Introduction
Understanding and addressing the root causes of challenges faced in the Australian dairy sector, specifically by Paul’s Dairy, is critical to practical solutions and improved business. The report revolves around the political, economic, social, technological, legal, and environmental factors affecting business operations in the country. It also addresses the existing competition in the industry, the threat of new firms entering the market, the threat of substitutes, and the bargaining power of suppliers and buyers. The strengths, opportunities, weaknesses, and threats faced by Paul’s Dairy and other challenges in the industry are also discussed. Paul’s Dairy is an Australian company under the Lactalis multinational brand. The analysis intends to determine the nature of the business’s environment and its relationship with the challenges it faces. A better knowledge of the market helps devise proposals on how Paul’s Dairy can survive in the competitive industry and realise profitability in the wake of the continued impacts of external factors on the business.
PESTLE Analysis
Political Factors
The political environment has a significant impact on the operations of a firm. The company has the country’s largest market share, and its political environment affects its operations. Paul’s Dairy works with different dairy farmers from other parts of the country, and the distribution network’s success or failure depends on the country’s political situation. Political stability is good for business, and the daily sector, including Paul’s Dairy, has thrived because there are no disruptions relating to the political situation. There is no central bureaucracy or corrupt practices to limit dairy business operations in Australia. The fact that firms such as Paul’s Dairy have been operating in the country for a long period indicates how good politics positively impacts business operations (TC Global, 2022). The political leadership in the country engages the firms in the industry to determine possible areas of collaboration for business continuity. Price regulation policies have been implemented to benefit customers, and firms such as Paul’s Dairy have been impacted and adjusted accordingly to survive in a market influenced by external forces.
Economic Factors
Australia has a mixed economic system with private sector freedom, government regulation, and economic planning. Paul’s Dairy is therefore affected by the economic decisions made by the government. Government regulations on the economy aim to create an enabling environment for businesses to thrive and ensure fair play for all. Paul’s Dairy accesses highly trained employees and pays reasonable wages in line with the revenues they generate and the economic situation. The country’s economy is doing well, and Paul’s Dairy also serves an international market. The different economic situations in the external markets negatively and positively affect the firm’s operations. The firm has no control over what happens externally, and in the countries where they export their daily products, economic instabilities or growth could affect income. The inflation rate in Australia has been reducing, and in September 2023, it was 5.4% lower than 6.0 in June of the same year (Australian Bureau of Statistics, 2023). The country’s interest rates are also stable, making it possible for firms such as Paul’s Dairy to access credit for business operations and expansions.
Social Factors
Society in Australia has generally been conducive to Paul’s Dairy operations in the dairy sector. The country’s education system produces skilled and knowledgeable citizens whose expertise is tapped to run the company’s operations. The export markets have different skill levels of employees, and the company has to make necessary talent acquisitions to identify the people it can work with. Australian society appreciates the roles of both genders in the nation’s well-being, and the company has embraced employees from both genders to work and enable it to achieve its short- and long-term goals. Society has different levels of health consciousness, and increasingly, the dairy sector is facing the challenge of customers being health conscious and moving away from processed dairy products to traditional products they consider healthy (Grout et al., 2020). This is a challenge that the company and others in the industry understand, and it is continuously implementing measures to adapt and respond appropriately. A reasonable customer base still exists that dairy firms compete for, and Paul’s Dairy has been at the forefront in attracting and retaining customers.
Technological Factors
Technology has grown and become an important facilitator in production. Paul’s Dairy is among the firms in different industries applying technology at different levels. Due to the growth of technology, the company and the industry use modern machines and technological processes to process different milk products. Most functions are automated as the company adopts the latest technology. Processes such as pasteurisation, sterilisation, and ultra-heat treatment use the newest technology. The company operates in a competitive environment and, therefore, has to move with technological growth as it happens because that is the surest way of survival in the market. Technology continues to change, and Australia is among the nations that have adopted changes brought about by technology (Breidbach et al., 2018). Paul’s Dairy history proves that it has been adaptive to change over time because it understands that what happens in the external environment impacts a firm’s operations. Technology is also applied in the value chain, where dairy farmers use technology for milking and other milk production and storage processes.
Environmental Factors
The environmental conditions in the country have an impact on the business and industry. The farmers depend on the weather and climatic conditions to ensure the cows produce the needed milk. The weather conditions fluctuate from favourable to unfavourable, but the farmers have adapted and used the most favourable part. The firm and others in the industry are expected to adhere to the Environmental Protection Act of 1977, which protects the environment from pollution and its effects (EPA, 2022). Paul’s Dairy is obligated to adhere to the needed environmental protection standards. As a firm that deals in the processing of milk and dairy products, there are structures it is expected to put into place to protect the environment from pollution. Globally, there are calls to protect the environment, and on that basis, Paul’s Dairy has to play a role in environmental protection. It has a policy upon which it applies to ensure it adheres to the environmental protection principles. Policies developed by the government are expected to be followed by all firms in the country, and Paul’s Dairy complies as expected.
