BUSM3200 Strategic Management Is An Essay.

Bellamy’s organic is Tasmania based organic food company established in Australia in 2003 as first Australian certified organic baby food. The Australian market recognizes it as largest organic formula and Baby Food Company. The image inserted below shows strategic growth of Bellamy in Australia in last 13 years. Bellamy’s organic market is expanded throughout Australia, South East Asia and China. Analysis of baby food market shows that in 2014 it was valued around $50.7 billion and expected to be increased up to $72.7 billion by 2020 (Bentley 2014). Rapid growth of organic food market is the result of consumers’ preference for organic food, in Asian countries also there is a huge demand for safe, high quality Australian organic food.

(Bellamy Operating for 13 Years Image-1) (Source)

Demand of packed and organic food for babies is increasing in different societies and cultures because of changes in life style and growth of urbanization. To meet the demand of the consumers Bellamy has introduced more than 40 products for babies from birth to three years. Bellamy as a premium quality organic food company, select only finest and certified ingredient as well as certified manufacturers (Brantsæter et al. 2017)  The company is producing two infant formula and one toddler milk product, which is suitable for the babies from birth up to three years of age. It is interesting to know that two varieties of each product is manufactured one for Australian and export market and other is specially designed to meet requirements of Chinese nutrition and regulations. Moreover to meet the demand of Asian babies Bellamy has introduced ‘Aussie baby’ it will work as a major step and marketing strategy to have strong hold and  increase its profit in the Asian market (Dunford et al. 2015).

Bellamy’s Organic was originally founded in 2004 by a Tasmanian family, as they wanted to arrange for a convenient and nutritious food choice for their children. They founded the company keeping in mind that everything they produced was to be organic and completely safe for babies. Its parent company is Bellamy’s Australia, who had taken over the family-run business in 2007.

Bellamy has been labeled as a ‘premium’ baby food brand within the domestic market, and its market share is over 14 per cent in the country. It has a well-established market in Australia, with its products being sold in more than three thousand stores all over the country. They are also involved in exporting a major part of their products to China and other Asian countries, where its revenue growth has been as high as 900 per cent (Dagevos 2016).

The macro environment aspects are those which are situated outside the industry. They are also known as PEST framework, which classifies environmental influences into four types- Political, economic, social and technological.

Political: The political factors such as free trade regulations have helped in the growth of Bellamy’s organic (Henryks, Cooksey and Wright 2014). The improved trade relation between Australia and the Asian countries, especially China and Singapore, ensures that they have a good stronghold in those international markets.

Economic: The government in Australia is constantly working to improve the stability of the working class people, and this has an influence on the inflation and taxation rates of the country. The increasing labour costs will also lead to the increment of the final costs or the selling price of Bellamy’s products (Illukpitiya and Khanal 2016).

Social: The social factors are perhaps the most important when it comes to any organic food industry. Their attitude towards a food product depends on many factors, including their ethnicity, cultural backgrounds and consciousness about the health issues. The growing concern among the people for their infants is something that has contributed to the growth of Bellamy’s organic. The food that they have developed is specially designed to meet the requirements of the babies, and thus they have become a popular choice among the people, especially those who are from the working classes.

Technological: Technology is an important factor in gaining advantage over the market in this era of globalisation. They have a very successful online sales strategy, and their products are sold over three thousand outlets in the whole of Australia, including the Coles and Woolsworth stores. They also have an online portal for retailing their products, and have the facility of delivering the products to their buyer’s homes (McCarthy, Liu and Chen 2014).

From the political point of view, the changing regulations pertaining to food standards and marketing strategies, along with the renewed stability of the government is an important factor for the market share of Bellamy’s organic. The awareness on the inflation rates, along with the level of income of the families are the factors that the company needs to keep in mind. They also need to source their raw materials from reliable suppliers with respect to their rising costs. The added awareness and concern on the nutritional needs of the babies, with an increase in the number of working women all influence the market trends for Bellamy’s organic (culturalsurvival.org, 2017). The factors that can restrain its growth would be the initiatives by the government to breastfeed the babies and to promote home-cooked food. However, as the number of women in Australia who are engaging in professional fields is increasing with every passing day, the need for baby formula is also experiencing a sharp upward growth.

Bellamy’s organic is a very well known brand in baby food industry; brand is a factor which has great impact on both head and heart. Overall, organic food industries are flourishing now a day because people are more concerned about their health, because they have already experienced the impact of chemicals and contaminated foods on their health (Osei 2014). Growth of urbanization and busy lifestyle are not allowing people to follow the traditional food for babies, they think that organic based food products will be more beneficial for their babies to grow and be healthy, because it will provide them complete and full nutrition. Original and Organic products, Bellamy’s products are purely organic; they claim that their products have no brand dilution conventional and only finest organic ingredients are used. Deep Distribution, Bellamy has around 4,000 distribution points across Australia; this makes them available to multiple consumers at their choice of retail outlet (Paull 2014). The large number of distributors creates strong producer and distributor partnerships. Bellamy has developed a global market through online direct delivery. 

