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Introduction to Fonterra

Question:

What Is the Most Likely System Acquisition Method Commercial Software Custom Software or ERP?

Fonterra Company is Australia’s largest dairy producing business and the world’s one of the largest exporters of dairy products. It is multinational company that is located in many parts of the world and where its operations are completely functional, effective and efficient (Nilsson et al, 2007). Its establishment started in the year 1871 by small co-operatives which later joined together to form a larger cooperative which was after adverse growth and development of the markets, factories and technology at that time. However, Fonterra was formed after the joining of the two top most dairy co-operatives in Australia in 2001.The company is owned by around 15000 farmers from New Zealand who manage and control its operations. Its headquarters are based in New Zealand.

The company specializes in the production, distribution and transportation of dairy products. It operates in more than 26 countries with the main one being Australia. The business is an increasingly growing business which is almost taking over the milk and milk products production and distribution role in the world. In Australia, it sell its milk, milk products and ingredients to some of the best and large food companies. It has been improving its factories, supply chain operations, marketing and advertisement roles, distribution and management responsibilities to name just but a few sectors of improvement (Nilsson et al, 2007). For the sake of completing this assignment, I will use the company as the business of my reference.

The company is a multinational business that deals with dairy product production. It is one of the most top rated businesses in Australia when it comes to product and service offering. It has been growing and developing its operations since its establishment and therefore is one of the best examples to use for this kind of assignment.

The organizational structure of a business refers to the policies rules and principles put in place to guard, control and manage the business operations and the direction of the business itself. The organizational structure for Fonterra is simple, easy, effective and efficient for its business operations. Just as mentioned earlier, it deals with dairy products (Barboza et al, 2011). However, it also specializes in dairy ingredients which are used for dairy products production. These are used mostly in food industry businesses like cafes, restaurants and commercial kitchens in the country. In that case, the company focuses on the dairy expertise, manufacturing capability, commitment and the attitude of the employees to produce the best quality products.

The structure of this company is based on the fact that every shareholder must be a farmer and registered with the company. Despite the fact that the company has currently been listed in Australia’s Stock Exchange, any public investor is allowed to buy its shared through the company’s shareholders. In addition to that, any buyer or distributor who would like to purchase some of the products from the business, should not negotiate with the farmers directly but rather should purchase from the company itself. This means that the business operations are completely controlled by the shareholders who are also the farmers. The business controls its own business operations in every way; i.e. in terms of product pricing, quality, marketing and amount among other product features. This kind of organizational structure has led to increased and improved management skills, experience and power for the shareholders which certainly helps them support and run the company. Also this helps them maintain the company’s market share and segment hence success in the food industry.

Fonterra's Organizational Structure

Every business has some problems that are related to the structure that is in use. However, the business must come up with ways to cub those problems and achieve its success objectives. Some of the problems that may face Fonterra because of its organizational structure include the following:

Currently, the business insists on being managed and run by its shareholders who are also the farmers of their products. The management responsibility in a business should be performed by skilled, experienced and knowledgeable employees who have the expertise to deal with the controlling, directing, leading and organizing roles of a manager (Borén et al, 2017). However, this is not the case for Fonterra Company. It is managed by business people who may not have what it takes to manage a business which may become a very big challenge for them.

Despite the fact that the business is managed by the shareholders themselves, they are also the people who set the product prices. In addition to that, the company does not allow any buyer to purchase directly from the farmers but instead should go through the company itself. That means that they get to sell the products at prices that they have set by themselves which may be different from the prices the farmers would have sold on their own. Therefore if the price is lower, then the farmers may cause problems which may affect the business operations in the whole company.

The business does not allow any public investor to buy shares from the Australian stock exchange market but instead they should contact the company and buy from it directly. This can really cause negative effects to the business because of discouraging them not to invest in the business shares. This is in relation to investors who need to buy shares through the Australian stock exchange markets. Also, if the shareholders should be farmers, then the investors who would want to be shareholders and are not farmers do not have the opportunity to buy shares (Pearlson et al, 2016). This causes negative effects to the business operations and especially its financial status.