Legal Factors
Organisations operate based on the existing laws. Paul’s Dairy and other firms in the dairy sector understand the need to comply with the current laws because they affect their operations. The milk and cream processing industry is now facing regulatory issues due to the implementation of new government laws, which have increased processors’ prices. The heightened level of attention and examination of milk price contracts, especially in response to past farm milk price reductions, has generated a climate that needs more predictability. Some dairy farmers experienced significant financial losses due to the implementation of price reductions. Paul’s Dairy is also affected by the employment laws it must adhere to when engaging employees. The Fair Work Act of 2009 requires employers to comply with the employees’ basic rights in areas such as minimum wage, safe working environments, leave periods, and compensation (Federal Register of Legislation, 2023). Health and safety laws must be followed in the dairy sector and by all firms engaged in food production. Data protection laws also exist to guide how firms manage data, especially those belonging to key stakeholders such as employees, customers, and suppliers.
Porter’s Five Forces Analysis
Threat of New Entrants
The industry is a competitive market with many large sellers and many buyers. The threat of new entrants is moderate because it takes work for a firm to put resources into the business. There are high barriers to entry into the industry, including economies of scale, brand recognition, and government regulations. Firms such as Paul’s Dairy have grown over the years and established themselves, and it is challenging for new firms to come up and reach the levels they have reached. Starting up a new firm requires the investor to put in the necessary resources to facilitate the new investment. They must comply with government regulations, have the support of relevant stakeholders for their operations, and employ the needed technology (Newton et al., 2020). For example, a firm has to create effective relationships with farmers to get the required milk supply for processing. It may be easier to access farmers if there is a clear strategy because most farmers have contracts with existing companies, such as Paul’s Dairy, where they supply their dairy products through pre-determined arrangements.
Bargaining Power of Suppliers
In the case of the dairy industry, the suppliers are primarily farmers who supply the companies with the milk they process. There are different dairy firms in Australia; hence, the farmers can choose who to give to at the correct prices. There is continuous demand for farmers because if a firm has the needed number of customers who supply it, they will be assured of continued production. Paul’s Dairy has a good relationship with over 680 farmers whom it has contracted to supply it with milk Paul’s (Dairy, 2023). The company understands that creating and building a strong relationship with the farmers is essential to prevent other firms from taking them over. The competition gives farmers the latitude to choose where they want to take their milk, and in most cases, they have contractual agreements that benefit both the farmer and the company. Farmers who are content with how a firm pays them will focus on other firms and ensure they get those who can pay for the appropriate amounts because of the existing demand for milk.
Bargaining Power of Buyers
Due to the existing competition among large firms in the market, consumers have a higher bargaining power. They can choose from products such as whole milk, cream, or milk powder. The different dairy firms operating in Australia make the same products in different brands, and it is up to each firm to identify and serve specific markets. Buyers can choose whether they want to buy from Paul’s Dairy or another firm. The high bargaining power is because these also compete for existing and new customers; hence, measures must be implemented to attract and retain them (Zeller & Langa, 2018). A firm with the best strategy, such as reducing costs to reasonable levels or ensuring high-quality products, will get more customers than others, and the customers will continually be free to shift to other firms based on their needs. Customers’ decisions depend mainly on their relationships with dairy firms and whether the firms have done relevant marketing to convince them to use the dairy products.
Threat of Substitute Products
The existence of different large firms in the dairy sector means that there are substitute products in the market. The firms produce the same products under their names. For example, there is whole milk for Paul’s and Saputo Dairy Australia. Customers can choose where they want to buy based on how they think the product serves them. Substitutes are all over the market, and many large firms understand the existing threat of customers shifting to other brands. There are also substitutes for plant-based products that health-conscious customers are shifting to because of the health benefits compared to animal-based dairy products (Jeske et al., 2018). Most customers may buy from a firm because of convenience and because it provides what they need and not due to any other attachment to the company. If they find a firm more convenient to meet their needs, they will shift and start buying from the other. This means that firms in the industry must apply strategies to create strong relationships with their customers so that they do not shift due to convenience and other factors. The threat of substitutes makes firms in the industry, such as Paul’s Dairy, innovate and continually develop new product specifications to serve the diverse needs of customers.
