Evaluate the suitability of your strategic initiative through referring to the findings of your assignment 1, particularly the external environment of a2 Milk, and its strategic capabilities and current business strategy as identified in this assignment.
Suitability, Feasibility, and Acceptability of Business Strategies
The evaluation of business strategies includes three phases, suitability, feasibility and acceptability. For the test of suitability, a question needs to be answered, which is the alignment of the strategy with external environment. The alignment could be understood by the results of external analysis in which the business is operating and internal analysis for the balance with the organization requirements. In the case of a2 Milk Company, the suitability of the strategy initiative will be assessed in regards with the findings from the external analysis. The new strategy, which is being recommended for the a2 Milk Company, is new product development and market expansion strategy. The strategic initiative recommendation of a2 Milk Company will be analysed by using the SAFE framework.
Industry life cycle portrays few stages indicating the position of the business. It depicts where the business functions, grow and collapse in the industry. The stages are introduction, growth, shakeout, maturity and decline. The business can be considered in the shakeout stage as a2 Milk Company is the leader in the segment of products of a2 milk. According to the industry analysis, it can be deduced that the entry barriers in the industry is moderate as the one of the most important determinants, cost of initial investment is low in the case of dairy companies. However, the presence of legal and environmental obligations as well as the standards of food securities contributes to the complexity for the entrants (Steyerberg and Harrell 2016). Buyer power in this industry is higher because of the increasing competition in the Australian market (Banerjee 2018). The supplier power is low because of the presence of large numbers of suppliers in the dairy industry. A2 Milk Company have a strong base of supply chain, which facilitates the efficient distribution of the milk, and milk products (Esty and Fisher 2019). The threat for substitutes is high as with the increasing technological advancement in Australia, big brands as Nestle, Lion Dairy & Drinks and Bellamy’s Organic can easily introduced the products with a2 milk nutrients. Moreover, the availability of options in the dairy industry is endless which marks the need for the a2 Milk Company for incorporating continuous improvement process. The company is the first mover for identifying and introducing the benefits of the a2 milk products but the company needs to utilize its product technology into the extension of their product portfolio. The strategic recommendation is to implement market development strategies by expanding its business geographically and through introduction of new product.
The Proposed Strategy for a2 Milk Company
The new target segment for the product can be concentrated to the infants (age- demographic segmentation) with deficiency of nutritional consumption or suffers from conditions, which marks the need for the benefits of a2 milk (Bodnár et al. 2018). The company can expand its business globally by setting the well-planned supply chain in each state of the neighbouring counties. The company can utilize the benefits from its financial backing in facilitating the expansion plan. With the product development and market extension strategy the company will be able to respond to the increasing competition in the market (Nystrom and Winston 2016). The need for the new strategic implication can be reflected by the presence of highly competitive market in the dairy industry and the presence of local brands. Low cost investment requirement is also a threatening factor for the company as it allows new brands in the market with different offerings as well as unique marketing communication strategies. According to the PESTEL analysis of the Australian macro environment, it can be observed that Australia depicts a moderate rate of employment (Mallawaarachchi et al. 2017). This can be used as an opportunity for bringing positive change in the employment rate and to facilitate the implementation of product development and market expansion strategy. The expanded work force can help with improvement of production efficiency. The external analysis reflected the positive effect of social environment on the business opportunities of a2 Milk Company. With the increasing rate of migrants and diversity in the Australian population, the opportunity for acceptability of new valuable products is increasing. The diverse population presents a chance for a2 Milk Company to introduce the new strategy in their business portfolio.
