Co-operative Group Limited is a New Zealand international dairy co-operative
owned by around 10,500 New Zealand farmers and their families. About 30% of the
world’s dairy exports is controlled by this company. Fonterra provides
employment to around 22,000 people around the world. The New Zealand dairy
industry along with Fonterra are hugely important to New Zealand as the dairy
sector is a major provider to New Zealand’s exports.
issue we are discussing about is how successfully Fonterra can be managed using
its culture and environment. There are certain limitations in managing a firm. Some
of the limitations are (i) Management techniques and policies have to be
accustomed according to specific circumstances. One technique may be good for
one enterprise but not for others, (ii) principles of management are not stationary
in nature. New concepts are invented, new products being introduced to the
market, new likes and dislikes are emerging every year. So what was a success
in 2015 may lead to disaster in 2016. Thus, a prodigious deal of adjustment is
to be done to survive with the changing periods, and (iii) Management is
concerned with the human element in an organization. Dissimilar groups and
different folks even in the similar group, perform differently under different
conditions. This human feature of management delivers the greater contest to
its scientific behavior. (Sheldon, 2018)
key objectives of Fonterra management are as follows:
Understand key features of management
and assess their relevance in the NZ business context.
Understand the impact of culture and cultural
variations that affect business effectiveness.
Evaluate how the changing, multi-faceted
environment affects organizations & influences efforts.
Managing an enterprise
successfully is based on how well the basic managerial functions are
implemented. The major managerial functions are as follows:
the first managerial function is planning. In this, a manager will generate a thorough
idea for achieving certain goals of organization. Planning is an enduring step
and can be greatly focused based on organizational goals, division goals,
departmental goals and team goals. It is manager’s duty to identify which goals
must be planned within his/her area. (Hartzel, 2018)
Organizing – The second managerial function
is organizing. This stage needs the manager to decide how to allocate
resources and shape his team members to the plan. The manager will need to find
different roles and make sure that he allocates the exact number of staffs to implement
the plan. He has to give authority, assign work and provide the way so that his
team reps can work towards greater sales figures without any obstacles on the
Controlling – It indicates a measurement of
accomplishment against the standards and alteration of deviation, if any, to make
a sure success of the goals set by organizations. The motive of “controlling”
is to make sure that everything befalls in conventionalities with the values.
An effective system of control helps to foresee deviations before they actually
happen. Theo Haimann says, “Controlling is the process of examining whether or
not appropriate growth is being made towards the goals and objectives and
acting if necessary, to correct any deviation”. (Younes, 2015)
Leadership – is very important to every enterprise. Employees
need someone to look to, learn from and prosper with. Leaders have their own
style and tactic. Further, leadership styles and approaches differ due to external
inspirations and personal challenges. To be precise, leaders have same goals
and values to put up with. Here are four ways by which efficient leaders attain
triumph: (I) leaders improve their atmosphere, (II) they know their team and
themselves better than anyone else, (III) leaders sustain an optimistic
approach and (IV) they shape next generation of leaders. (Caramela,
The context within which a manager exercises
his power or decision is limited by two constraints. They are (1) the firm’s
culture and (2) the environment within which the firm works.
Every enterprise has its own unique
character, just like people do. The inimitable character of the enterprise is called
its culture. In groups of people working together, the culture of organization
is an unseen but commanding energy that impacts the performance of the group members.
The culture of an organization is a structure of shared expectations,
values, and views, which direct how people act in organizations. These values
have a solid inspiration on the people in the business and command how they
dress, act and do their works. (McLaughlin, 2018, p. xx)
Employees learn culture through the
stories – a tale of important actions or persons.
rituals – repetitive orders of actions that express and strengthen important
standards and goals.
symbols – communicate an organization’s character.
– detects and unites people in a culture.
Managers can use organizational culture to
change the mode an organization compacts with its environment in the following
with changing environments means altering the organizational culture.
is nothing called “right culture”.
example of changing culture is to change the manner in which organization deals
with clients. This generates a customer-responsive culture.
A company culture can be divided into two:
visible culture and invisible culture.
Visible culture- is the culture of a company whatever is
For eg:- visible culture includes walls,
paintings, pillars and so on of an organization.
Invisible culture- refers to the immaterial sides of culture
that influence how people behave. Values, beliefs, and assumptions of people
are at the core of invisible culture.
The organization functions within the
background provided by various elements of society. All such components lying outside
the organization are called external environment or just an environment. An
Organizational environment can be broken down into two: General and Specific
General environment/mega environment is an
important part of environment. The reason why it is called mega is that it only
states to the wide styles and societies within which an organization functions.
PESTEL analysis is an important instrument that managers can depend up on
to organize factors inside the general environment and to find how these
factors influence industries and the firms within them.
A PESTEL analysis is a plan used
by marketers to study and display the macro-environmental (external marketing
environment) features that have an effect on an organization. PESTEL is
expanded as (Political-Economic-Social-Technological-Environmental-Legal) factors.
Political – political factors are about how and to
what extent a government interferes in the economy. This consists of –
government policy, political steadiness or shakiness in overseas markets,
foreign trade policy, tax policy, labor law, environmental law, trade
restrictions and so on. The list above shows that political factors frequently
have an effect on organizations and how the business is done. Organizations will
have to be able to react to the present and expected future legislation and the
marketing strategy has to be adjusted so.
Economical – these factors impact substantially on how
an organization does business and how much benefit they get. Factors comprise –
growth in economy, rates of interest, rates of exchange, price rises, the disposable
customer income and businesses.
Social –the socio-cultural factors are the areas
that include the shared confidence and attitudes of the population. These consist
of – growth in population, age supply, awareness of health, career attitudes.
