External Environment Analysis Of Bega Cheese Essay.

Strategic management is considered as the systematic approach to setting objectives, goals, and procedures for making an organisation or company more competitive within the target market. Thus, the present report aims to provide a brief investigation of the external environment for Australian-based diversified food company Bega Cheese. Strategic position of the selected company along with the external factors that are and will influence organisational long-run sustainability and profitability will be demonstrated with the help of PESTLE (Political, Economic, Social, Technology, Environmental, and Legal) and Porter's five forces analysis.

Bega Cheese, an Australian-based diversified food company is found to distribute, manufacture, process, and receive dairy products as well as other food-related products across the mentioned country. The company is found to be associated with two operational segments such as Bulk and Branded (Bega Cheese, 2021). Bulk segment of the company is found to manufacture bio-nutrients, nutritional and dairy ingredient-based products, and Branded segment manufacture value-added products for externally owned and owned brands. In the context of the following figure, it is identified that the company earned a revenue value of AU$2.87b with a market capitalisation of AU$1.48b and earning values of AU$78.50m during the financial year 2021 (Simplywall, 2022).

 

Figure 1: Earnings and Revenue of Bega Cheese

(Source: Simplywall, 2022)

Diversified product range and launching of the new products by perceiving the customer demands can be considered as key strategic approaches of Bega Cheese that flourish their growth and market competitiveness.

2.1 PESTEL analysis

2.1.1 Summary of PESTLE

The Political Stability Index (PSI) of Australia is found to be 0.86 points during the fiscal year 2020 (The Global Economy, 2022). In this regard, PSI value is found to be average for the country, which might not create complexities for Bega Cheese as the company has already positioned and achieved a strong market share. On the other hand, the Corruption Perception Index (CPI) in Australia is found to be high as compared to other countries. For example, a news report published in 2020 underlines Australia scored a recorded value of 73 from 100 in the context of CPI (Knaus, 2020). The persistence of the corruption rate can negatively influence upon long-run sustainability and profitability of Bega Cheese.

Stable economic growth in Australia has been perceived with an increased GDP rate of 4.54% during the financial year 2021 (O'Neill, 2021). The growing rate of disposable incomes and demands for high quality of food and beverage products enhance the chance for Beg Cheese to gain competitive advantages by stabilising its future growth.

Discussion

The growth and stability of Bega Cheese are found to be highly reliant upon product acceptance by their target customers and customer loyalty. Considering the following figure, it is identified that consumption of dairy products such as yoghurt, butter, and cheese is found to be increased by 13% during the fiscal years 2021 and 2022 respectively (IBIS World, 2021). Growing demands for food and dairy products will directly influence upon the performance of Bega Cheese in terms of long-run business stability and growth.

 

Figure 2: Demand and consumption of dairy products in Australia

(Source: IBIS World, 2021)

With the growing adoption of technology and digitalization in the present era can positively influence Bega Cheese in terms of generating strategic benefits within the market. The company can maximise its productivity by introducing online service facilities that will positively drive business success across the global market. Thus, this factor would create positive and high impact on performance of Bega Cheese.

Livestock farming in Australia accounted for 10% to 16% of the emission of greenhouse gas followed by dairy farms, which contributed 19% of the emission rate (N Villanueva, 2016). On the other hand, water scarcity in Australia is found to be growing rapidly due to the rapid climate change.

Legislation such as Dairy Act 2000, Food Act 1984, Guidelines for Food Safety Regulation and authors are required to be adhered by businesses operating across the food and brewery industry (Dairysafe, 2022).

From the PESTLE analysis, it can be mentioned that technology and social factors are the major external factors and key drivers for Bega cheese in terms of their future strategic business operations. For example, the demand for healthier beverage products is found to be growing rapidly due to increased preferences for living a healthier lifestyle. On the other hand, due to the present pandemic situation consumers are more preferring online services. Thus, for Bega Cheese, to maintain long-run strategic business stability, they need to focus on incorporating an e-commerce business model to export or sell their products directly to the target audiences. It is identified that future industrial change is highly reliant upon changing consumer demands for healthier products and online purchasing preferences (Bega Cheese, 2021). By addressing these two factors, Bega Cheese can bring future opportunities and business prosperity in the future.

Factors	Impact	Description
Supplier’s bargaining power	High	Supplier numbers within which Bega Cheese operates are found to have high creating strong control over the prices. Powerful suppliers within the industry can utilise their negotiating power to obtain a high price from the businesses entity operating across the food and beverage industry creating a force strong for Bega Cheese
Consumers bargaining power	Low	Buyers or consumers are found to have limited options to purchase their required food and beverage products from respective companies. Thus, they have little control over the prices (Courtenay, 2021). Price sensitivity and preferences of specific brands for dairy products will create less impact on Bega Cheese's future strategic growth.
Substitution threat	Moderate	The threat of substitution of Bega Cheese is found to be from plant-based products such as Hemp milk, rice milk, soya milk, and others (Paul et al. 2020). However, preferences for dairy products such as yoghurt, cheese, milk, and others are found to be high, creating a moderate impact on the performance of Bega Cheese.
New Entrant Threats	Low	Bega Cheese already is found to have a strong market position with brand recognition. Thus, for new entrants, it would take time to take the position of Bega Cheese creating a competitive threat to them. Thus, this force for the mentioned company is low.
Competitive rivalry	High	The industry within which Bega Cheese operates is found to have a wide range of strong competitors such as Ferrero, A2 Milk Company, Think Products, and Lancaster Colony (Craft, 2022). These market competitors can create a threat to the company in case Bega Cheese fails to meet customers' demands by introducing differentiated products from its competitors.

