Contents Executive Summary....................................................................................................4 Summary....................................................................................................4 Introduction..................................................................................................................5 Introduction ..................................................................................................................5 Problem Statement......................................................................................................5 Statement......................................................................................................5 Delimitations................................................................................................................5 Delimitations ................................................................................................................5 Methodology................................................................................................................6 Methodology ................................................................................................................6 *Data collection.............................................................................................................6 *Models an theories used..............................................................................................6 Source criticism..........................................................................................................7 criticism..........................................................................................................7 Introduction of the company......................................................................................9 company......................................................................................9 *Mission.......................................................................................................................10 *Vision.........................................................................................................................10 *Goals..........................................................................................................................10 Conclusion of the business frame...............................................................................10 nternal anal!sis Value Chain analysis.................................................................................................10 analysis.................................................................................................10 *"esearch and De#elo$ment.......................................................................................11 *%roduction..................................................................................................................11 *Mar&etin'....................................................................................................................11 *(ales and (er#ices....................................................................................................1) *Conclusion of the #alue chain....................................................................................1) Core com$etencies.....................................................................................................1) Supply Chain analysis..............................................................................................1) analysis..............................................................................................1) *ntroduction of the com$an!.............................................................................................. 1) *"a Materials *%rocessin'+ manufacturin'+ com$onents *"esearch and De#elo$ment *nno#ation *,estin' and Certification *,rans$ort *,rans$ort and lo'istics *(tora'e and or'anisation
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*Conclusion.................................................................................................................17 Stakeholder nalysis................................................................................................1nalysis................................................................................................1*dentification of (ta&eholders..................................................................................1*/istin' sta&eholders..............................................................................................1*nternal sta&eholders...............................................................................................19 */ternal sta&eholders.............................................................................................)0 *%otential sta&eholders ............................................................................................)1 *%atents+ certification+ la frames............................................................................)1 *,rans$ortation.........................................................................................................)) Corporate Social !esponsibility..............................................................................)) !esponsibility..............................................................................)) *m$lementin' C("..................................................................................................)) *Dri#ers for commitment...........................................................................................) dentit! and thics................................................................................................) ccountabilit! and trust in C("........................................................................... .)4 %artnerin' ith (ta&eholders................................................................................)4 2eadershi$ and m$lo!ees m$lo!ees Ca$abilities and Com$etencies............................. ..)5 Conclusion............................................................................................................)5 "inancial nalysis.....................................................................................................)5 nalysis.....................................................................................................)5 (3 of (,.........................................................................................................)6 (tren'ths...............................................................................................................)6 ea&nesses.........................................................................................................)7 Conclusion of (3 of (,...............................................................................)7 External nalysis.......................................................................................................)nalysis.......................................................................................................)%orters i#e orces..................................................................................................),hreat of substitutes.............................................................................................),hreat of ne entrants..........................................................................................)"i#alr! amon' e/istin' firms.................................................................................)u!in' $oer........................................................................................................)(u$$lier $oer......................................................................................................)9 Conclusion of %orters i#e orces.......................................................................)9 Competitor nalysis..............................................................................................)9 nalysis..............................................................................................)9 Direct com$etitors.................................................................................................)9 Conclusion of the role of the com$etitors............................................................. #enchmarking analysis......................................................................................... analysis.........................................................................................
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*Conclusion.................................................................................................................17 Stakeholder nalysis................................................................................................1nalysis................................................................................................1*dentification of (ta&eholders..................................................................................1*/istin' sta&eholders..............................................................................................1*nternal sta&eholders...............................................................................................19 */ternal sta&eholders.............................................................................................)0 *%otential sta&eholders ............................................................................................)1 *%atents+ certification+ la frames............................................................................)1 *,rans$ortation.........................................................................................................)) Corporate Social !esponsibility..............................................................................)) !esponsibility..............................................................................)) *m$lementin' C("..................................................................................................)) *Dri#ers for commitment...........................................................................................) dentit! and thics................................................................................................) ccountabilit! and trust in C("........................................................................... .)4 %artnerin' ith (ta&eholders................................................................................)4 2eadershi$ and m$lo!ees m$lo!ees Ca$abilities and Com$etencies............................. ..)5 Conclusion............................................................................................................)5 "inancial nalysis.....................................................................................................)5 nalysis.....................................................................................................)5 (3 of (,.........................................................................................................)6 (tren'ths...............................................................................................................)6 ea&nesses.........................................................................................................)7 Conclusion of (3 of (,...............................................................................)7 External nalysis.......................................................................................................)nalysis.......................................................................................................)%orters i#e orces..................................................................................................),hreat of substitutes.............................................................................................),hreat of ne entrants..........................................................................................)"i#alr! amon' e/istin' firms.................................................................................)u!in' $oer........................................................................................................)(u$$lier $oer......................................................................................................)9 Conclusion of %orters i#e orces.......................................................................)9 Competitor nalysis..............................................................................................)9 nalysis..............................................................................................)9 Direct com$etitors.................................................................................................)9 Conclusion of the role of the com$etitors............................................................. #enchmarking analysis......................................................................................... analysis.........................................................................................
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Conclusion............................................................................................................5 PES$ nalysis........................................................................................................6 nalysis........................................................................................................6 %olitical actors....................................................................................................6 %romotional acti#ities............................................................................................6 inancial acti#ities.................................................................................................6 conomic actors.................................................................................................7 (ocial actor.........................................................................................................7 ,echnolo'ical........................................................................................................9 Conclusion %(,..................................................................................................40 %&$ of S'%$.........................................................................................................40 S'%$.........................................................................................................40 $$ortunities........................................................................................................40 ,hreats..................................................................................................................40 Conclusion of 3, of (,................................................................................40 Strategy......................................................................................................................41 Strategy ......................................................................................................................41 %ositionin' (trate'!.................................................................................................41 %ositionin' decisions................................................................................................4) Mar&etin' Mi/ 4%8s.............................................................................................................................4) Conclusion...................................................................................................................4 "ecommendations......................................................................................................45 (ource 2ist...................................................................................................................46
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Executive Summary Arla is a company that moves from one success to another success as well as from one crisis to another crisis. While growing and expanding Arla steps on many toes which builds opposition against the possibility Arla to become a monopolist. monopolist. Arla Arla is a monopoly in 3 countries so far. In Danish law there is nothing about cooperatives. It will be heard for Arlas opponents to stop Arlas Arlas expanding worldwide though they might succeed in !". #ne of the crises led to a consumer boycott of Arla products in the $iddle !ast and Arla is a company that moves from crisis to crisis. After widespread widespread criticism in Denmar%& many Danes seemed seemed to li%e Arla tried to apologi'e on behalf of Denmar% ( Arla 2))*+ . ,he criticism has been both politically and consumer consumer based and and Arla Arla has had and and will still relate to political criticism& lawsuits and a poor image i mage among some consumers. $any cases were started against Arla but somehow in the end the company in most if not all cases cant be affected at all. Due to possible restriction regarding regarding its growth in !"& Arla have to start expanding globally in order to be able to sell all the mil% produced in the cooperative. -hinese mar%et is very interesting for Arla for a few reasons. -hina is polluted and the mil% is affected as well& so -hina needs a big supplier of pure dairy product as Arla with a reasonable price. ,he second is that -hinas -hinas government which represents the country country and ta%es decisions is a huge client which is worth %eeping satisfied on the long run. y targeting -hinas middle middle class Arla is aiming to the biggest mar%et segment of customers with buying options in -hina. /till due to Arla0s mar%etleading status is not uncommon to hear people say that they deliberately avoiding Arla0s Arla0s products when shopping& for example. In one internet debate on ordys%e /tiftstidende /tiftstidende after Arla0s Arla0s ac4uisition of 5irtshals $eeri where 6unte ielsen writes 7 ,here will never be mil%& etc. on the table from Arla in this house& hope many will boycott them.8 (ordys%e (ordys%e /tiftstidende 2))*+ 2))*+ . #n the popular popular networ%ing site 9aceboo% 9aceboo% & was there even created the group 9or people who are against the merger of Arla and 5irtshals Andelsmeeri. ,he group has in writing& and long after the transaction tr ansaction is a real :&11 :&11;; members ( 9aceboo% 2))*+ . It is a bit confusing if we admit that Arla is actually a company living of consumers. #ne of the targets for Arla could be wor%ing on building a more positive image in !urope and ust retaining its mar%et share without being too aggressive with farmers and retailers and focusing on global expansion in areas where Arla can build a stron brand image from a scratch and avoid any possible negative steps in building a stable ground for growth.
Introduction to Arla Arlas net revenue is D<< =3.1 billion& of which >2 per cent comes from Arlas Arlas core mar%ets of "<& /weden& Denmar%& ?ermany& ?ermany& 9inland and the etherlands. Arlas Arlas profit for the last year is D<< D<< 1.* billion. :
Arla 9oods is a global dairy company and a cooperative owned by dairy farmers with production facilities in 12 countries and sales offices in a further 3)& with a total of more than 1@&))) employees. ,he mil% wheel is a snapshot of Arlas business model. Arlas owners are Arlas /uppliers. In other words& mil% is both commodity and growth engine. ,he more mil% there is in the wheel& the more power is supplied to the engine and the greater the company0s growth. $il% is what drives the companys earnings and fuels its opportunities to innovate& its product development& branding and efficiencies. !arnings& however& are a precondition for attracting mil%. ,he performance price is therefore Arlas ultimate goal. After our 2)12 mergers& Arla weighs in 12.; billion %g mil% each year. $easured by weighedin mil%& that ma%es us one of the worlds biggest dairy companies. /till Arla struggles as every big company with its growth. !ntering new mar%ets on new continents is uneasy tas% while trying to %eep a high level of satisfaction for the existing customers. With respect to its efforts today we will evaluate the companys innovative options& we will share some recommendations& we will go through identity areas and possibilities for improvements by ma%ing a few %ey analyses. Arla sells full range dairy products and different beverages in orthern !urope and exports high 4uality cheese& butter and mil% powder products all over the world. ,he Arla brand is both corporate brand and brand across all product categories. httpBBwww.arla.comBAboutusB
Arlas products are sold under the well%nown brands ArlaC& 6urpa%C and -astelloC in more than 1)) countries and our core mar%ets are Denmar%& /weden& ,he "<& 9inland& ?ermany and ,he etherlands.
