Introduction:
The Australian dairy industry continues to be one of the most important agriculture industries as it generates more than $13 billion across its total supply chain. In order to make the industry most trusted, the government has taken initiatives to modify strategic objectives and aligned with the overall supply chain process. Eventually, organizations operating under the dairy industry have undergone significant changes in the overall business model so that value additions can be promoted through the right interactions of key management stakeholders. Considering the fact, the present report provides a clear view of how the Angus Dairy Cooperation has altered the business model to enhance the value creation using management theories. This report also demonstrates key issues faced by the company in the process of creating a value proposition, based on which concluding remarks have been made followed by the final recommendations to enhance the existing value creation process of the chosen company.
Change in the organizational business model in the Angus Dairy Cooperation:
Business expansion in new geographic locations:
In order to ensure value creation, the company has increased the number of operating areas across different geographic locations in Australia. The company is headquartered at New South Wales, which is found one of the most significant areas of producing dairy products in Australia. PWC report indicates that dairy production is increasing throughout Australia and regions such as Queensland, Victoria, etc. are experiencing high demand in the dairy productions. Thus, to ensure value creation through adequate production and distribution system, the company has expanded its business units across Queensland and Victoria (Pwc.com.au, 2018).
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Figure 1: Geographical expansion of Australian Dairy Industry
(Source: Pwc.com.au, 2018)
Year round production:
Along with the seasonal production, the newly developed business model of Angus dairy has focused into year-round production, where calving is spread throughout the year and this area is regulated by the management as most prominent for supplying fresh milk into the domestic consumption.
Significant changes in processing and distribution system:
The disruptive changes in the large-scale production and distribution of dairy products enabled the firm offering discounted pricing for the major retailers with value-added parameters such as increased food security concerns. Moreover, Alston et al. (2017) stated that the equal distribution of the supply chain of the national and international market has tightened the supply-demand dynamics of the company. This change has left a significant value proposition to the overall company.
Promoting the Value of business model to the internal and external stakeholders:
The ‘Green Business Model’: Overview
Value proposition referred to the product or services that create added value for the specific group of target customers. Along with the conventional dairy production and supply to the domestic and international market, Angus Dairy has targeted specific segment such as ‘Restaurant’ and ‘Health Conscious’ customers, which has added value to the products offered by the Angus Dairy (Bilge et al. 2015).
The ‘Green Business Model’ of Angus Dairy Cooperation is aimed to capture business opportunity that provides the environmental improvement combined with the overall economic benefits. The identified business model is also an ‘Open Model’ that creates an effective synchronization of internal and external stakeholders in its overall value chain, through active collaboration with the outside partners (Byrne et al. 2016).
Value chain including internal and external stakeholders:
Primary activities:
The inbound operation and logistics are targeted to operate under multiple channels so that targeted product can be developed and channelized as per the customer requirements. Value proposition Canvas Model is considered by the executives of Angus Dairy to identify the gain creators and pain relievers of the Australian and international customers.
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Figure 2: Value proposition Canvas
(Source: Conti, 2010, pp. 889)
The ‘customer job analysis’ element has helped Angus Dairy identifying the gaps in the Australian Dairy industry and the company promoted the added values in the products based on the specific need of the consumers. Addition of Omega 3 fatty acids, low salt level, is considered as gain creators in the value proposition business model of Angus Dairy. The value creation is also characterized by ‘Quality Assurance’, ‘Food hygiene and safety standards’, ‘Pasture Based Farming system’ and ‘Year Round Milk Supply’ and these activities are synchronized with the core operational activities. Moreover, the environmental protection act, Animal welfare standard and other corporate responsibilities are also focused as a part of value creation activity and positive business relation building activity (https://www.dairyxbred.com, 2018).
