Perform an analysis of the External environments of the business
One of the top six dairy organizations in the globe, Fonterra is the leader in many of the markets. The primary mission and the vision of the company are to lead in the dairy products and sell the milk of the shareholder of the company (Pham Duy & Chau, 2015). The competitive strategies among the global dairy industry are actually being driven by number of complex situational factors. These include the consolidation of the base of the customer, the protectionism and liberalization of trade and the increased requirement for the environmental and the customer awareness.
There have been some of the significant barriers towards the entry of the dairy of the industry. These include trade/political barriers, sale economies, access towards the distribution of the networks, distance and the access to supplies.
The analysis of the environment of the business of the famous dairy company, Fonterra can be done by PESTEL analysis for the analysis of the macro environment of the organization.
PESTEL analysis of the dairy company provides a detailed summary of the challenges and the weakness the company has which is prevalent in the macro environment.
Political Factors – The political factors of the company includes trade barriers and the context of protectionism that furthermore includes labeling, trademarks and arguments related to bio diversity. Some of the other factors furthermore include free trade arrangements and negotiation and deregulations of the dairy market (Dooley et al., 2017). Furthermore political stability and the essentiality of the food sector towards the economy of the New Zealand contribute to the political factor that tends to affect the organization.
Economic Factors – Macro economic factors including the rate of inflation, the savings rate, the rate of foreign exchange and the economic cycle denotes the aggregate investment and demand in the economy of the country. Factors such as the unemployment rate, educational level of the company, labour costs and the rate of the productivity of the company furthermore contribute to the effect to the dairy company.
Social Factors – Some of the social factors contributing to the business of the dairy company, Fonterra is the increasing demand of the market of the consumer and the growth of the standards of labeling (Ngo, 2018). Factors such as growth in nutrition and bio markets together with the cultural differences in the perception of milk are some of the social factors.
Technological Factors – Stocks for feed for reduced emissions and great productivity together with the advanced ingredients and the reduction of the bi products and the consumption of the energy during the process contributes to the technological factors of Fonterra
Legal Factors – The threats in connection to the legal challenges in the grounds of the environment or the health together with the commissions of the anti-competition that allows in increased environmental regulations are some of the legal factors of Fonterra.
Environmental Factors - Environmental factors include unpredictability of the climate, the issues relating to GM and bio diversity. Furthermore seasonal nature regarding the milk supply and intergenerational sustainability of the dairy farming of Fonterra contributes to the environmental factors.
2. For the chosen organization,
a) Identify its organizational culture
The culture serves as the king over the strategy for the dairy company, Fonterra. The culture among the organization and among the operational workers is generally challenging as well as fun loving providing an essential sense of respecting and motivating each other (Dooley et al., 2017). For being the globes’ most trusted source of the dairy nutrition, Fonterra’s set of aims and values forms the basis of the culture.
b) Explain how this culture is shown in the organization
The code of the business and the organization’s culture helps the employees in the organization to make the correct decision at their employment. The culture reflects their values outlining the expected nature and conduct and helps in translating the commitments of the company into actions
c) Discuss how employees can learn the culture of an organization
The employees of the company get ample opportunity to develop their set of values related to the culture of the organization. This is because the shared values of Fonterra don’t develop in a manual basis (De Witt, 2017). The employees get the chance to evaluate their decision making skills every day.
d) Discuss how this culture impacts on the performance of the company
The culture of the organization includes co-operative spirit, challenging boundaries, rightful thinking and planning through contingencies (Siddiqui & Ahmed, 2016). As per the current reports the culture of the organization will help in tackling the poor performances of the company together with the issues related to the capital spending problems and the success of the business in the competitive dairy market of the world.
Learning outcome: 6
The company Fonterra is mostly an organic in structure as the organic structures are used in organization where dynamic and unstable environments are faced. In this form of organization, there is a need for adaptation at quick stances. The company less of mechanic structure as the organization is a not much of a bureaucratic structure that is not firmly based on a network that is formal and centralized. It is for the distribution that the company is mechanic in structure.
The centralization of an organization is basically the concentration of power to the higher level of the organization (Cooper, 2015). The power is given only to the higher authorities and not the people working below a certain level. The Fonterra Company has a centralization of powers as the top management are the ones retaining the maximum authority. Therefore, the organization is not of decentralization nature as authority is not divided systematically in every level.
The organization is hierarchical or deparmentalised is important to consider organization’s depends largely on adaptation of any one form of structure (Agostinho, 2015). The Fonterra Company is mostly towards the deparmentalised as division of work is done as per the department. It allots individual positions into departments and larger units to form hierarchy. Existence of hierarchical structure is very limited.
Span of control is the number of people report to one person preferably the manager (Keeling, 2018). The Fonterra has a wide range of people working under one manager. Being one of the largest dairy firm it has branches all over the world which makes the role of the manager and senior manager challenging. The company has recently added new Fonterra management team in the office (NZ Herald, 2017).
For a large operating company such as Fonterra, a divisional structure would be a suitable form of structure. In this form of structure each division would be able to work independently along with independent freedom. It would be convenient to work in a workplace where there is no requirement of direct supervision from senior manager. It also improves the full utilization of resources. Divisional management is a way of improving the use of resources. A lot of time get saved which results to timely and effective decision making.
Apart from divisional, functional structure can also be a suitable option for the form of organization. Due to high number of distributers, branches and expansion to overseas it is an organization with high workloads. It is a high productivity structure that helps in specializing and accuracy.