,hrough the close to nature concept& Arla is committed to ma%e products free from artificial coloring and flavoring and limit our use of additives. 9ood additieves are becoming a serious anemy with many side effects. According to the latest researches they might lead to 5DID (autism+ in %ids and adults as a form of food allergy resulting in disconnection in neuron impulses in the brain of humans. Arla is the worlds largest organic dairy company.
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et turnover 2)12 DKK 63.1 billion
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$il% weighed in 10.4 billion kg
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-ooperative owners& an. 2)13 1!"6
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umber of employees& an. 2)13 1#!11 1 httpBBwww.arla.comBAboutusB
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$roblem %tatement -an Arla successfully enter -hinese mar%et with -ocioC mil%sha%echocolate drin%E 1. 2. 3. :. ;.
What are Arlas strengths and wea%nessesE Who are the potential competitors and how is the competition situationE What external problems can Arla meet when entering -hinese mar%etE Who are the potential customersE 5ow the concept of the product can be improvedE
Delimitation% As -hina is a very big mar%et& we narrowed down our research to a concrete area. At this proect we observed entering eiing F the capital of -hina. At our proect& we decided to enter -hinese mar%et with one of Arla 9oods brand F -ocio.
&ocio -ocio is a brand that lies under Arla 9oods. /ince 2))@ -ocioC was ac4uired by Arla 9oods. -ocio products are made from fresh mil%& the best chocolate from Africa and plain sugar. In early 1*;)s -ocio was found by An%er Gallesen from !sberg after a visit to the "/ which inspired him to start a production of chocolate mil%. /ince then there have been many varieties of chocolate drin%& with -ocio 6ight and the organic version of -ocio as popular additions to this classic range. As the product grew in popularity& the factory had to be expanded and later relocated to accommodate the increased production. #ver the years& exports grew and in 2))1& a new and modern factory was built to accommodate the approximately :))&))) -ocio bottles leaving the production lines every day. -ocio is produced at a factory in !sberg& Denmar%. It is sold in Denmar% and also exported to orthern ?ermany& orway and Iceland 1.
'et(odology ,o elaborate on and solve the problems we used the methods and models listed below.
Data collection De%k re%earc(
/econdary data 1 httpBBwww.arla.comBbrandsBeveragesB-ocioB =
-ompany specific data the companys website& internet& boo%s Industry specific data internet to find the necessary information about the industry& competitors -ountryBmar%et specific data official statistics to find and gather the information about political& economic& social& cultural factors )ield re%earc(
Grimary data $ar%et specific data personal phone calls
'odel% an t(eorie% u%ed
,he companys business frame mission& vision& goals& core competencies F to understand the values and the direction of the company. Halue chain to examine the activities that ta%e place in the business and to determine how value in each function is created. /upply chain F to understand how natural resources& raw materials& and components can be transformed into a finished product that is delivered to the end customer. /ta%eholder analysis F to identify the individuals or groups that are li%ely to affect the business. -/ F to see the vision of the business accountability. 9inancial analysis F to evaluate the companys financial situation. /W#, F to evaluate the strengths and wea%nesses of the company& and see the opportunities and threats within the mar%et. Gorters ; forces F to analy'e five competitive forces that shape the industry. -ompetitor analysis F to identify the potential competitors in the mar%et and to evaluate their strengths and wea%nesses. G!/, F to evaluate macroenvironmental factors within the particular mar%et. Gositioning strategy F to understand how the product should be positioned and what strategy should be used. $ar%eting mix F to determine the products and brand0s offer
Source critici%m * Books:
Blue Ocean strategy: How to create Uncontested Market Space and make the Competition Irrelevant, ! "im, #enee Mau$orgne, %&&'
>
! "im is (he Boston Consulting )roup Chair *ro+essor o+ Strategy and International Management at IS-./! #enee Mau$ourgne is the IS-./ /istinguished 0ellow and a *ro+essor o+ Strategy and Management!
-ntrepreneurship: Success+ully 1aunching ew 2entures: 3rd edition written $y Bruce #! Barringer and #! /uane Ireland!
Bruce #! Barringer is a pro+essor in the department o+ management at the University o+ Central 0lorida and #! /uane Ireland is a pro+essor o+ management at (e4as . 5 M University! Both o+ them are e4perts in entrepreneurship and management! (he $ook is pu$lished $y *earson and has $een revised $y educators +rom .sia, -urope, South .merica, .ustralia and the Middle -ast!
Marketing Strategy 5 Competitive *ositioning: ritten $y )raham Hooley, 6ohn Saunders, igel *iercy!
(his second edition e4tends the scope o+ the original to include a num$er o+ new topics in marketing strategy! (he main trust o+ the te4t remains competitive positioning, $roadened to cover other aspects o+ competitive marketing strategy as strategic alliances and networks o+ development, +orecasting methods and techni7ues, competing through service and innovation and the role o+ internal marketing in achieving competitive success! .uthors are pro+essionals within 8eld o+ marketing, research and strategy and they are teaching at .ston Business School and Cardi9 Business School in University o+ ales!
Management accounting, 2ol! , 8nancial management and planning ;with 8nancial and marketing perspective<, written $y -rik "roggarger and 6ette 1aurit=en!
(he $ook covers > sections: key $usiness, 8nancial and economic issues within a marketing +ocused company? accounting, /anish law and 8nancial reporting? a +ramework +or analysing and interpreting 8nancial statements? an introduction to 8nancial management systems! -rik "rogager he has $een Senior 1ecturer and Business consultant at 1yng$y Business College since @@A! He worked as /irector o+ 0inance +or companies in -ngland and US.! 6ette 1aurit=en $een a senior lecturer at 1yng$y Business College since @@&! Besides 6ette 1aurit=en is teaching at the CBS and the /anish School o+ *u$lic .dministration!
Business .nalysis (echni7ues: A% -ssential (ools, 6ames Cadle, /e$ra *aul, *aul (urner, @
@
6ames Cadle has $een involved in the 8eld o+ $usiness systems over 3& years! /e$ra *aul ointly edited the $estselling BCS pu$lication Business .nalysis in %&&D! *aul (urner specialises in the provision o+ training and consulting in the areas o+ Business .nalysis and Change!
6ames *ost, 1ee *reston and Sy$ille Sachs ;%&&%, Managing -4tended -nterprise, (he new stakeholder 2iew
(his $ook presents a stakeholder view o+ the corporation in $oth theoretical and practical terms! Its central proposition is that organi=ational wealth is created ;or destroyed< through a corporationEs interactions with its stakeholders! -9ective stakeholder management develops and utili=es relationships $etween a corporation and its stakeholders +or mutual $ene8t, there$y accomplishing the +undamental purpose o+ wealth creation! 6ames -! *ost, *h/, 6r! *ro+essor o+ Management at Boston University where he teaches strategic management, corporate governance, ethics and nonpro8t management, he is an author and coauthor in more than %& pu$lications and $ooks! 1ee *reston is an author o+ many pu$lications imprinted $y Stan+ord University *ress! Sybille Sachs is a *ro+essor at the University o+ Furich, Swit=erland and Head o+ the Centre +or Strategic Management: Stakeholder 2iew Websites and other: (o get in+ormation a$out .rla we used the oGcial we$site o+ the company and gathered the in+ormation +rom their presentation, annual rapport %&% and materials a$out .rla as articles! e contacted the company through e mails and $y calls! .rla looks well organi=ed and cooperative $ut they re+use to cooperate with students and help +or their proects as long as they are not interns in the company, still they have a special link on the we$site in -nglish which is a a great gesture o+ good will to people researching +or .rla! Still it limits the opportunity the research to $e +undamental as long as it is one sided view! .dditionally we gathered in+ormation +rom competitor we$sites, where they, o+ course, emphasi=ed only good things a$out their companies, there+ore we looked +or customer reviews and re+erences through di9erent we$sites and then we have remained a $it con+used o+ the +act that .rla is having a strong group o+ people who dislike .rla and itJs products! Customer re+erences cannot $e perceived as &&K truth, $ecause at the same time these Lcustomers can actually $e competitors who ust want to make a $ad reputation o+ other 8rms still are all the over >&&& antigroup on 0B compatitors! e donJt think so, they are too many to $e +alse! e looked upon more than one news portal as sometimes at news sites rumors or +alse in+ormation can $e written!
*
e also used several we$sites as virk!dk and 1inkedIn well known and relia$le portal in /enmark, where we could 8nd $usiness and employment related in+ormation e used (he orld 0act$ook! (his source is popular and relia$le and provides in+ormation on the history, people, government, economy, geography, communications, logistics, innovation, etc!
'i%%ion ,o secure the highest value for our farmers mil% while creating opportunities for their growth2.
+i%ion -reating the future of dairy to bring health and inspiration to the world& naturally3.
Strategy 1. ,o develop the core business to achieve the full potential of leading positions by becoming more advanced throughout Arla. 2. ,o create the growth outside !"& mainly focusing on ussia& -hina& the $iddle !ast and Africa. 3. ,o become more effective by establishing new relationships& utilising production capacity better& reducing consumption of energy and water and avoiding waste :.
+alue% 6eadsensecreate is the way how Arla values can be characteri'ed. ,EAD ta%ing the lead& being in the drivers seat in all our actions. It is about
being passionate& striving for leadership and identifying the highest potential in our people& business and relationships. SE-SE perceiving people& consumers and the world around. It is about
showing integrity& having an open mind& seeing opportunities and high potential in people& business and relationships.
2 httpBBwww.arla.comBAboutusBstrategy2)1>B$issionB
3 httpBBwww.arla.comBAboutusBstrategy2)1>BHisionB
: httpBBwww.arla.comBAboutusBstrategy2)1>B/trategyB 1)
&EA/E developing and being creative in ac4uiring expertise& products and
mar%et relationships. It is about creating and developing strong potential in people& business and partnerships;.