Operations as a part of Porter’s primary value chain activities, involves a diversified operating model to safeguard the profitability of the company and the members. The total profit generated in the financial year 2017 was paid to the farmers through the dividends and reinvestment opportunities. It can be considered value creation for the farmer members of the company. Zalcman and Cowled (2018) also pointed out that processing, manufacturing and sales of dairy products and the provision of farm advice have been successful enough to deliver diversified food categories and dietary needs as per the need of the domestic and international customers. The demand for milk and the diversified product is increasing throughout Australia, which has increased the overall demand ratio by 43%since FY 2014 (Pwc.com.au, 2018).
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Figure 3: Value chain activities
(Source: Conti, 2010, pp. 890)
At the same time, in order maintain the value proposition, Angus Dairy promoted the unique benefits through proper marketing sales and service channels and developing value-added high margin market and channelling the products through multiple ways. The marketing activities are outsourced to the third party units to create values through promotional alliances so that better products and services can be delivered to the targeted customers.
Support activities of value chain:
With a team of 3000 farmer members and 2500 employees, the firm has been able to meet the consumer demand for dairy products. As per the PWC report, the Australian dairy industry is facing the challenge to produce adequate milk to meet the overall demand of different consumer segments. Considering the fact, the company has managed to utilize the resources so that the daily milk collection can be maintained potentially to meet demand ratio.
The mixture of the divisional and functional infrastructure of Angus Dairy has enabled the firm to institute different channels of communication to deliver the right value proposition. Moreover, the firm has changed its machinery maintenance, rental facility and refrigeration storage, which has helped to channelize the products through potential logistic systems. Thus, the firm can easily maintain and promote the value proposition to external stakeholders such as customers, suppliers and local communities. Through the investment in technological up gradation and infrastructure, Angus dairy has created innovative corporate social responsibility actions such as environmental stewardship, animal welfare and standard of living of the local community (Smallbusiness.wa.gov.au, 2018). Thus, the value propositions are maintained through potential value chain activities employed by the Angus Dairy Cooperation.
Key highlights on value proposition to external and internal stakeholder:
- Strategic partnerships with external stakeholders to utilize resources and reducing risks by improving the economies of scale
- Setting standards for high food values and broadening the operation to advisory to introduce enterprise growth.
- 100% distribution of the profitability within the internal stakeholders
- Technological advancement for maintaining food diversity and hygiene to meet the demand of external stakeholders
- Diversified pricing to manage national and international consumers with valued added dietary elements in the produced product.
- Engagement of the internal and external stakeholders in the decision making process of the overall business remodelling
- Aggressive marketing through the employment of third party vendors to promote the value proposition to the global and local consumers, thereby influencing the brand awareness to the external stakeholders.
Interactions of key management aspects supporting the value creation:
Alignment of the structure with people management:
Angus Dairy has Bureaucratic organizational structure, proposed by Max Weber, to distribute the power across all hierarchical levels through centralized operational activity. Conti (2010) mentioned that the approach helps a firm to define job duties in a fair and transparent way. Similarly, employing a similar organizational structure, Angus Dairy has potentially managed labour division in seven different locations across Australia along with its international business operation. The harmonization of all departments has enabled the firm to manage the supply chain process in accordance with the changing demand of the customers (Prakash and Henham, 2014).
A broader analysis indicates that the company has successfully integrated atomistic and systematic view which resulted producing an interest-alignment system through active utilization of knowledge-based view and resource-based view to maintain the value proposition of the new products and services. The dynamic capabilities and value chain activities are synchronized with the stakeholder theory and principal-agent theory which allowed all stakeholders to execute active participation on the decision making process and initiating the majority voting system as a fair business practice.
In addition, Henry Fayol’s management principle is followed in Angus Dairy to maintain increased productivity by allocating the job duties across its production, operation and distribution systems. The internal and external members responsible for the whole supply chain management process are coordinated through active communication strategy and equitable opinion proving scheme (Kijima, 2018). As a result, the outside vendors responsible for marketing and promotions can easily communicate changing need and existing gaps in the dairy industry, thereby creating the need for incorporating innovative business models throughout the global operations. Finally, the alignment between divisional and functional structure has improved the manufacturing and logistics activities, thereby improving the value proposition for global consumers.