A mechanistic model will help the organization in achieving high levels of production and efficiency. It will achieve the high production and efficiency through extensive use of procedures and rules, centralized authority and specialized labor.
The organic model of the organization will help in achieving the same goal with limited use of rules and regulation, decentralized authority and very less degree of specialization. Although the goal is same the approach for achieving the goals are different.
4c) Span of Control
The span of control refers to the number of employees who are governed directly by a manager. Previously it was not weird to see a 1:4 span of control. Latter, corporate leadership was flattened by causing the average spans to come closer to 1:10 (Grayson and Hodges, 2017). The inexpensive information technology have made it possible for the companies to achieve this gap. The need for span of control is reflected in the words of the director Scott, St. John. The operations of the internal market have experienced an intense lack and accumulated high debt and the profit margins have been very tight. The market sales team have not been able to manoeuvre the on field team properly and that is why the company is running on a low sales margin. Owing to lenient span of control this issue have been waged. Now, in order to replace the deficit in the ongoing, the company have appointed an interim chief executive. This would allow more space to the chief of market operations and the activities of the field executives would be on check also (Shaw, McMaster & Newholm, 2016).
4d) Benefits of centralised as well as decentralised organisational structure
The centralised structure would benefit the company if the export activities of the organisation are handled from a single domain. This would help in keeping track of the business accumulated as an impact of the already existing sales contracts. The apprehended sales volume of the export business can be mapped as an outcome of this. Again, on the contrary, the market distribution and the sales target management department is decentralised structure is followed in this case. In case, if the different territories are segmented and allocated to the different business heads and based on that the company prices the outcome of business, it would result in better sales volume.
Learning Outcome 7
- Role of the leadership and stakeholders in the company
The higher management of the company is always attentive to share the best interests with the shareholders of the company. The basic motive of the company’s leadership is provide a transparent management of the organisation so that directors can scope the performance of the management and organisation as a whole in order to assess the performance. The company leadership also ensures that a dedicated group of marketing team is always focused up on determining the market risks that the company face in domestic retail sector. Other than the Shareholder’s council of the company, executive head, Miles Hurrell is the fundamental guide to the formulation of the foreign expansion strategy of the company. Mike Cronin is another head of the risk and reputations management. The entire council of strategies rest up on him and he is liable for monitoring of the foreign markets like China where majority of the exported products of the company goes. Other than that, the stakeholders generate value towards the organisation by meeting the respective objectives and working to the best of their skills.
6a) Bribery issues and reflection
Recently Fonterra was issued a warning to denominate to a case of arbitration tribunal in Singapore. The company was liable to pay an award for the compensation to cover recall costs that French company DANONE suffered in 2013 (Schleper, Blome & Wuttke, 2017). Fonterra alleged that the company was engaged in the supply of infected whey proteins. It was later proved that the allegation was an absolutely false alarm and because of that the French company had to undergo a major loss. They had to retract their business from eight major countries including China. According to the press releases, it was later publicised that Fonterra had done this as an outcome of market rivalry. DANONE had been becoming a major export market competitor of the company. Sources say that DANONE had launched a major compliant against Fonterra in the New Zealand high court. However, as some of the media articles questions, Fonterra had bribed the national intelligence bureau to get out of the case without any major allegation. Hence, the complaint was internally manipulated. However, as an outcome of this, the shares of the company detoriated and this stable fall in turn raised questions regarding the sustainability of the business in the foreign market. The company had alleged that Fonterra had breached the Fair Trading Act of the country. However, the readily activism that was shown to close down the case made the CSO of DANONE comment that trust, transparency as well as foundations was missing in the way the court handled the case of the Fonterra Company.
About 27 cases of Botulism were recorded in UK in the recent few day and it was alleged that the consumption of Hazelnut butter was the cause of this. Researches unfolded that the Hazelnut puree that the company used, had been manufactured from nuts that were nurtured in a condition that mostly favoured the culture of C Botulinum. Now Fonterra is one of the premium brands of peanut butter in the country. This issue impacted the sales of product. This was a call for the company to exhibit that they were not involved in unethical production of any of the products and that they valued customer’s safety highly. In order to show that, the company launched an official disclaimer stating that if any customer had a doubt regarding the way in which the Fonterra product was manufactured, they could visit any of the production plants of the company. The company also published a report that stated that in tests conducted by three of the most sampling companies of the country and also in the national accreditation test, the product had passed.
In this context, the ideals of ethical behaviour can be highlighted. A primary component of workplace ethics is that the company is showing a basic integrity of behaviour, being absolutely honest with the customers with the external stakeholders and taking the right step to justify the actions that the company undertakes in the context of external market operations. In this context, it can also be specified that the two most feasible viewpoints that cam justify the ethical aspects of the market behaviour of the Fonterra Company during this crisis are integrity of behaviour and taking the most justified step to define their action. These two steps defines that the company have a definitive integrity with their action that they had undertaken at all crucial points of their business. At the time when the crisis arose, the company made the right decision to restate that all allegations that was made against them were all invalid. However, they could not avoid the negative market impressions owing to the fact that the company did not make any direct confrontation to claim the purity of the products that was suspected because of its quality. In terms of taking the most justified decision to establish their ethical viewpoint, the company exhibited that the sampling results after tests were conducted by the National accreditation bureau of the country and two other neural agencies. These test were enough to foster back the belief in the hearts of the people that the products of the company were absolutely safe.
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