&onclu%ion Arla fallows their mission F to create the highest value to their farmers. ,hey have established close connections to farmers. 9armers are involved in regular wor%shops& where important factors are absorbed and discussed as greenhouse gas emissions& effect of farms on the local environment& animal welfare& feed& waste& farm economics& wor%ing conditions =. $oreover& to achieve Arlas vision they have adopted the philosophy J-loser to nature8 which stands for product naturalness& reduced waste and improved resource utilisation. As well as& Arla adopts ArlagKrden 4uality programme which concentrates on four cornerstones mil% composition& food safety& animal welfare and environmental concerns thus ensuring healthy dairy products that help people to improve their health. egarding Arlas strategy& Arla has recently established relationships with partners in -hina F $engniu and -#9-# and the -hina agreement is a forward loo%ing initiative intended to move members mil% from !urope to -hinas growing middle class in the long term >. $oreover& Arla is using #G!L& 6ean& total cost of ownership and design to value programmes& to become more effective& to reduce waste as well as to simplify their business model and to ensure clear lines throughout organisation. Arla has based their values on a leadsensecreate base& where they note that they have to be responsible for their actions& strive for leadership& sense people around Arla and create products that are clean and would meet customer needs and desires.
Internal analy%i% +alue c(ain Halue chain is a model that helps to identify opportunities to enhance firms competitive strategy. y loo%ing at value chain& an organi'ation can identify ways to create additional value and assess whether it has the means to do so @.
; httpBBwww.arla.comBAboutusBstrategy2)1>BHaluesB
= httpBBwww.arla.comB/ustainabilityBclosertonatureB9armB
> httpBBwww.arla.comBImagesBarla.comBGD9BannualreportB2)12B!?M2)12.pdf pp 2> 11
At each stage of the value chain exists an opportunity to contribute positively to the firms competitive strategy by performing some activity or process in a way its better than the competitors& and so providing some uni4ueness or advantage *.
e%earc( and develoment Arla has one of the biggest mil% volumes in !urope in 2)13 1). Arla merged together with $"5 and $il% 6in%& and the production weigh in 12.; billion %g mil% in 2)12 and have thereby aggregated one of the biggest mil% volumes in !urope 11. Arla has adopted ArlagKrden 4uality programme as an investment in the future& which emphasis on mil% composition& food safety& animal welfare and mil% 4uality which in turn results in improved products. Implementing development programmes as 6ean and #perational !xcellence (#G!L+N ,otal -ost of #wnership and Design ,o Halue and /tructural streamlining to simplify their business model and ensuring clear lines throughout the organisation. Arla is using ecofriendly and energysaving initiatives& among other things& using excess heat and biogas plants& optimisation of routes for the collection of mil% and shipping of goods to save fuel12. Arla has a /trategic Innovation -entre that focuses its resources in different research areas as sustainability& new food forms& mil% power& microbiology& manufacturing efficiency& and& moreover& Arla has established different research partnerships with institutions in Denmar%& /weden& "nited
* 9randsen ,.& /alesP$ar%eting& A of International /alesP$ar%eting $anagement& !dition 1 2)13& pp 1;>
1) httpBBwww.arla.comBImagesBarla.comBGD9BannualreportB2)12B!?M2)12.pdf pp *
11 httpBBwww.arla.comBImagesBarla.comBGD9BannualreportB2)12B!?M2)12.pdf pp 1)
12 httpBBwww.arla.comBImagesBarla.comBGD9BannualreportB2)12B!?M2)12.pdf pp 2;
13 httpBBwww.arla.comBAboutusBesearchandInnovationBesearchpartnershipsB 12
$roduction ,he maority of Arlas products have always been free of artificial ingredients and additives and they have reviewed the contents of all of the products and are wor%ing consistently to ma%e them as natural as possible.1:. Arla is focusing on costs with cost and efficiency programmes (#G!L& 6ean& total cost of ownership and design to value& structural streamlining+ to simplify Arlas business model& streamline production and optimise processes 1;. Arla closely wor%s together with farmers who are willing to invest in their own mil% production and therefore in the business. Arla is owned by 12 3)) !uropean members in six countries who together lift a business with global ambitions1=.
'arketing Arla has revised their strategy by putting more focus on a global scale. ,he !"s mil% 4uotas& which will be eliminated in 2)1;& are one of the driving forces behind the initiative. ,hey have developed a concept of OArla 9oods /trategy 2)1>8 that they are willing to achieve till 2)1>. ArlagKrden 4uality agreement is expected to have a positive impact on Arlas members mil% price because Arla can perform a far higher degree of processing of mil% that will alternatively be sold in the global industry mar%et where earnings have historically been lower. Arla is positioning their dairy products as clean and safe by using philosophy Q-loser to atureR. ,his philosophy represents product naturalness& reduced waste and improved resource utilisation. It obligates Arla to ensure that our products are as natural as possible& that the mil% is produced at farms in harmony with nature& and that Arla0s own processes have minimum impact on nature and the environment1>. !cofriendly plastic bottles in "<& to reduce -#2 emissions and improve companys efficiency and competitiveness1@.
1: httpBBwww.arla.comB/ustainabilityBclosertonatureBGroductsB
1; httpBBwww.arla.comBImagesBarla.comBGD9BannualreportB2)12B!?M2)12.pdf pp 1:
1= httpBBwww.arla.comBImagesBarla.comBGD9BannualreportB2)12B!?M2)12.pdf pp 1)
1> httpBBwww.arla.comBImagesBarla.comBGD9BannualreportB2)12B!?M2)12.pdf pp 23 13
Sale% and %ervice 7?et -loser to ature7 internal involvement programme was %ic%ed off by a wor%shop in Arlas executive management team. ,he campaign is still running and helps to create a common understanding of what the company is hoping to achieve1*.
Whistleblower programme for employees that will provide colleagues with yet another option to react if they see managers or colleagues violating Arlas -ode of -onduct or other policies2). Arla closely wor%s together with their suppliersSfarmers. Arla is owned by 12 3)) !uropean members around six countries Denmar%& /weden& ?ermany& 6uxembourg& elgium and "<. ,he profits from Arla results go to their owners the dairy farmers. It is only by ensuring a high mil% price for the owners that dairy company can remain strong and produce enough mil% so that they can live up to the ambition to ma%e healthy& natural mil% products21.
&onclu%ion o t(e value c(ain Arla has one of the biggest mil% volumes in !urope in 2)13 after merging with $"5 and $il% 6in%. And as we found& Arla owns 1.>T mar%et share of worlds mil% production and is on the =th place of I9- ,op 2) mil% processors list 2)12.
Arla has adopted ArlagKrden 4uality programme which emphasis on mil% composition& food safety& animal welfare and mil% 4uality which in turn results in improved products. ,his 4uality programme is well perceived internationally& for example& the main reason why -hina $engniu Dairy has chosen to cooperate with Arla is because they have adopted ArlagKrden 4uality programme. Arla is focusing on cost savings with different cost and efficiency programmes as #G!L& 6ean& total cost of ownership and design to value and structural streamlining. Arla is positioning their dairy products by using philosophy J-loser to ature8 ensuring clean and safe production. 1@ httpBBwww.arla.comBImagesBarla.comBGD9BhalfyearreportB2)13BA6AM5A69U!A T2)!G#,M2)13M"<.pdf pp 1>
1* httpBBwww.arla.comB/ustainabilityBclosertonatureB-olleaguesB
2) httpBBwww.arla.comBImagesBarla.comBGD9BannualreportB2)12B!?M2)12.pdf pp 23
21 httpBBwww.arla.comB/ustainabilityBclosertonatureB-olleaguesB 1:
Arla is wor%ing closely with their suppliers who are also Arlas owners& therefore they are more engaged in the business and inwilling to invest in their own mil% production. $oreover& Arla has adopted whistleblower programme which creates favorable wor%ing conditions for their employees they %now that in case if they see managers or colleagues are violating -ode of -onduct or other policies& they can report and be heardV
&ore cometence% y loo%ing at Arlas value chain we distinguished Arlas core competences F a uni4ue ability that a company develops and that cannot be easily imitated. -ore competencies are what give a company one or more competitive advantages& in creating and delivering value to its customers22.
ArlagKrden 4uality programme Arlas philosophy O-loser to nature8 -lose collaboration with farmers
Suly &(ain analy%i% Arla is the first cooperative in the world with owners in = different countries. -orporate /upply -hain handles contact with owners& global supply chain efficiency. ?lobal -ategories P #perations has general responsibility for Arlas three global brands F ArlaC& 6urpa%C and -astelloC F and responsibility for global innovation& 4uality and environment. ,his business area also handles mil% planning and logistics& industrial sales& production of cheese& butter and spreads and mil% powder in /candinavia& as well as production of cheese in ?ermany (formerly Allguland+ under the management of ais Haleur. /ubsidiaries wholly owned by Arla Arla 9oods Ingredients& yn%eby and 9oods& -ocio and Dairy 9ruit. Arlas value and supply chains are complementary views of an extended business integrating processes flowing in the company and around it. 9or Arla both chains overlay the same networ% of companies. oth are made up of companies that interact to provide goods and services. /till when we tal% about supply chains& however& we usually tal% about a flow of goods and supplies from the source to the customer. Halue flows the other way. ,hus& the primary difference between a supply chain and a value chain is a shift in focus from the supply base to the customer. /upply chains focus on integrating supplier and producer processes& improving efficiency and reducing waste& while value chains focus on creating value in the eyes of the customer.
22 httpBBwww.businessdictionary.comBdefinitionBcorecompetencies.htmlXix''2mnb/5>? 1;
Arlas supply chain activities are connecting its products and the companys performance and interaction with the world& the whole bond from raw materials to supply and closing the chain with recycling possibilities. Its a chain among and within such areas as purchasing& logistics& manufacturing and mar%eting& responsibilities to the environment and all partners the company is interacting with within and out of the company. Arlas supply chain is long& very long. It starts with a farm and ends up on the table. ,here are also many elements that we can focus on spea%ing of Arlas /upply -hain.