The risk associated with the new strategy of expanding the business into newer market or regions can be proved unsuccessful in regards with the acceptability of the highly priced milk and milk products by consumer segments. The company will be exposed to a different set of competitors in the process of introducing the brand in newer markets. The brand will be experiencing moderate level of risk for the strategy of expansion. This risk can be addressed by introducing the product in neighbouring regions as the chances of acceptability or word mouth advertisement will be higher in this case. For the strategic initiate of new product development of the company, the risks can involve the concern of the mothers in replacing breast milk to the new a2 infant formula but the risk is very low. This risk can be mitigated as the company have positioned itself by a product, which can address nutritional deficits, and the infant formula can be positioned as a value product, which can be used for infant with conditions like autoimmune disease or if the mother cannot or have decided to stop breastfeeding (Banerjee 2018). However, even if the company can implement the strategy for expansion in newer regions successfully then it can focus on the new product development strategy for expanding the current market. The technological incorporation in the production of the products is tough to copy but not impossible for other big brands with the budget in Research and Development. The high level of buyer power for this industry would require the company to focus on different positioning approaches for targeting foreign markets like positioning by attributes (the product attributes are the differentiating factor of the brand) and positioning by competitors by depicting a differentiating factor.
External Analysis of the Dairy Industry in Australia
The analysis, which is used in determining the likelihood and ability of a specific strategy in business operation. It must be assessed by under the light of various factors like financial factors, human resources, communication as well as technological factor for understanding the feasibility of the new strategy. Available and potential financial, people, communication and technological resources of the company can test the feasibility of the new recommended strategy for the a2 Milk Company, which is product extension as well as market expansion.
The company have a strong financial backing, which can be used to take the risk of expanding the business into foreign markets. The financial capability of a2 Milk Company will also allow the product development strategy of the business (thea2milkcompany.com 2019). Moreover, the tax rate of Australia is not very high and loans can be easily organized for new business development and especially for an established reputed company like this.
The company have a strong supply chain structure with the availability of skilled work force, which enables the quality maintenance of the a2 milk and milk products (thea2milkcompany.com 2019). Moreover, with the increase with the scope of recruitment for responding to the moderate rate of employment in Australia, the company will get an opportunity to implement the strategies effectively and efficiently.
A2 Milk Company reflects the availability of technologically advanced system. The product technology of the company can be utilized for the production of new formula for infants (Jianqin et al. 2015). The new technology can also be used as medium for increasing the productivity of the company.
A2 Milk Company have the capability of using communication tool effectively and efficiently which can be reflected from its unique communication message utilized in advertisements. The company also have a strong social media presence (thea2milkcompany.com 2019). Advertisements and social media marketing tools, which are used at present, can be used for creating awareness of new product development and geographic expansion.
Therefore, after the analysis, it can be concluded that the new strategy recommendation of the company is both suitable and feasible with the presence of resources and competencies of the business.
Banerjee, S., 2018. A2 Milk: The Unknown Story About a Milk Protein. Acta Scientific Nutritional Health, 2, pp.28-31.
Bodnár, Á., Hajzsér, A., Egerszegi, I., Póti, P., Kuchtik, J. and Pajor, F., 2018. A2 milk and its importance in dairy production and global market. Animal Welfare, Etológia és Tartástechnológia, 14(1), pp.1-7.
Esty, B. and Fisher, D., 2019. The a2 Milk Company. HBS Strategy Case, (719-424).
Jianqin, S., Leiming, X., Lu, X., Yelland, G.W., Ni, J. and Clarke, A.J., 2015. Effects of milk containing only A2 beta casein versus milk containing both A1 and A2 beta casein proteins on gastrointestinal physiology, symptoms of discomfort, and cognitive behavior of people with self-reported intolerance to traditional cows’ milk. Nutrition journal, 15(1), p.35.
Mallawaarachchi, T., Nauges, C., Sanders, O. and Quiggin, J., 2017. State?contingent analysis of farmers’ response to weather variability: irrigated dairy farming in the Murray Valley, Australia. Australian Journal of Agricultural and Resource Economics, 61(1), pp.36-55.
Nystrom, J. and Winston, D.R., 2016. A2 milk marketing and human health. Journal of Animal Science, 94, pp.18-18.
Steyerberg, E.W. and Harrell, F.E., 2016. Prediction models need appropriate internal, internal–external, and external validation. Journal of clinical epidemiology, 69, pp.245-247.
thea2milkcompany.com (2019). The a2 Milk Company. The a2 Milk Company. [online] Available at: https://thea2milkcompany.com/ [Accessed 26 Mar. 2019]
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