current customers of Australia. As the result of the lowers supply of the dairy products, the customers will grab the opportunities to taste the imported products irrespective of the price (Shadbolta and Apparao 2016). Moreover, the international companies will have a new global market. The above graph and the numeric table show the evidence of the sheer competitive disadvantages of the Australian dairy companies. However, the present situation provides the prime opportunities to the local existing companies to rebuild their marketing strategies in order to capture the market. Conclusions: The above report concludes that the crisis in the dairy industry has made the dairy companies to reach the verge of the extinction. The competition with the international firms producing the dairy products are rapidly and remarkably increasing and threatening to the potential Australian companies. The cutting off the purchasing cost of the raw materials from the farmers is the basis of the crisis resulting to the selling of the dairy cows by many farmers. The crisis had made a clear and broader context and background of the competition in the dairy industry with the global companies. From the analytical study of the Porters Five Forces as the measurement-marketing tool of the competitive framework of the industry, it is evident that the threats of the new entries in the dairy industry are high. However, there is no threat of the substitute products, but the competitive rivalry within the Australian companies as well as the international companies is prevalent. Numeric table and the g raph present the total cost (production and selling) and the competitive position of Australia in the global market of the dairy trade respectively are in the alarming position. The report presents the competitive advantages of the Australian dairy companies are low and threatening to the companies as well as to the entire nation: Reference: ABC News. 2017.Inside Australia's 'horrendous' dairy crisis. [online] Available at: https://www.abc.net.au/news/2016-08-15/dairy-farmers-forced-to-sell-up-in-face-of-plunging-milk-prices/7730638 [Accessed 26 Aug. 2017]. Abs.gov.au., 2017.1301.0 - Year Book Australia, 2004. [online] Available at: https://www.abs.gov.au/Ausstats/abs@.nsf/0/B006A83A9127B0F5CA256DEA00053965?Open [Accessed 26 Aug. 2017]. Adams, M.A., 2016. Contemporary case studies in corporate governance failures.Governance Directions,68(6), p.335.. Becker, J. 2017.Farmers do it tough as global dairy prices fall further. [online] ABC Rural. Available at: https://www.abc.net.au/news/rural/2015-08-05/milk-price-fall-global-dairy-trade/6673704 [Accessed 26 Aug. 2017]. Byrne, P.J., 2016. Crisis in dairy industry escalates to new level.News Weekly, (2979), p.5. 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