6ogistics In relation to both customers and suppliers& which in turn may include both purchases and sales& transportation& etc. and control of internal flows of materials and commodities in the form of eg production planning. 9urthermore& one can see it both in a national and an international perspective& so it0s a huge area. httpBBwww.arla.comBImagesBarla.comBGD9BaboutusBlogisti%presentation.pdf
I might also simply start by loo%ing at given mil% and its way from cow to consumer. ,hen you could identify all the issues relating to /upply -hain $anagement& as you can see and consider how they can best be handled. I am sure that even it can become 4uite a tas%. ,he mil% wheel is a snapshot of Arlas business model. Arlas owners are the Arlas suppliers. In other words& mil% is both commodity and growth engine. $il% is what drives the companys earnings and fuels its opportunities to innovate& its product development& branding and efficiencies. !arnings& however& are a precondition for attracting mil%. ,he performance price is therefore Arlas ultimate goal. After 2)12 mergers& Arla weighs in 12.; billion %g mil% each year. $easured by weighedin mil%& that ma%es us one of the worlds biggest dairy companies. ,he maority of cooperative members in "nited
a2 material%
aw mil% in million of %ilos Denmar% :&:1* "< 2&3:2 /weden 2&);* ?ermany *1> 9inland 22= etherlands 2)) elgium ;3 6uxembourg 2> #ther countries 1== ,otal 1)&:)*
,he role of the mil% is vital for Arla as long as the 4uality and price of the mil% is the %ey to securing an optimal performance price and product values as taste& consistency and nutrition levels. Processing, manufacturing, components/ Research and Development, Testing and Certication:
Arla wor%s with suppliers from all over the world. All of them are a smaller parts of the chain and they all have impact on the 4uality and ethical obligations.
7We challenge and encourage our suppliers to support us in our efforts to abide by our code of conduct. 7 httpBBwww.arla.comBdaBaredygtighedBHoresAnsvar1BInd%obB
Arla strives to ensure that our suppliers comply with the re4uirements set out in our -ode of -onduct.
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Arla re4uires that all employees are aware of and follow our guidelines for procurement and understand the need for ethical behavior.
All of the Arlas suppliers are selected on a high professional& systematic and standardi'ed basis. ,he negotiation process with all suppliers is direct& based on honesty& always fair. Arla always collect the goods ordered on time and even if they are overproduced in almost most cases Arla cares about the overproduction as well and always pays on time which ma%es the company reliable and internally stable. ,hen why for some Arla is a -roo% and how this might affect the companys future in the process of international growth we can only guess.
(tt*222.arla.comdaaredygtig(ed+ore%5An%var1Indkob Alication% •
a%ery
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/ran%ort! ,ogi%tic% 6ogistics in relation to both customers and suppliers& which in turn may include both purchases and sales& transportation& etc. and control of internal flows of materials and commodities in the form of eg production planning. 9urthermore& one can see it both in a national and an international perspective& so it0s a huge area. Arla 9oods wants to operate in Denmar% most efficient and serviceoriented logistics system& primarily focusing on dairy and other highfre4uency refrigerated goods. We want our customers perceive us as a competent partner that sets focus on optimi'ing service and minimi'e costs throughout the supply chain. 1@
Arla 9oods0 strengths in logistics !lectronic (!DI+ and $anual order ta%ing /hort order cycle (order is placed today at 1@.)). Y Delivery the next day before noon Y !arly delivery (>;T of the stores start up *.)) ocloc% in the morning+ Y Glanning& storage and shop dispatching Y 5ighfre4uency refrigerated goods from external suppliers Y 5igh degree distribution of the Danish grocery sector Y !ffective systems for product management& route planning and followingup elevant basic data umber of deliveries per wee% day 2&==@ shops umber of delivery points 3&1); shops :.: million. rolling pallets B year (S 2.@ million. !uro pallets+ Holume (of which approx. 3;T goods from external suppliers+ Drove miles per year 2@&@2=&))) %m Drivers ;;2 efrigerated truc%s for distribution 2>> -old storage& divided into : terminals :;&*)) mZ 9at 33 million. %g B year -heese production ;; million. %g B year Drin%ing mil% production =:; million. liters B year • •
httpBBwww.arla.comBImagesBarla.comBGD9BaboutusBlogisti%presentation.pdf httpBBwww.arla.comBdaB#mArlaB9orstuderendeB9A[B6ogisti%ogsupplychainB
Innovation Develoment Advanced technologies are li%ely to be partly attributable to technological change& both internal and external to the firm. !conomies of scale often apply in cases of large investment items within the firm& li%e hightechnology processing systems& information technology particularly those that are bar codeFbased+& pac%aging systems& logistics& and brandbased mar%eting. !conomies of scale also apply to nonFinvestmentrelated items such as promotion 1*
and mar%et research. ,echnological forces external to the firm include the availability of reduced transport costs and rapid advances in information technologies.
,he consumer is the heart& the core of all Arlas activities. #nly by serving the %nown and yet un%nown F can meet the needs of Arlas consumers. Arla will continue to secure its position in !urope through meeting its customers needs while as a parallel activity develops business in $iddle !ast& orthern Africa& ussia and -hina. Innovation as an absolute top priority at Arla with main focus on balancing partial and radical innovation across the business with a primary target that 1)T of our turnover should come from new product development.
/pea%ing of adical innovation it all is about offering the consumer completely new and surprising categories of dairy products. adical innovation is a clear departure from existing practices and user experiences. Incremental innovation is gradual improvements within existing& defined areas.
Another maor focus will Arla puts on establishing strategic partnerships with universities& research organi'ations& suppliers and other private organi'ations which fuels Arla with external expertise and new perspectives.
httpBBwww.arla.comBAboutusBesearchandInnovationB #ne of Arlas teams of food scientists is created of Innovation 'anager
$anages Innovation team(s+ and resources within the function and translates obectives& goals and decisions to provide effective Innovation procedures& policies and processes supporting Arla 9oods0 business needs. e%earc( /ec(nician
-onducts chemical& physical and biological tests to support the scientific and technical development of Arla 9oods products and processes. Garticipates in the development of new measuring methods and ensures that all relevant 4uality standards and re4uirements are met.
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,aboratory A%%i%tant
Analyses and evaluates products and materials to chec% and analyse results and ensure that 4uality and approved analysis standards are met.
httpBBwww.arla.comBobandcareerB$eetArlaB#urbusinessBInnovationDevelopmentB
Storage,ocation%! organi%ation! %tructure Arla offers cold storage always in its own facilities and truc%s with cooling systems.
&ororate &entre and 7lobal u%ine%% Service%
?lobal tas%s& which extend across the entire organi'ation& are handled by four global business services& -orporate Affairs& -orporate 9inance P I,& -orporate /upply -hain and -orporate 5uman resources functions which are responsible for longterm development and provide operational support. Arla )ood% u%ine%% 7rou%* 7&8* 7lobal &ategorie% 8eration%
?-# has overall responsibility for the three global brands ArlaC& 6urpa%C and -astelloC ,he business group also handles mil% planning& international logi%tic%& trading& 21
production of butter and spreads (/$+& cheese and mil% powder. ?-# wor% in close collaboration with -/!& -D<& -"<& -? and -I. &I-* &on%umer International
-onsumer International (-I+ covers all mar%et and retail sales responsibility outside Denmar%& /weden& 9inland& the "<& ?ermany and the etherlands for cheese& butter P spreads and mil% powder. &9K* &on%umer 9K
-overs production and logistics of fresh mil%& butter and fermented products in the "<& as well as mar%et and retail sales responsibility in the "<. &SE* &on%umer S2eden )inland
-overs production and logistics of fresh mil% and fermented products in /weden& as well as mar%et and retail sales responsibility in /weden and 9inland. &DK* &on%umer Denmark
-overs production and logistics of fresh mil%& "5, and fermented products in Denmar%& as well as mar%et and retail sales responsibility in Denmar%. &7-* &on%umer 7ermany -et(erland%
-overs production and logistics in ?ermany and the etherlands& as well as mar%et and retail sales responsibility in the two countries.
Among our 100: o2ned %ub%idiarie% Arla (a% t(ree %igniicant and %trategic %ub%idiarie%* •
Arla 9oods Ingredients ?roup GB/
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yn%eby 9oods AB/
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-ocio -ho%oladem\l% AB/ -ountries and areas where the company operates
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Denmar% 9inland ?ermany /weden ,he etherlands "nited
?lobal procurement and investments under the management of Govl
!ocations and o"ces: Arla 9oods 5eadoffice& Denmar%&Arla 9oods Ingredients&
5eadoffice& Denmar%& Arla 9oods -openhagenN A%afaN ArincoN ir%um -heesN islev Dairy& Denmar%N rabrand Dairy& Denmar%N randerup Dairy& Denmar%N -hristiansfeld Dairy -enteN Danmar% GroteinN !sberg DairyN ?esing DairyN 5obro Dairy -enterN 5ocoN 5olstebro -ream -heeseN 5olstebro DairyN5`gelund Dairy&
Sale% and %ervice% Arla is strong in 2. Among her leading customers are governments. In connection with the crisis during the last few years all mar%ets developed more negatively than anticipated. ,he downturn for Arla is primarily a result of an unexpected increase in global mil% production& which depressed prices. 5owever& it was also due to general caution among !uropean consumers brought about by the economic situation. httpBBwww.%unde.d%BcasesBclosertonatureT!2T@:TA2.aspx $ar%eting and -/ Gollution and waste responsible ecovery and recycling 23
Stake(older Analy%i% /ta%eholders analysis provides the innovation side in a better understanding of the needs Arla might meet and the optimal ways to address it. 9rom this analysis we will try to understand and describe the process of identifying %ey sta%eholders and isolating their perceptions about a defined need.