The best acquisition method for Fonterra is the ERP system whose purpose is to manage and control a business operations with an aim of achieving its objectives and increasing its success chances. This system will definitely help the company figure out its potential challenges and come up with suitable solutions that will manage those challenges (Reich et al, 2013). Most importantly, it will help the business know and create its competitive advantage against its competitors as well as improve its system operations. With this, the company will increase its effectiveness and efficiency in its product production and performance position.

Every business system has problems that come in handy but every business must come with suitable solutions to those problems or learn how to coup with them. Some of the problems that may arise from Fonterra’s control system include the following:

The system are normally run by soft wares which include are made from algorithms and computer languages. Therefore, it means that the systems are in the danger of being hacked and maybe controlled by unauthorized persons. This is a problems to a business because its operations will definitely be interfered with, information and data stolen or any other interference caused by the hacking (Peppard et al, 2016). For instance for the Fonterra Company, the business’s secret ingredients may be stolen and therefore possible duplication of its product production using its ingredients.

Problems with Fonterra's Organizational Structure

A business management team may make the problem of choosing the wrong processing technique or method. The production process is the aspect that determines the quality and physical appearance of the product (Arvidsson et al, 2014). Therefore, if the process is wrong or incorrect, then it may cause great negative effects to the business operations which may lead to business failure. For instance, the shareholders of Fonterra business may choose the wrong milk production process or ingredient making process which spoils the whole production process.

This is in relation to having many employees and ineffective organizational structure. In that case, the organizational structure must not be just ineffective but also complex, difficult and not easy to understand (Park et al, 2014). A business with poor communication structure will lead to poor decisions and maybe failure. The process should be highly effective and efficient to enable the management team and employees communicate easily and understand each other.

The business has been growing and expanding in many parts of Australia. Currently it has adopted the use of accounting soft wares and packages in New Zealand where the business has been growing, developing and improving its daily operations. The company is using accounting soft wares to analyze the performance of the farmers and their use of the available resources, manufacturing operations, investment decisions and management levels to name a few. The use of these soft wares has improved their evaluation and analysis results for the better and has helped the business realize its position in the market.

The business participates in both the local, national and international markets. Its markets are in Australia, New Zealand and Chile. These are the domestic markets (national and local) where the company sells its products to its distributors and consumers as well (Barboza et al, 2011). The business’s international markets are in Latin-America, Asia, Africa and Middle East. The company has also participated in international partnership with Nestle. Jointly, they produce and sell consumers products for the Latin-America consumers. With this fact in mind, the business, has a very large market share all around the world and is still increasing. In addition to that, considering the fact that the company’s products are well known, are of good quality and is the largest producer of dairy products in Australia and New Zealand, then it is obvious that it is popular and famous in the country.

Apart from engaging in domestic marketing, the company also participates in international trade. This means that it deals with both domestic production and export of the excess products. The company has a number of competitor who also produce the same kind of products and engage in the same trading activities just like Fonterra. Some of the competitors include: Nestle, Danone, Groupe Lactalis, BPC Foods PTY Limited and China Milk Producers (Gaurwitsch et al, 2010). However, these competitors certainly have a competitive advantage over Fonterra which makes them better and popular and probably better in the market and in the industry. For instance, Danone is a business that is growing at a faster rate than Fonterra and has currently expanded by purchasing the Numico; a Dutch baby food maker which has helped them become even more popular. Another advantage is that, the business have been concentrating so much on their product sales and therefore are continuing to take a larger market share in the industry.

The Best System Acquisition Method for Fonterra

These refer to problems facing the accountants or financial accounting team. They may include the following:

Lack of required qualifications. This includes lack of skills, knowledge, experience or the expertise that is needed to operate the systems (Galliers et al, 2014). This problem may lead the business having wrong accounting analysis, negative effects on the business’s growth, financial deterioration due to errors to name a few.

Lack of enough facilities or machines to run the systems. This relates to internet, software, computer packages and computers themselves. A business that does not have enough equipment to run the systems and make them function will be increasing its chances of making errors financially and also its daily operations.