(Bellamy’s Share in Formula Market Image-2)

(Source: bellamysorganic.com.au, 2017) 

The above chart shows the growth of Bellamy’s organic in Australian International Monetary Fund (IMF) Market. The Bellamy’s organic has designed a business model in such a way that benefits all the stakeholders equally.

Customers: customers are the most important stakeholder in any industry to survive and flourish. The customer satisfaction is provided through high quality infant formula and baby food. Organic food is a differentiated offering by the company fulfilling its social responsibility and sustainable growth.

Partners: the company is able to develop strong relationship with the suppliers. Bellamy believes in the formula that ensures supplier growth as Bellamy’s growth. Tatura Milk Industry (TMI) is Bellamy’s core manufacturing partner in Australia. They are working as partners since 2006; Bellamy is third largest customer of TMI (dairyaustralia.com.au, 2017). Blend and Pack is Melbourne company main packers of Bellamy. To support its future growth the company is constantly working to build relationships with suppliers in Australia as well as globally (Seufert, Ramankutty and Mayerhofer 2017).

Investors: The Bellamy’s organic provides extensive opportunity of growth to its investors. With high scale and leading market position it offers attractive risk return to its investors.

(Birth Rate in Australia Image-1)

(Source: annualreports.com 2017) 

The above birth rate map of Australia shows that both the birth rate and consumption of infant formula is stable in Australia. Hence, it can be seen that Bellamy’s organic has an extensive opportunity of growth not only in Australian market but throughout the world.

Major threats to Bellamy’s organic in Australia are:

Potential loss of organic certification- 100 per cent organic status is the trade mark of the company, in case of quality control issue and non satisfaction of certifying bodies, organic certification may be lost (agriculture.gov.au, 2017).

Competitive Environment- booming of the organic industry is creating competitive market. Some of the major competitors are- Nestle, Danone, Mead Johnston etc. the competitive pressure will be increased if these companies introduce similar products and it has to struggle to maintain its financial performance (Suh, Eves and Lumbers 2015).

Range of Laws and Regulations- the company needs to comply with range of laws and regulations like- fair-trading and consumer protection, employment, property and environment, taxation, tariffs, customs, food standard etc. if there is any regulatory change may affect its revenue generation and increase product costs.

Shortage of Raw Material Supply- Bellamy’s does not own any farm; rather it maintains its organic status by strictly controlling its supply chain. With rapid growth in demand of organic products and instability of environmental factors a sudden supply shortage may occur. The supply shortage or supply limitation may adversely affect Bellamy’s financial prospects (Paull 2014).

Rising Input Costs- there is a certain chances that the input cost of Bellamy’s will significantly increase because of extreme weather conditions in the agricultural producing region in Australia.

Bellamy’s Organic is number one baby food company in Australia, which is providing a wide range of products for new born babies up to age of three years and later on. It is only company in Australia which is able to grab the certification of 100 per cent organic products. Here is Porter’s five forces analysis of Bellamy’s Organic, which helps to understand the competitiveness of the company.

Baby food industry is the fastest growing industry in and around the world. With the changing lifestyle and increase in number of working women is working as a catalyst to increase the demand of baby food products in Australia. Bellamy’s baby food is very popular and accepted and trusted brand by Australian mothers. The new entrants find baby food industry in Australia quite attractive. But they have to fight the already existing brands available in the market like Bellamy’s organic and Nestle to get reasonable amount of share in the market. More over the government policies, access to supply and distribution, retaliation from Organizations already in the market make difficult for the new entrants to enter the market (Suh, Eves and Lumbers 2015). It is very much essential for the new entrants to get the approval of FDA, works as discouraging factor.

With the growing demand of organic baby food in Australia there are numbers of companies manufacturing similar products that can substitute the products of Bellamy’s Organic. However, there are companies which are gaining a steady market in the recent years, especially Bubs and Holle, with their ‘premium’ range of organic baby food products. Therefore Bellamy has to be innovative in products to increase customer satisfaction as well as preventing them from going to substitution of their products. (Zainuddin and Mercer 2014).

The customers have access wide range of baby food products available in Australian market increases their bargaining power. Moreover, it is very well known that bargaining power of buyer increases when- buyers are concentrated, when they have low switching costs, and they can provide their own inputs. In Australia, approximately 70 per cent of Bellamy’s organic revenue is generated from large customers. Any change in the behaviour of these large customers may significantly reduce sales of its products. Therefore, Bellamy has to satisfy the demand and needs of the customers to counter their bargaining power.