Identiication ,he concept of the sta%eholder was first used in 1*=3& at the /tanford esearch Institute. It defined sta%eholders as ,hose groups without whose support the organi'ation would cease to exist23. It was further developed in the 1*@)s by !dward 9reeman and has subse4uently been widely accepted in the business community. ,he relationship is lin%ed between an organi'ation and its sta%eholders& particularly in relation to ris% and reward Gracticing managers and management scholars recogni'e the critical interdependencies that exist among a firm& its employees& customers& investors& communities& and constituencies. $oreover& they recogni'e that such dependencies cannot be described in terms of simple contractual exchanges& but involve interactions and networ% effects. ,he sta%eholders in a corporation are the individuals and constituencies that contribute& either voluntarily or involuntarily& to its wealthcreating capacity and activities& and that are therefore its potential beneficiaries andBor ris% bearers
Exi%ting %take(older% Deining Arl%;% &ororate &ommunication level% by*
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focus inwardly upon developing a business culture focus outwardly upon providing more value for customers by matching the organisation and its strengths meet customers0 needs.
Greviously& organi'ations communication could be broadly categori'ed as mar%eting communication& organi'ational communication& or management communication. In each category had its own specific target audiences and flowed from specific organi'ational ‟
23 . !dward& 9reeman& eed& David 6. -alifornia $anagement eview& /toc%holders and /ta%eholders A new perspective on -orporate ?overnance& 1*@3& page @@1)=
2:
sources (van iel& 1**; 2+. ,oday& however& a new media environment& increased audience fragmentation& new communication technologies as well as new crossfunctional organi'ational roles and departments have changed this orderly arranged picture. In practice this means that communication now flows from a range of different organi'ational sources& and it is argued that this might negatively affect the organi'ation OIn practice& the large variety of internal communication Jsources can lead to fragmented& sometimes even contradictory& external manifestations of the company as a whole8 (van iel& 1**; 3+. ,herefore& a need for coordinating all forms of corporate communication has emerged. A definition encompassing this view and pointing to the goal of corporate communication is presented below Apart from this criticism& there seems to be a conflict between the integration ideal of corporate communication F including the entailed need for organi'ational control F and current ideals of dialogue and sta%eholder involvement& which implies that the organi'ation needs to be flexible. In other words& organi'ations today need able to balance the need for control with the need for flexibility (-hristensen et al& 2))@ 1>)+. O-orporate communication is a management function that offers a framewor% for the effective coordination of all internal and external communication with the overall purpose of establishing and maintaining favorable reputations with sta%eholder groups upon which the organi'ation is dependent8 (-ornelissen& 2))@N ;+. According to this definition& corporate communication demands an integrated approach to managing communication with the ultimate goal of establishing and maintaining favourable reputations with %ey sta%eholders. eputation is understood as the sum of evaluations of the organisation over time and its positive effects are widely recogni'ed today. Among the advantages associated with a favorable organi'ational reputation are its positive effects on the organi'ations ability to attract the people necessary for its success& its competitiveness& and its ability to demand premium prices for its products and services (-ha%et& 1*@*N rin%erhof& 1**)N lauw& 1**: in van iel& 1**; >=+. In other words& Oa strong corporate reputation holds similar promises to the organi'ation as a powerful corporate brand identification& differentiation and profitability8 (-hristensen& $orsing P -heney& 2)))@ *)+. Arla publications httpBBwww.arla.comBdaB ‟
It consists of the sta%eholders the company is wor%ing with at the moment with respect to privacy and humansBanimal rights& laws and environment. Arla recogni'es the importance of confidentiality and ensures that confidential information received by all its sta%eholders.
Internal %take(older% ,he list is endless. It starts with a few countries of strong influence 9nited Kingdom
,he ritish mar%et is undergoing difficult mar%et conditions. It has been pushed bac% into recession& which lasted for most of 2)12. S2eden )inland
/weden is characteri'ed by an economic downturn and a focus on inexpensive food products. -ompetition is tough and the presence of private label products on shelves is growing. ,he high level of price sensitivity is lowering the demands. Denmark
2;
Danish consumer confidence remains low& price sensitivity is high and the mar%et is characteri'ed by a drin%ing mil% price war. -onsumers are increasingly focused on lower prices. 7ermany t(e -et(erland%
,he general economic situation in ?ermany ispositive. /trong economic development and relatively low unemployment private label products are purchased across all categories. ,his trend puts pressure on both branded and organic products. In the etherlands& lac% of growth and high unemployment have resulted in low consumer confidence. 'arket% out%ide Euroe <&(ina=
,he general outloo% for global consumption of dairy products is positive& and growth is expected to continue. Across all mar%ets& there is growing demand for high4uality dairy products from !urope. ,he global growth in discount chains also places demands on increased cost efficiencies. In -hina& members of the emerging middle class are see%ing out 4uality products with food safety being a maor concern. -onsumption of dairy products is growing faster than the countrys otherwise rapidly growing dairy production. evenue growth is at approx. 1) per cent per annum& and -hina is thereby expected to exceed the worlds biggest mar%et for dairy products in 2)2). ,hose growth rates are currently driving the country and will for many years to some ma%ing it is critical for Arla to have a solid footing in the -hinese mar%et. /upplier elationshipsE Arla not only act in an efficient but also in a fair& sustainable and reasonable manner when dealing with our suppliers. At the same time the company is striving at all times integrity& honesty and accountability. 2)1) 2)11 2)12 #wners in total >&1>@ @&)2: 12&2;= of these in /weden 3&;2* 3&@=; 3&==1 of these in Denmar% 3&=:* 3&;1: 3&3;: of these in ?ermany& elgium and 6uxembourg (5ansa Arla $ilch and $"5& 2)12+ F =:; 3&=;> of these in the "< ($il% 6in%& 2)12+ F F 1&;@: A9$G members in the "< 1&3=2 1&33) 1&232 /uppliers in 9inland 1&)=) 1&))) @13 of these under contract 2=) 2:3 223 /uppliers in ?ermany (Arla 9oods <sereien+ F 1&33@ 1&3@@ $otions to the oard of epresentatives meeting ; 1 2 Garticipants in owner seminars 3@) 2)) ) Appeals to Appeals -ommittees in /weden and Denmar% :3 13 21 !mployees& $anagers P #wners
2=
,eader%(i and Emloyee% &aabilitie% and &ometencie%
5 play a great role in Arla. ,he situation now calls for a strengthening of the competencies of directors& managers& and employees on how to engage sta%eholders and create results in the matrix. A matrix organisation as Arla includes a complex sta%eholder landscape and a complex setup of roles and mandates. ,his calls for competencies to feel at ease when facing complexity.
/ituational savvy& building relationships& and influencing sta%eholders are %ey competencies to wor% efficiently& handle complexity& and create results.
In close cooperation with the three pillars of Arla 5 ?lobal 5 /ervices& 5 partners and #rganisational Design and 5ealth Wor%' . ,his process designs the whole company. httpBBwww.arlafoodsingredients.comBobscareer1B
#wners are the farmers who supply the mil%. Arla 9oods is an agricultural cooperative owned by 12&2;= dairy farmers in = countries /weden& Denmar%& ?ermany& "<& elgium and 6uxembourg. /(e management team*
-hairman ^%e 5antoft& Hice chairman an ,oft `rgaard& -!# Geder ,uborgh& Hice -!# Govl
Denmar% >&;3=N /weden 3&;**N "< 3&)1>N ?ermany 1&13;N 9inland 3=2N etherlands 3=1N #ther countries 2&1)2N ,otal 1@&112N As of 31 December 2)12& the total number of colleagues employed by Arla was 1*&=:=N net revenueD<< =3.1 billion& of which >2 per cent comes from the core mar%ets of "<& /weden& Denmar%& ?ermany& 9inland and the etherlands. Owners
#wners in total >&1>@ @&)2: 12&2;= N of these in /weden 3&;2* 3&@=; 3&==1N of these in Denmar% 3&=:* 3&;1: 3&3;:N of these in ?ermany& elgium and 6uxembourg N (5ansa Arla $ilch and $"5& 2)12+ F =:; 3&=;>N of these in the "< ($il% 6in%& 2)12+ F F 1&;@: N A9$G members in the "< 1&3=2 1&33) 1&232 ecruitment and riendly aroac( to %tudent% a% o%%ible uture emloyee%*
At Arla 9oods there are many wor%ing students and graduates. We li%e the energy and new ideas that students bring to our -ompany& and we are happy to provide students the 2>
opportunity to explore theories in a reallife and practical context& and at the same time give them a chance to build up their personal networ%. Grogrammes )1" 7raduate rogramme* As an 91; graduate in Arla 9oods every student enters an
individually taliored 2:month programme& consisting of three eightmonth rotations in three different parts of the company. We recruit 1; graduates every year. N Suly &(ain ,eader /alent $rogramme* ,he ideal candidate for the /upply -hain 6eader
,alent Grogramme is eager to put %nowledge into action at a production site in one of Arlas core mar%ets. ,o 4ualify for the programme you will have a $asters degree in either DairyB9ood ,echnology& /upply -hain $anagement (/-$+ or !ngineering. N Summer Intern%(i $rogramme* In the summer of 2)13 Arla launched an international
summer internship for 1) topperforming students. ,he internship is paid and of a duration of @1) wee%s& and all students are assigned with their own proect.