Table 1: Porter's Five Forces

In the context of maintaining long-run business sustainability, the bargaining power of consumers is found to be highly interlinked with the strategic business practices of Bega Cheese. Brand loyalty and premium diversified product range are found to be the key differentiator of Bega Cheese and thus they have highly dependent upon their product acceptance by the target audiences or customers (Gibson and Gordon, 2018). The company is found to be constantly improving its product ranges and services according to the changing customer preferences. This strategic business approaches enhances the chance to grab the market opportunity and their long-term future stability.

External analysis

3.0 Conclusion

In the context of the above discussion, it can be mentioned that strategic management plays a significant role for any business entity in terms of strengthening business performance and gaining overall market competitiveness. It is important to analyse both strategic position and external environmental factors that influence business performance in accordance with which strategic business decisions can be made. In the context of Bega Cheese, it is identified that the company has gained a strong market position with financial stability by introducing a range of diversified dairy and food products that meet consumers' demands. From the PESTLE analysis, it is identified that social and technological factors will influence Bega Cheeses in the context of accomplishing long-run business sustainability. On the other hand, with the help of differentiated products and strong brand impact, the bargaining power of the consumer is found to be minimal for the company, which would positively influence its future growth and market stability.

4.0 References

Bega Cheese, 2021. 2021 Annual Report. [Online]. Available at:

<https://www.begacheese.com.au/wp-content/uploads/2021/10/Bega-Cheese-Ltd-Annual-Report-2021-Interactive.pdf> [Accessed on 25 March 2022]

Bega Cheese, 2021. The Great Australian Food Company. [Online]. Available at: <https://www.begacheese.com.au/> [Accessed on 25 March 2022]

Courtenay, A., 2021. The big (ger) cheese. Company Director, 37(2), pp.34-39.

Craft, 2022. Bega Cheese competitors. [Online]. Available at: <https://craft.co/bega-cheese/competitors> [Accessed on 25 March 2022]

Dairysafe, 2022. Regulating Victoria's dairy industry. [Online]. Available at: <https://www.dairysafe.vic.gov.au/privacy-policy?catid=24&id=68:legislation-and-regulations> [Accessed on 25 March 2022]

Gibson, C. and Gordon, A., 2018. Rural cultural resourcefulness: How community music enterprises sustain cultural vitality. Journal of Rural Studies, 63, pp.259-270.

IBIS World, 2021. Cheese, Butter & Yoghurt Consumption. [Online]. Available at: <https://www.ibisworld.com/au/bed/cheese-butter-yoghurt-consumption/4774/> [Accessed on 25 March 2022]

Knaus, C., 2020. Australia records its worst ever score on anti-corruption index after decline to match Hungary’s. [Online]. Available at: <https://www.theguardian.com/world/2022/jan/25/australia-records-its-worst-ever-score-on-anti-corruption-index-after-decline-to-match-hungarys> [Accessed on 25 March 2022]

N Villanueva, G., 2016. There are a lot more problems with the dairy industry than the price of milk. [Online]. Available at: <https://www.thechainsaw.com/there-are-a-lot-more-problems-with-the-dairy-industry-than-the-price-of-milk-2016-5#:~:text=The%20environmental%20impact&text=In%20Australia%2C%20livestock%20farming%20accounts,from%20livestock%20are%20significant%20contributors.> [Accessed on 25 March 2022]

O'Neill, A., 2021. Gross domestic product (GDP) growth rate in Australia 2026* [Online]. Available at:

<https://www.statista.com/statistics/263602/gross-domestic-product-gdp-growth-rate-in-australia/> [Accessed on 25 March 2022]

Paul, A.A., Kumar, S., Kumar, V. and Sharma, R., 2020. Milk Analog: Plant based alternatives to conventional milk, production, potential and health concerns. Critical reviews in food science and nutrition, 60(18), pp.3005-3023.

Simplywall, 2022. Bega Cheese [Online]. Available at: <https://simplywall.st/stocks/au/food-beverage-tobacco/asx-bga/bega-cheese-shares#about> [Accessed on 25 March 2022]

The Global Economy, 2022. Political Stability Index of Australia. [Online]. Available at:

<https://www.theglobaleconomy.com/rankings/wb_political_stability/Australia/#:~:text=Political%20stability%20index%20(%2D2.5,New%20Guinea%3A%20%2D0.74%20points.> [Accessed on 25 March 2022]