These factors are of precise interest as they directly influence on how
marketers recognize customers and what motivates them.
Technological – it’s quite clear how technology changes
and how this affects the marketing of our products. These factors affect the
management in three ways: a) new ways of goods production and services, (b) new
ways of goods distribution and services and (c) new ways of interacting with
– These factors have really
come to the front in the past fifteen years or so. They have become significant
due to the growing shortage of raw materials, pollution targets, doing business
as a moral and maintainable company, carbon footprint targets fixed by
Legal – these include – health and safety, equal
chances, advertising standards, customer rights and laws, product labeling and
product security. It is clear that enterprises need to know what is legal and
what is not in order to trade well. If an organization trades internationally,
this becomes a very complicated area to get accurate as each country has its
own set of guidelines and protocols.
2) Specific Environment
environment or task environment refers to the forces and institutions external to
the enterprise within which it interfaces in the course of conducting business.
Such forces and institutions are openly related to the attainment of goals
because they have a direct and immediate effect on manager decisions and
actions. The specific environment is unique and amends with circumstances. The
important elements are customers, suppliers, competitors and pressure groups.
Customers –of an organization are those persons and
organizations that buy its goods and services. Organizations are there to meet
the customer requirements through which they earn a lot of money. But these
customers have their part in uncertainty to the success of an organization
because of their taste changes, preferences, lifestyles etc. Hence many
organizations are functioning towards improving the quality of goods and
services according to the taste of customers, staying close to the customers
and listening to them of their needs.
Suppliers – firms require different resources such as
raw materials, goods, and services for conducting their tasks. Hence they buy
these resources from several individuals and firms called suppliers.
Competitors – are those organizations that either offer
or have an ability to offer opponent goods or services. It means that it is not
only the existing rivals who are going to be a threat but also potential beginners.
Groups – refer to those
special-interest groups that try to have an influence on the organizational
actions. These groups are able to have an influence on the success of
organizations so that managers must be careful in dealing with them and be
careful in making decisions.
Environment (Specific or Task Environment),” 2010)
Managing a huge
organization like Fonterra is somewhat complicated unless a person is not good
in his managerial skills. Managers are, or are considered as, the persons
responsible for an enterprise’s success as well as downfall. They are the core
of the organization. Managers usually have a group of people to abide by the
decisions and functions they (managers) make. For carrying on the functions of
an organization smoothly, the managers follow certain functions of management:
Planning, Organizing, Leading, Staffing and Controlling. Managers have to keep
in mind of two major constraints that restrict their power – culture and
environment. Culture in an enterprise derives from the national culture, learned
experiences, the type of personality attracted to the organization and
particularly from the founder’s personal values and style. The environment of
an organization is the set of all components which lie outside the firm. The
management of Fonterra is well established as they have the control and
leadership qualities of good management. Fonterra hasn’t lost their reputation
even after falling prey to some controversies because of the well-run
management. Fonterra is a well-built organization only because of the culture
and environment blocks. The management of the firm has tried their best to
maintain the cultural and environmental qualities well so that people have
immense faith in it. The fact that some farmers own the organization is one of
the main reasons why Fonterra is rich in culture and environment.
Management, as we all know, is the nucleus of an
organization due to which it functions successfully. The manager will be
successful when he/she makes a practice of following the basic functions of a
manager, i.e. planning, leading, organizing, staffing and controlling. Planning
is mapping out how to achieve a particular goal. After a plan is in place, a
manager has to organize the team and raw materials according to what was
planned. Leading is how to lead the team members to achieve the target.
Staffing is how the managers recruit required personnel to get the work done.
Controlling is the way by which a manager has a full control of the staff to
follow his commands. A strong foundation of management has helped Fonterra in
reaching the height it is today. There is nothing shocking that Fonterra is in
control of 30% of the world’s total dairy exports.
Organizational culture defines the way by which
employees complete responsibilities and interact with each other in an
organization. The impacts of culture on the organization can be divided into
negative and positive. Impacts of negative culture include: (a) employees work
alone, (b) employees blame each other, (c) not completing targets on time and
(d) ego clashes. Impacts of positive culture include: (a) organizational
targets are achieved on time, (b) employees support each other and (c) friendly
environment due to healthy work culture.
functions inside the background provided by several components of society. All the
components lying outside the body are called external environment or just
environment. Companies are controlled by this environment. Managers must be
able to evaluate the risks from the potential change in their environment and
then plan to either anticipate the changes or react well to them. That is what
can be seen in the case of Fonterra. The management has cop up with the new
trend of skimmed milk, fat-free milk, protein milk, etc. moving apart from just
There are some
things even a dairy giant like Fonterra will ignore which might result in the
bad reputation of the company. In 2013, there arose an issue when China banned the
import of milk powder from New Zealand as there was a scare of the presence of
botulism in it. It is well known that majority of the dairy products from New
Zealand are exported from Fonterra. Though the botulism scare was proven to be
false, the incident impacted heavily on the company reputation.
In the above
case, there were many cases Fonterra failed to look into and so could have
saved their face. Some of them are mentioned below:
· Fonterra was unable to track the affected
· Management of the crisis wasn’t acceptable
for this kind of event.
· Early crisis management wasn’t managed.
· The plan of crisis wasn’t ever been
experimented at a business level.
· Fonterra didn’t apologize.
resulted in losing some faith in the company. If the management would have
managed the situation well, this could have been avoided. In the above
mentioned Fonterra crisis, a manager following the basic fundamentals could
have behaved properly to avoid the loss of reputation to an extent.