httpBBwww.arla.comBdaBobog%arriereB/tuderende%andidaterB
External %take(older% Arla is offering an active fair dialogue with consumers. -onsumers can voice their complaints and opinions via Arla 9orum& our consumer contact service. ,he service also responds to 4uestions on various subects including product 4uality& pac%aging& advertising campaigns and recipes via telephone& email and letter. In general& the different types of issues that are raised in different countries and often reflect the topics being debated in society at that time. It is therefore important that we respond on a national basis. During the year several countries also have intensified consumer dialogue via social media channels& for example& ,witter& 9aceboo% and blogs. -umber o contact% 010 011 01 Denmar% 2)&;)) 2)&3)) 2)&=))B /weden 2@&)))
2=&;)) 2=&:))B /weden (web+ :)&))) :;&))) :;&)))B "< 2:&))) 2;&))) 2>&))) B 9inland 1=&))) 1;&))) 1:&))) B ?ermany F @&))) 1@&))) B,he etherlands ;&@)) =&1)) ;&;))B "/A 1&:)) 1=) 2;)B -anada F @)) 1&;))B &on%umer ercetion o Arla * In Denmar%& /weden and 9inland Arla measures consumer
perception of Arla annually. In general Arlas products are awarded top scores in most cases. In all three countries consumer perception of Arla has decreased slightly. ,his appears to be a general trend which also applies to other companies. In /weden and 9inland Arla continues to have a very good reputation. -onsumers feedbac% is that we should improve communication of companys activities and aims& where our products originate& and how they are processed. $any believe that we should become more closely engaged in society and engage more in organic production and ecofriendly pac%aging. egarding the consumers perception of Arla spea% by themselves the numbers below. ,hey show the total scores on a scale from ) to 1)) (where 1)) was best+& which consumers gave Arla in a survey carried out by eputation Institute in a research 2)12. 2@
2)1) 2)11 2)12 B Arla in Denmar% =1.) =:.* =2.:B Arla in /weden >1.3 >>.> >=.:B Arla in 9inland =*.; >3.1 >).; ?ood relationships with all our customers are essential. $any of them express appreciation for Arla as a partner and supplier. ,his reflects the fact that we ta%e our responsibilities seriously and we play an active role in developing the industry. In Denmar%& /weden and the "<& Arla ran%s as one of the top three suppliers to the retail sector. In /weden for the second year in succession Arla is the company that wholesalers in the restaurant and catering industry prefer. In the "< Arla was awarded the title of #wn 6abel Dairy /upplier of the year2)12. In etherlands Arla too% first place in a survey of the countrys largest retailers& called the Advantage eport. In /pain we ran% as one of the four best suppliers in terms of developing our product category. In many other countries& including the "nited Arab !mirates& #man and [atar& Arla measures customer satisfaction among our most important customers. In countries where Arlas products are sold via distributors& it is more difficult to get a clear picture of what our customers thin% of us. Arla subsidiary y yn%eby 9oods is number 13 of the top 2) largest suppliers to the Danish retail sector.
$otential %take(older% 7lobal outlook or 013
,he global demand for dairy products isexpected to grow over the next five years at an estimated 2.: per cent per year. While the higher consumption in mature mar%ets is expected to remain unchanged& growth will primarily be driven by our emerging mar%ets especially -hina& ussia& the $iddle !ast and Africa. 9rom 2)11 to 2)2)& these mar%ets are expected to represent a general increase in consumption of around 3) per cent and the dairy sector will receive its share of this. ,he list is endless. /till spea%ing of the future two important events are on the list for Arla. 9or example examining the human habits is an interesting field of study spea%ing of potential sta%eholders. 9or example regarding entering the -hinese mar%et it will be critical to research& estimate& evaluate & understand and implement the customers habit (middle class+ & consumer shopping habits and tastes. 5uman need change and reflect consumers lifestyle and habits as well as availability and changing constantly in direction to healthier product. -oncentration and cost are %ey factors too& as well as information regarding the products. 6arger firm as Arla & with larger volume of opportunities can better serve than smaller competitors for example. "rban location is important too. It plays an important role in the si'e of growth and the control of the growth process and coordination of activities connected with the process. A variety of tests should be considered regarding tastes. 9or example in -hina the customers are not too friendly to chocolate taste in a product. Innovation is another %ey process as thought to be related with mar%et penetration so it builds a proper connection among sta%eholders as ma%ing the product and the future relationships promising and ade4uate.
,a2 rame% 2*
,hough Arla is following all the patent and certification processes correctly until 2)):& Arla 9oods charged new dairy supplier members an entry fee to 2 percent of the value ( at basic price+ of mil% to be supplied. ,hree Danish farmers brought this matter to the Danish -ourt& alleging abuse of a dominant position. In august 2))1 the Danish -ompetition Authority ruled that Arla had abused its dominant position in procurement of Danish cows mil% on the ground that the fee exceseeded fair compensation to Arla for the cost of admisiion. In ovember 2))3 the Danish -ompetition Appeals ,ribunal overturned the decision and analysis of the facts. 9urthermore the Appeals ,ribunal stated that a high fee alone does not constitute evidence of abuse of a dominant position. ,he farmers too% the case to the Danish 5igh -ourt& which dismissed it in /eptember 2))=. In 2)): the Danish -ompetition Authority concluded that the series of mergers between
/ran%ortation efore entering a mar%et Arla should have a careful loo% at the transportation costs and time included& as long as this will be a serious part of their product price formulation. ,ransportation to countries as far as -hina could be more expensive and ma%e the product less profitable. ,here should be prepared a flow of money analysis to identify additional 3)
sta%eholders in %nown and new areas which may set some ris%s for the need of the products offered. /till -hina is so polluted that the mil% there probably should be considered as dangerous for personal use.
&ororate Social e%on%ibility Imlementing &S httpBBwww.youtube.comBwatchEvS;!"U;Id;ms ero WasteE Is this the first and most impressive side of Arlas interaction with the worlds. It is a powerful message . ,o be able to fulfil its 'ero waste vision& Arla is targeting in three ecofriendly directions /arget 1 ecyclable pac%aging Arla wants to achieve 1)) per cent recyclable pac%aging by
2)2) by focusing on the following •
-ooperation with suppliers& researchers and partnerships with %ey customers
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!valuating and selecting the right pac%aging in relation to design and materials /arget * educing food waste
Arla want to help consumers in their efforts to reduce food waste by ;) per cent •
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5elping them to better plan food purchases and to ma%e full use of products e.g. online tips and tric%s for using leftovers& wee%ly dinner plans& climate friendly recipes 9ind the right pac%aging in terms of portion si'e and its ability to be completely emptied by consumer
/arget 3 Waste from production
Arla wants to eliminate waste to landfill from production by
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"sing waste product for animal feed or biogas production
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-ooperating with waste management vendors or suppliers to recycle or reuse solid
•
waste
,he rationales for -/ can be based on a moral argument& a rational argument& or an economic argument2:. Arla is growing& and the larger and more global the company becomes& the greater is the responsibility. It is very reassuring therefore to %now that the company is based on a strong& responsible foundation. All employees as well as all owners and partners play their part in ensuring that Arla is& and continues to be& a sustainable company& which is imperative for our success in the long run. ,he concept of -orporate /ocial esponsibility& which includes the 4uestion of the role and responsibilities of corporations in relation to society& has been discussed immensely by scholars and practitioners for more than half a century in the "/ and for the last couple of decades in !urope. It is a widespread perception that understandings of -/ and thereby also -/ practices differ across countries due to different cultural and institutional framewor%s& i.e. national business systems. /till common values as driver can attract positive attention and support. Arla saw these possibilities in changing their attitude to environment. ,heir cables are environmentally friendly which means not harming the nature as becoming recyclable. httpBBwww.arla.comBImagesBarla.comBGD9B-/B2)12B!?M2)12.pdf
Driver% or commitment Gast and recent commitments can derive from either economic selfinterest (a solid business+ or from ethical grounding (of any moral importance+. Wor%ing responsibly in Arla is by responsibility through our entire chain. Arla strives to wor% in a responsible manner throughout its entire chain& from the wor% at the far ms& through to operations and distribution& even including recycling of pac%aging material. ,o ensure commitment to the -ode internally& Arla has established a -/ committee with -!# Geder ,uborgh as chairman and with representatives from the senior management team. ,he committee prioriti'es the areas that need additional focus to ensure the companys commitment to responsibility for the long term. A holistic approach . ,he 11 areas that the -ode describes are the ones covered in this report& from business principles to human rights. 2: Werther W.& /trategic -orporate /ocial esponsibility& /ta%eholders in a ?lobal !nvironment& 2))= 32
,his year we have chosen to group these areas under our themes& see the illustration to the right. Arla is a global company. !ach of our business groups delivers content and material to this annual report. Arla is succeeding in its wor% with responsibility and also grows with respect to all the opportunity to readdress& and clarify& the areas on which are needed to be put a special focus in the future. Arla is a responsible company built on usiness principles& #perational principles& Grocurement& $ar%et conduct. Arla is confident with its products by wor%ing hard on food safety P focus on food and health as a whole. Arla is building respectful relations within wor%place& community relations& human rights. Arla cares for the environment and animal welfare by putting an extra effort in !nvironment and climate relations P Agriculture. -orporate /ocial esponsibility (-/+ has become a popular topic within western companies. -/ gives a competitive advantage and can help strengthen a companys image. ,odays sta%eholders re4uire more transparency in the companies regarding -/. It has become more important for companies to communicate their -/ initiatives to their sta%eholders and therefore -/ reporting has become an implemented part of every serious companys strategy. According to acob Dahl endtorff strengthens social responsibility employee motivation and attracting s%illed labor as it ma%es them feel that their ob ma%es sense ( endtorff & 2))>+. 5e is not alone in this position also theorist 9rederic% 5ert'berg believes that it motivates employees when they feel a deeper meaning to the ob ( uelens & 2)1)+ . eyond that& acob Dahl endtorff to business ethics is to create a better brand that will be profitable through the use of values and responsibility and that it strengthens the company 0s competitive position. It can be difficult to measure the precise relationship between -/ initiatives and profit& with which & however& good theoretical arguments for the connection gives a positive return. A responsible approach to achieving economic sustainability in the long term when there is credible values that strengthen the company0s activities in the community ( endtorff & 2))>+. -/ is not only positive & being as%ed many critical 4uestions of corporate responsibility . ,he criticism voiced include if it diverts attention from the economic profits when a company underta%es actions that have nothing directly with the company to do. ,he companies promise too many things to their sta%eholders and& according to critics & it is unli%ely to believe that companies can ma%e everyone happy . It can be discussed on the community and businesses are the appropriateness of -/ . If companies are utili'ing their responsibility to guide the development for their own benefit ta%es the concept a completely different turn . In this 33
situation& it is more a political issue and a struggle for power . ,his may result in companies use -/ to dominate the mar%et and gain power over some processes that are not in the state0s interest ( oepstorff & 2)1)+ . It is discussed whether companies only act in their own interest or whether they act on the basis of society and they only ta%e into account the primary sta%eholders or whether they act on the basis of social and environmental problems and satisfy sta%eholders regardless of selfinterest. ,hese terms may conflict with each other in some areas where it is necessary for companies to have less profit& in order to contribute to the social responsibility. ,he trend is that companies are interested in ta%ing a social and moral responsibility (
,he -ode of -onduct governs Arlas responsibility wor%. Arlas principles for ethics and sustainable development are contained in Arla 9oods -ode of -onduct. Arlas oard of Directors approved the -ode of -onduct and it is now available in eight languages and can be downloaded from www.arla.com. ,he -ode serves as both a tool and a compass& guiding us on how we should behave and ta%e responsibility within every process and decision in Arlas business. ,here are always a few %ey attributes that define a companys essential character. I% Arla a &ooerative -arrative! a 'onooly! an Innovator and a market;% abu%er>
,he contemporary global path to input values reflects as an evolutional path and leads to the so called personality or identity& fingerprint of a company. Arla becomes from a global company with global brand. Arla 9oods addresses ethical and 4uality matters in a sustainable and responsible manner& in order to safeguard the companys reputation and profitability. Arla 9oods is one of the world0s largest dairy exporting to more than 1)) countries and subsidiaries around the world. In order to also be one of the strongest dairy brands Arla began in 2))> to bring together its global organi'ation and mar%eting around one common identity and value position Arla 9oods is the business established through ac4uisitions and mergers. #n the part loo%s li%e Arla 9oods many other large enterprises and also with the same challenges when it comes to the tas% of assembling the company around one common identity and value position. In particular& the merger of Danish $D 9oods and the /wedish Arla ta%es up much of Arla 9oods0 own consciousness and put in br anding terms Arla 9oods faced with a particular challenge. It is clear that the large domestic mar%ets have a special meaning& but in the future outloo% extends Arla 9oods far beyond /candinavia. ,herefore launched Arla 9oods in 2))> a 3:
comprehensive proect aimed to create the foundation for a global Arla brand.