All of the Bellamy’s products are manufactured from agricultural and dairy raw materials. It is well known that growth of any organization is very much influenced by the bargaining power of suppliers. The bargaining power of the supplier increases when they are concentrated, and provide special or rare input, and most importantly when the switching costs to another supplier are high. In case of Bellamy’s organic, the bargaining power of suppliers can be high because the company does not own any farm, and to maintain its certified status it has to depend completely on its suppliers. With the growing demands of organic produce and instability in the environmental factors, influencing organic goods production may lead to sudden shortage in raw material supply. This shortage of organic goods/raw material will increase the bargaining capacity of the suppliers but increase the price of goods also (Smith, Galtry and Salmon 2014). Therefore, Bellamy needs to have sufficient number of suppliers to get high quality raw material so that it can manufacture high quality products; at the same time it needs to take efforts to retain its best and reliable suppliers like Tatura Milk Industry (TMI).

Bellamy’s organic is able to gain the leading position in Australian baby food market, still there are many competitors working in the same industry like- Organic Baby, Plum Organics, Nestle, Little Ducks Organics, Oh Baby Foods. This tough competition is actually healthy because the customers get best quality products in best price. Bellamy is able to maintain high its high quality 100 percent organic baby food products to satisfy the need of mother in and around Australia (Rödiger and Hamm 2015).

The above-mentioned Porter’s five forces analysis helps to understand and identify the attractiveness of organic baby food industries in Australia. Health consciousness, changing life style is resulting into expansion of organic food industries. According to Porter’s five point analysis Bellamy is an undisputed leading company in Australia, specialist in the field of organic baby food products. Limited availability of organic goods, limited suppliers and consumers trust in Bellamy’s products for being 100 percent organic is building a huge barrier for new entrants. These five forces may have different implications on different organizations (Liu, Salamova and Hites 2014).  Large firm are able to deal with barriers more easily than small one.

All the forces mentioned above are very much interconnected because the power of buyers is dependent on number of available competitors and new entrants. On the other hand, the power of suppliers or distributors are majorly dependent on the demand of the products, range of products and availability or scarcity of raw materials. Moreover, the new companies can only enter the market if the consumers are open to try newer brands and if they are able to give attractive incentives in terms of high quality and low price (Liu, Salamova and Hites 2014). When it comes to the threat of substitution, Bellamy’s organic in Australia has earned people’s trust in the company as 100 per cent organic certified product for their babies. In case of competitive rivalry, it can be said that there are a number of other organic baby food companies, but Bellamy’s organic has been able to get the leading position in Australian market because of the consumers’ trust in their products.

The macro environmental factors combined with competitive forces and their overall impact on the industry in general and Bellamy’s organic in particular are the main driving forces in the competitive market. Therefore, the analysis gives a positive sign of growth of Bellamy’s organic in baby food industry in Australia.

The VRIO analysis tool was developed by Barney (1991) in his famous work ‘Firm Resources and Sustained Competitive Advantage’. In his work the author has mentioned four attributes must be possessed by resources to get competitive advantage. The four attributes of resources are- value of resources, rare quality of resources, imperfectly imitable and non-substitutable. Here, as far as Bellamy’s organic resources are concerned they perfectly fit into the VRIO criteria. Firstly, Bellamy’s resources are organic, and value of organic resources is increasing every day. Secondly, its organic resources are rare because it cannot be produced anywhere and their production is very much influenced by the environmental instability, which makes them rare. The organic resources cannot be substituted perfectly, and hence cannot be substituted easily (foodstandards.gov.au 2017). Finally, it can be said that the resources and competences f the company can be regarded as its strategic capabilities.

Bellamy’s organic is the number one organic baby food brand in Australia. The company is able to maintain 100 percent organic certification with 100 per cent Australian. Bellamy is the only company in Australia offering range of infant organic baby food products. Organic products are the fastest growing industry around the world. The baby food industry is considered as one of the stable industry not getting much affected by change in economic conditions of the country, because people child related products gets high priority irrespective of financial position. As far as PESTEL analysis of the company in Australian market is concerned, it is seen that macro environment is providing favourable condition for the growth of the company. The political, economic, social, technological, environmental as well as legal factors are allowing the company to grow at fastest rate. Because of on an average demand of organic products has been increased up to 10-15 per cent. Again, Porter’s five forces analysis helps to understand and identify the attractiveness of organic baby food industries in Australia. The five challenging factors that is competitive rivalry-no equal competitor is there in the market, supplier power- having long term and deep relationship with the suppliers, buyer power- able to maintain brand name and people trust. Threat of substitution the range and quality of the product is not easily substituted. Entry of new similar product company is not very easy because of limited availability of raw materials, their cost, marketing and other expenses. After the overall discussion, it can be said that Bellamy has a great future in the Australian organic food market.

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