Marketing aspect supporting the value creation:
The third party marketing team employed by Angus Dairy boosts the local and international sales through aggressive marketing and digital advertising. As a consequence, the brand awareness is getting increased significantly. Since the company has employed new business lines such as supplying dairy products to the local restaurants and customized dietary products to the health-conscious customers, a proper branding conducted by the external marketing team has helped the company managing the brand awareness in a time and cost-effective way (Lower and Pollock, 2017). Thus, the value proposition gets increased.
Financial aspect supporting the value creation:
The rental mechanism of processing and refrigeration helps the brand to cut down the cost involvement. However, the finance team has more prioritized on high standard logistics for managing the daily milk collection in a potential way. This scenario adds up the cost value to the overall operation. On the other hand, the synchronization of the decision-making process with the financial support system has enabled the company outsourcing the marketing activities which reduces the overall marketing expenditure. Mazurek (2014) also stated that the company prioritizes more on value creation to manage brand loyalty irrespective of the expenditure to manage safe and healthy product deliveries and advertising the same to the global customers. Although the advertising expenditure is projected to be significant, the existing customer relation maintenance appeal and the exportation of products in Asian and European countries are found effective enough to control the overall return on investment of the business. The rapid increase in the revenue ($3.2 Billion in the FY 2017-2018) proves the effectiveness of the finance team that supports the value creation of the Angus Dairy.
Issues observed in the process of creating value proposition:
In order to crate proposed value proposition, the organisation may need to encounter with several issues as mentioned below:
Third party outsourcing resulting to controlling issue:
Since the vendors are external agencies, the management may need to have a stringent policy manual for the vendors and third parties for better controlling the entire supply chain process.
Implementation of continuous monitoring and follow-up mechanism:
In addition, the management may face the problem while implementing the said strategy as there needs to be continuous follow-up mechanism the absence of which may vitiate the basic purpose of the supply chain process.
Conclusion:
Based on the discussion and analysis performed in the preceding sections of the report, it may be concluded that the organisation is being able to devise a structured supply chain for creating value for the customers. The management of the business should consider a thorough and concise business strategy for value creation so that the same may largely contribute towards the growth and development of the firm in most sustainable manner in the industry in the long-run.
References:
Alston, M., Clarke, J. and Whittenbury, K. (2017). Gender Relations, Livelihood Strategies, Water Policies and Structural Adjustment in the Australian Dairy Industry. Sociologia Ruralis, 57(11), pp.752-768.
Bilge, P., Badurdeen, F., Seliger, G. and Jawahir, I. (2015). Conceptual modelling of interactions among value creation factors for improved sustainable value creation. International Journal of Strategic Engineering Asset Management, 2(3), p.287.
Byrne, T., Santos, B., Amer, P., Martin-Collado, D., Pryce, J. and Axford, M. (2016). New breeding objectives and selection indices for the Australian dairy industry. Journal of Dairy Science, 99(10), pp.8146-8167.
Conti, T. (2010). The dynamics of value generation and their dependence on an organisation's internal and external value system. Total Quality Management & Business Excellence, 21(9), pp.885-901.
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Prakash, R. and Henham, A. (2014). Decentralized Energy Systems for the Dairy Industry. The International Journal of Environmental Sustainability, 9(3), pp.1-9.
Pwc.com.au. (2018). [online] Available at: https://www.pwc.com.au/industry/agribusiness/assets/australian-dairy-industry-nov11.pdf [Accessed 24 Oct. 2018].
Smallbusiness.wa.gov.au. (2018). Small Business Development Corporation. [online] Available at: https://www.smallbusiness.wa.gov.au/ [Accessed 24 Oct. 2018].
The Dairy Crossbred Blog. (2018). Angus - The Dairy Crossbred Blog. [online] Available at: https://www.dairyxbred.com/2011/12/03/angus/ [Accessed 24 Oct. 2018].
Zalcman, E. and Cowled, B. (2018). Farmer survey to assess the size of the Australian dairy goat industry. Australian Veterinary Journal, 96(9), pp.341-345.