Rivalry among Existing Competitors
Competition is rife in the industry among the existing firms. Paul’s Dairy operates under the parent company of Lactalis Australia. Its competitors include the Bega group, RF, Saputo Dairy Australia, A2 Milk Company, Fonterra Co-op group, and Norco Co-op (IBISWorld, 2022). These firms provide high-level competition to each other. The competition happens locally and internationally for those undertaking international business, such as Paul’s Dairy. The competition focuses on acquiring and retaining customers with their products because these firms make similar products from milk. The competition makes the firms apply different strategies to understand the market and develop what tailors to their needs, which happens in all firms. The competition focuses on whole milk, low and reduced-fat milk, UHT milk, and cream. Paul’s Dairy under Lactalis Australia has applied necessary measures to maintain a significant market share among the major players in the industry. It is facing stiff competition from players at different levels. The existing competition is good for customers because it focuses on their needs and improves the quality of the milk products to attract and retain them.
SWOT Analysis
Strengths
Paul’s Dairy has a substantial market share, which enables it to compete effectively with other industry firms. It has built a strong customer base for years, it has been in operation, and some customers have become loyal and created long-lasting relationships. The company generates high revenue, slightly above other firms in the industry. For example, in 2022, it generated $553.1 million in revenue, followed by Saputo Dairy Australia, which generated $487.3 million, then Bega Group, RF, and other firms (IBISWorld, 2022). The company produces high-quality milk products, effectively serving customers with different needs. The company’s distribution system in Australia is very effective, allowing customers to access its products where they are increasing loyalty. There are also suitable structures with stakeholders such as farmers where the company undertakes clear contractual agreements and meets their parts of the bargain to ensure sustainability in supply. The company also understands the role of innovation and continually invests in technology to improve its production processes and reduce costs, reflected in the products presented to customers.
Weaknesses
All firms have areas of internal weaknesses that they deal with due to the operational designs and structures. Paul’s Dairy may need help responding to customer demand and preferences changes. The company must employ strategies to survive in the continuously competitive market; internal decisions react to what happens outside (Paul’s Dairy, 2023). There may be inefficiencies due to the need to understand what to do and how best to respond to the changes. Cases of product recalls mean that there are loopholes in the production processes that affect the product quality. In certain instances, the urge for mass production may lead to various stages needing more efficiency, affecting product quality. These internal deficiencies reflect negatively on the management and those engaged in production. The company operates at a large capacity, and its products may negatively impact the environment due to the packaging and a lack of control over how customers dispose of waste after using the products. The blame falls on the company, which has not effectively dealt with such accusations, affecting its reputation.
Opportunities
The country’s dairy industry has many opportunities that Paul’s Dairy can explore. It is possible to increase the target market by undertaking intensive marketing strategies. Many potential customers still need to be tapped and provided with the products. The company can also leverage its strengths to expand its market share. The company should also engage consumers in awareness programs to improve their understanding of the products and what they offer and build relationships that imply improved sales (Mele, 2023). Innovation is essential for the continuity and sustainability of companies, and the firm has to engage in research and development to find ways to improve its products and serve customers better. The focus should be on how it can continually use technology to enhance its products. The quality of its products is also essential. Due to the existing competition, the firm needs to apply measures to make products that serve the increasingly conscious customers about their health and what they consume. The market is expected to change over time, making it necessary for the firm to be responsive and develop what serves customers’ interests.
Threats
The primary threat for firms operating in a competitive environment such as Paul’s Dairy is competition from other firms. Large firms operating in the industry have high competition, and Paul’s Dairy has to invest in strategies to deal with competition continually. If no clear structures are implemented to address the challenges related to the match, the firm will not survive the existing competition in the market. Export to different countries without clear contingency measures may be exposed to various challenges that the organisation cannot control, such as reduced economic activity, hence the need to continually monitor the markets to ensure business is continued in regions with demand and no losses arise from the distribution to external countries. Customers are learning about the negative impacts of dairy products on their health, which could be a threat in terms of reduced customers. Focus on traditional dairy products means that firms such as Paul’s Dairy and others in the industry would not get the number of customers they currently serve, which would affect the business.
Conclusion
The Australian dairy sector operates in an environment impacted by various external factors, so firms must respond effectively to realise sustainability. Paul’s Dairy operates in a competitive market with prominent players providing similar but differentiated products. The existence of other firms makes the market competitive and requires Paul’s Dairy to undertake various customer engagement measures to attract and retain customers. Australia has a stable political environment for business, and the legal environment is also transparent, with different policies to guide business operations in multiple industries, including Dairy. The country’s economic environment promotes business activities and attracts investors locally and internationally, and Paul’s Dairy has leveraged that economic stability to run its operations. The dairy sector faces challenges, making it necessary for Paul’s Dairy to continually apply innovation, customer engagement, and efficiency in its operations to ensure sustainability and improve product quality.
References
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