In our efforts to identify the performance and decision ma%ing drivers for Arla 9oods brand was leading trend agencies and futurists as%ed to identify the main trends for dairy products in a global perspective. ased on their wor% Arla 9oods and
)) consumers in seven countries. In addition to the eight trends were there for the test also developed and illustrated various positions& such as Arla 9oods could strive for. ,he test showed that there was everywhere a preference for 7natural foods7. ,he testing also showed that within Arla 9oods0 two primary product categories fresh dairy products on one side and butter and cheese on the other was a set of brand drivers that were uni4ue to each category. naturalness as 7brand driver7 ,he may seem li%e a truism that a company that lives by producing products of natural raw materials& chooses to 7naturalness7 to the company0s 7brand driver7. ut it0s more nuanced than that. 9irst& Arla 9oods because of its si'e in many consumers0 eyes a tinge of industrial producer about it. ,here has also been a strong trend among consumers towards the stage of natural. ,he re4uest is 1))T natural foods& but that desire cant be always met. o producer in the real world can meet in large this scale 1))T. 3;
Arla 9oods is already far in efforts to provide as natural products to as many people as possible. ut although Arla 9oods is among the world0s leaders in this field& it is because of the desire for it 1))T natural and perceptions of the large dairy giant difficult for the company to get 7credit7 for his efforts. -loser to nature proect is a part of Arlas efforts to create a common global positioning around 7naturalness7& so Arla 9oods has defined an obective it must be Arla 9oods0 case 7,o ma%e natural products available to everyone.7,his case is translated into Arla 9oods0 new corporate concept& consumers and employees 7-loser to ature7 (7-loser to nature7+.,he promise has two legs. #n the one hand promises Arla 9oods consumers natural products. At the same time promise Arla 9oods& the company ta%es the responsibility and respect for nature when it produces and distributes its products and socially responsible business. ,he basic elements in place were made in cooperation with
processing operations (whether cooperative or private+ face competition from Arla& with the li%ely conse4uence of damage to mil% prices. httpBBwww.mynewsdes%.comBarla foodsBpressreleasesBthechargeagainstarlaindenmar%>=)*=> As one conse4uence& local dairy processing firms may be forced out of production of the most profitable dairy products and left with less possibilities. Arlas exclusivity regarding 3=
infrastructure and hardware& collaborative pricing arrangements might build other issues between Arla and its sta%eholders especially with Arlas suppliers and retail customers. ,hough such policies may prove difficult to implement because it is difficult does not mean that it wont be done in future. httpBBeuropa.euBrapidBpressreleaseMIG)212;2Men.htm
Accountability and tru%t in &S Is -/ wal%ing hand in hand with accountability and trust buildingE Ues. Its one of the processes whereby leaders& teams& employees& the whole company or organi'ation see%s to ensure integrity& completeness and completion. Its build in our DA. In our global sta%eholder society& accountability is among the %ey challenges of organi'ations. esponsible humans and builders of accountability are concerned with meeting the demands& needs& interests and values of employees& customers& suppliers& communities& shareholders& governmental and nongovernmental organi'ations& the environment and society as one. -/ re4uires accountability. It is complex as long as it re4uires interaction between and by leaders& individuals& and organi'ations& other sta%eholders& customers& and community members.
eccomendation%* Will Arlas success turn against ArlaE Arla is a persistent and dominant mar%et force. Golicy ma%ers might consider limiting Arlas mar%et share in the event of any new proposed mergers and ac4uisitions. /uch a step would re4uire legislators to define a maximum allowable mar%et share and then defend that definition. /everal complicating factors would arise from this situation Y /hould mar%et share be defined over the !" as a whole as long as it is politically defined as a Qsingle mar%et or ust for the three mar%ets in which dominance is clearE Y/hould mar%et share be defined over all dairy products or ust certain onesE In the past& large& vertically integrated cooperatives have ustified their si'e and influence and any actions ta%en to reduce Arlas ability to act as a counterweight to retailers would face some if not serious opposition. ,his opposition will re4uire compensations for the farmers that my exceed benefits to customers on behalf to Arla. A possible approach may be to prohibit Ara from operating in mar%ets related to the once in which it has achieved dominance. Arla might be at some point being excluded from some mar%ets. /uch an approach would re4uire sales of Arlas product to competing firms which wouldnt be able to maintain performance and presence in the industry. ,his will be the biggest challenge in 3>
Arlas future. An extreme response to monopolists is a re4uirement Arla to be bro%en up into separate and competing firms. ,he brea% up might be regional and vertical by stages and distribution levels or by mar%et according to the products. Arla is a monopolist in Denmar% and /weden spea%ing of buying raw mil%. It has been tolerated so far only because Arla is a cooperative ", it has to be examined closely and carefully whether cooperatives should be allowed to become monopolists or the cooperative shaping is ust a way to ease a companys way to the position of a monopolyE Denmar% has no cooperative law even. /till it is possible the length of Arlas contracts with suppliers to be restricted and even as%ed the exclusivity to be removed from some agreements in order to be guaranteed fare play for all companies in the sector. httpBBwww.oecd.orgBdataoecdB;1B1=B3::2;::>.pdf httpBBwww.foodanddrin%europe.comB-onsumer,rendsB-onsumerssnubArlas$ini3)mil% ,hen entering a huge new mar%et as the one in -hina becomes if not vital at least very important for the future of Arla. #ur recommendation is Arla to continue entering new big stable mar%ets in order to guarantee stability in its structure. In the case with -hina where the power is government centrali'ed it should be ta%en into consideration that governments do are significant buyers of dairy products through their ownership of hospitals& prisons& schools and other of the %ind. ?overnments could encourage and sustain Arlas growth as well as it may control the outcome of this partnership by giving chance to competing firms in case of unfair game. &onclu%ion 6eadership competencies consistent with Oresponsible8 leaders include courage& business
acumen& passion& having a life (Oyou cant thin% out of the box if you are always in the box8+& compassion& %indness& humor and vision for legacy are the new way of achieving results through interpersonal s%ills. A leader should be first a great person in order to be able to design the society as healthy& educated& environmentally conscious and friendly& economically sustainable and safe. #nly then growth will be long term. According to the literature& there is a growing awareness that business needs to manage its relationship with the wider society& a multista%eholders dialogue. It all starts with the role of the leaders.
3@
,he role of the leader in guiding business toward sustainable social responsibility is complex and vast. ,he change in management thin%ing has been from the process to the people and environment. $anaging change is not enough you have to lead it 2;.