Also, lack of modern technologies can lead to emergence of challenges that relate to accounting systems. The systems themselves have to be modernized and of the latest technology. This is likely going to lead to ineffective and inefficient organizational operations and practices.

Every business should hire only qualified employee especially accountants who are experienced, skilled and are experts in dealing with the accounting software. This means that they will be able to operate the systems exactly as required.

Also, every organization should ensure that the accounting systems are very well supported by the latest technology as much as possible. This will ensure that systems are effective, efficient and able to perform their intended objective.

A business should make sure that there is internet axcess, updated computers and improved software among other things. This will enable them to be able to achieve their expected objective because of the right support.

References

Galliers, R.D. and Leidner, D.E., 2014. Strategic information management: challenges and strategies in managing information systems. Routledge.

Willcocks, L., 2013. Information management: the evaluation of information systems investments. Springer.

Cassidy, A., 2016. A practical guide to information systems strategic planning. CRC press.

Shapiro, C. and Varian, H.R., 2013. Information rules: a strategic guide to the network economy. Harvard Business Press.

Park, J.G. and Lee, J., 2014. Knowledge sharing in information systems development projects: Explicating the role of dependence and trust. International Journal of Project Management, 32(1), pp.153-165.

Barboza, M., Myers, M. and Gardner, L., 2011. INFORMATION TECHNOLOGY MULTISOURCING AT FONTERRA: A CASE STUDY OF THE WORLD’S LARGEST EXPORTER OF DAIRY INGREDIENTS. INFORMATION TECHNOLOGY, 10, pp.6-2011.

Nilsson, J. and Rydberg, C., 2015. Factors behind the Fonterra shareholders’ rejection of the board’s capital restructuring plan of 2007.

Gholami, R., Sulaiman, A.B., Ramayah, T. and Molla, A., 2013. Senior managers’ perception on green information systems (IS) adoption and environmental performance: Results from a field survey. Information & Management, 50(7), pp.431-438.

Dwivedi, Y.K., Wastell, D., Laumer, S., Henriksen, H.Z., Myers, M.D., Bunker, D., Elbanna, A., Ravishankar, M.N. and Srivastava, S.C., 2015. Research on information systems failures and successes: Status update and future directions. Information Systems Frontiers, 17(1), pp.143-157.

Reich, B.H. and Benbasat, I., 2013. 10 Measuring the Information Systems–Business Strategy Relationship. Strategic Information Management, p.265.

Gaurwitsch, S. and Nilsson, J., 2010. Members’ readership of annual reports–a cross-national comparison of supply co-operatives. Journal of Co-operative Studies, 43(1), pp.5-13.

Arvidsson, V., Holmström, J. and Lyytinen, K., 2014. Information systems use as strategy practice: A multi-dimensional view of strategic information system implementation and use. The Journal of Strategic Information Systems, 23(1), pp.45-61.

Cassidy, A., 2016. A practical guide to information systems strategic planning. CRC press.

Peppard, J. and Ward, J., 2016. The Strategic Management of Information Systems: Building a Digital Strategy. John Wiley & Sons.

Pearlson, K.E., Saunders, C.S. and Galletta, D.F., 2016. Managing and Using Information Systems, Binder Ready Version: A Strategic Approach. John Wiley & Sons.

Borén, S., Nurhadi, L., Ny, H., Robèrt, K.H., Broman, G. and Trygg, L., 2017. A strategic approach to sustainable transport system development–Part 2: the case of a vision for electric vehicle systems in southeast Sweden. Journal of Cleaner Production, 140, pp.62-71.

Fayoumi, A. and Loucopoulos, P., 2016. Conceptual modeling for the design of intelligent and emergent information systems. Expert Systems with Applications, 59, pp.174-194.

Chang, J.F., 2016. Business process management systems: strategy and implementation. CRC Press.

Wirtz, B.W., Pistoia, A., Ullrich, S. and Göttel, V., 2016. Business models: Origin, development and future research perspectives. Long Range Planning, 49(1), pp.36-54.

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