)inancial Analy%i%
External analy%i% $orter;% " orce% /(reat o %ub%titute
Dairy products are an important source of calcium& protein& and vitamins D and 12& and still there are substitute products dairyfree products as almond mil%& coconut mil%& rice mil%& soy mil%& oat& hemp and flax mil% that contains calcium and vitamin D& however& these substitute products dont contain all benefits that dairy products provide& and these substitute products are usually consumed by people who suffer from lactose intolerance& mil% allergy or people who have addopted veganism as their lifestyle. As we can see F there are a wide variety of mil% substitutes& again& these substitutes are not as popular as real mil% is& and they are often more expensive& therefore& we consider threat of substitutes as moderate. /(reat o ne2 entrant%
,o become s big player& significant resouces are necessary. rand is important F a new entrant has to compete with other companies that have already mar%eted their production and possess a large number of loyal customers& 4uality guarantees and programs& production facilities& start capital is needed and of course access to distribution channels. $oreover& a new entrant can face government and legal barriers& especially when a foreign company is entering a mar%et. In -hina supermar%ets force foreign dealers to pay large commissions to put their products on shelves& which means that in order to ma%e profit& they have to be raise the prices2=. ,hreat of new entrants is low. ivalry among exi%ting irm%
Is high. ,here are approximately >3> enterprises operating in dairy industry in 2)13& most of which are small or medium in si'e. ,he four largest enterprises in the industry& $engniu& Uili& right and /anyuan& ointly account for about :3.3T of industry revenue in 2)13& showing a moderate industry concentration level2>. $oreover& foreign businesses view -hina as an attractive mar%et& not surprisingly F as -hine is the worlds most populous country with a great deal of growth potential and after several dairy scandals& -hinese get more and more 2; http[email protected]
2= httpBBenglish.caixin.comB2)121)3)B1)):;3>>1.html 3*
interested in foreign production. -hina has imported @::&))) tons of dairy products& up 2@.: percent compared to the same period last year& statistics from a -hinese organi'ation that trac%s the import and export of foodstuffs show2@. argaining o2er o %ulier%
/uppliers play a huge role into Arlas operations Arla 9oods is owned by farmers and run for the benefit of farmers. In 2)12 Arla had 12&3)) mil%producing owners in Denmar%& /weden& ?ermany& 6uxembourg& elgium and the "nited
,he power of buyers is moderate as there are many customers& low switching costs& the product is undifferentiated& the customer can choose to pay for the less expensive products& however brand plays a big role& especially& after several scandals within dairy industry in -hina& many customers are interested in 4uality certificates& and give preference to foreign brands. &ometitor analy%i%
$ES/ $olitical )actor% /axation %y%tem
-hina has 1* tax categories& i.e. value added tax& consumption tax& business tax& enterprise income tax& individual income tax& resource tax& urban and township land use tax& house property tax& city maintenance and construction tax& tax on the use of arable land& land appreciation tax& vehicle purchase tax& vehicle and vessel tax& stamp tax& deed tax& tobacco 2> httpBBwww.ibisworld.comBindustryBchinaBdairyproductproduction.html
2@ httpBBenglish.caixin.comB2)121)3)B1)):;3>>1.htmlEp2
2* httpBBwww.arla.comBImagesBarla.comBGD9BannualreportB2)12B!?M2)12.pdf pp 2@
3) httpBBwww.arla.comBImagesBarla.comBGD9BannualreportB2)12B!?M2)12.pdf pp 2@
:)
leaf tax& customs duty& tonnage dues& and fixed assets investment orientation regulatory tax. #f which& 1> tax categories are to be collected by tax authoritiesN the fixed assets investment orientation regulatory tax was suspended to be collected as from 2))) as determined by the /tate -ouncilN customs duty and tonnage dues are to be collected by the customs& in addition& the import value added tax and import consumption tax are to be withheld by the customs. 31 Halue Added ,ax •
(HA,+ is 1>T
-onsumption tax •
,he consumption tax is imposed on the entity and individual engaged in producing& consigned processing& or importing taxable consumer goods within -hina.
usiness ,ax •
,he business tax is imposed on the entity and individual engaged in providing taxable services& transferring intangible assets or selling immovable property within -hina. ,he tax rate applicable to entertainment industry is 2)T& except that the tax rate applicable to the billiards clubs and bowling halls in such industry is ;TN the tax r ate applicable to all the other tax items is 3T or ;T.
!nterprise Income ,ax •
All enterprises and other income receiving organi'ations (excluding sole proprietorship enterprises and partnership enterprise+ within -hina shall be the taxpayers of the enterprise income tax. ,he tax rate is 2;T. !nterprise income tax shall be calculated on the basis of a tax year which shall commence on anuary 1 and end on December 31 of each calendar year.
Individual Income ,ax •
,he individual income tax is imposed on the taxable income derived by individuals. Grogressive tax rate of > levels from 3T to :;T is applied to the income from wages and salaries& a progressive tax rate of ; levels from ;T to 3;T.
esource ,ax •
,he resource tax is imposed on the entity and individual engaged in exploiting various taxable natural resource. ,he resource tax is collected under the rate on value method and the amount on volume method. ,he resource tax rate applicable to crude oil and natural gas products is ;T to 1)T of the sales volume.
"rban and ,ownship 6and "se ,ax 31 httpBBwww.chinatax.gov.cnBn===*)>3Bn===*133B=@@>:)>.html(reliable government recourse 2)13.)=.12+
:1
•
,he urban and township land use tax is imposed on the land in cities& county towns& administrative towns and industrial and mining districts. ,he tax shall be levied on the entities and individuals who use the land on the basis of the actual area of the land used at the specified tax amount.
5ouse Groperty ,ax •
,he house property tax is imposed on the houses within the cities& county towns& administrative towns and industrial and mining districts.
-ity $aintenance and -onstruction ,ax •
,he city maintenance and construction tax is imposed on the entities and individuals who pay value added tax& consumption tax and business tax.
,ax on the "se of Arable 6and •
,he tax on the use of arable land is imposed on the entities and individuals who use the arable land to build houses or for other nonagricultural construction purposes
6and Appreciation ,ax •
,he land appreciation tax is imposed on the increment value of the transfer of /tate owned land use rights& aboveground structures and their attached facilities& and is collected at the specified tax rate. ,here are four level progressive rates& i.e. 3)T& :)T& ;)T and =)T
Hehicle Gurchase ,ax Hehicle and Hessel tax /tamp ,ax •
,he stamp tax is imposed on the entities and individuals executing or accepting the taxable instruments specified in tax laws during the economic activities and exchanges.
Deed ,ax •
,he deed tax is imposed on the land and houses the titles to which are transferred through such means as transfer& assignment& purchase or sale& gift or exchange& and shall be paid by the entities and individuals who are the transferees.
,obacco 6eaf ,ax.32
32 httpBBwww.chinatax.gov.cnBn===*)>3Bn===*133B=@@>:)>.html(reliable government recourse 2)13.)=.12+
:2
7overnment% organi?ation and attitude
-hina is a oneparty state& with real power lying with the -hinese -ommunist party. ,he country is governed under the constitution of 1*@2 as amended& the fifth constitution since the accession of the -ommunists in 1*:*. ,he unicameral legislature is the ational Geople0s -ongress (G-+& consisting of deputies who are indirectly elected to terms of five years. 33 -hina have a very serious attitude when it comes to food products& and they are controlling the food 4uality on daily basis& recently china banned all of the $il% powder import from ew ealand and Australia& as informed in ewspaper (euters+ on /un Aug :& 2)13 F Q-hina has halted imports of all mil% powder from ew ealand and Australia& ew ealand0s trade minister said on /unday& after bacteria that can cause botulism found in some dairy products raised food safety concerns that threatened its *.: billion annual dairy trade. !ven though ew ealand is the biggest mil% importer to china and over the last year supplied *)T of all the mil% powder provided to china& they still banned them form the mar%et& thats how strict they are in -hina wen it comes to health issues. 3: &on%umer rotection
-onsumers in -hina are being protected by -onsumer protection 6AW. Also a lot of processes are being regulated by -hina consumer association. 3; Economical actor%
9ast growth of -hinas economy can be explained by the influence of inflows of foreign investments and because of the cheap labor in -hina& developed countries move their production to -hina in order to cut expenses. As - 9inancial news inform -hina0s economy sped up in the ulyto/eptember 2)13 4uarter to expand at >.@T yearonyear& according to official gross domestic product (?DG+ figures. ,he -hinese government is aiming for a slower and better balanced economy that can grow more sustainably. 3=Average
33 httpBBwww.infoplease.comBencyclopediaBworldBchinagovernment.html (2)13.12.)*+
3: httpBBwww.reuters.comBarticleB2)13B)@B):Busnew'ealandmil%id"/!*>3)1<2)13)@):(ewspaper article /un Aug :& 2)13 +
3; httpBBwww.reuters.comBarticleB2)13B1)B2;Buschinaconsumerlawid"/!**#);!2)131)2; (newspaper article #ct 2;& 2)13+
3=(httpBBwww.bbc.co.u%BnewsBbusiness2:;>>):3 - 9inancial news () %ctober *+(,+ :3
inflation in -hina in year 2)13 is 2.;3T 3>& And it is predicted that the inflation rate will grow during the years as pwc"< informs the inflation could reach 3.:T in year 2)1;& and ?DG growth rate might drop till >T in year 2)1;. 3@-hinas consumer -onfidence index is declining in a long term since year 1**= till year 2)13 it have been declined from 11; till *=. 3*
Social )actor%
-hina have the biggest population of the world that consists from more than 1.3 billion people and still are constantly growing. -hinese culture is slightly different form !uropean culture so Arla should loo% into this fact when entering the -hinese mar%et. In -hina people are wor%ing for at least 1)h a day and that ma%es a lot of consumer habits different from the average !uropean consumer. -hinese culture in ?eneral is very different from !uropean culture. When it comes to buying household products significantly& for the most part women in -hina remain the decisionma%ers when it comes to household spending& with both married and unmarried women helping to determine which products and services their families purchase. ,his adds even more to their importance as the drivers of -hinas consumer attitudes and habits. ,he $isery Index for -hina in 2)11 was *.:. have stayed up from ;.= in 2))=. In coming years& the perspective for fluctuations is great based on potential inflation rates in fastgrowing sectors such as housing and food. :)As well men earn more than women even with the same 4ualification and education. :1In chine the consumption of coffee is very fair comparing to !uropean countrys in !uropean country people are drin%ing an average 12) cups of coffee per year per capita& but on other hand china only consumes ; cups of coffee per capita.:2 3> httpBBwww.inflation.euBinflationratesBchinaBhistoricinflationBcpiinflationchina 2)13.aspx
3@ httpBBwww.pwc.co.u%BeconomicservicesBglobaleconomywatchBgewproections.html
3* httpBBmar%etrealist.comB2)13B1)BconsumerconfidencechinadeclinedlongtermB
:) (!uromonitor report -onsumer 6ifestyles in -hina& 9ebruary 2)12& pp. 1;.+
:1 httpBBchinaperspectives.revues.orgB2**2 (/alary differentials according to sex in urban -hina+
:2 httpBBwww.sprcoffee.comB$ar%et.html (analyses of china coffee mar%et+ ::
/ec(nological )actor%
-hina is well %nown about its technological development& as in army as in medicine and robotics. -hina is Investing incredible amounts of money in research and development last year 2)12 they invested 1.>>T from their ?DG for research and development& what is times more comparing to year 2)11. -hina is the biggest -ountry of development and research. 2.3 million people in china are wor%ing in research and development sector& and it is been strongly predicted that china will maintain its status as an leading development country for the next ; years& however if we loo% at the percentage& than they are far bac% form !uropean PD level that is 2.:T but if its compared of the amount of people wor%ing within this sector& it is unbeatable& but china expects to get till !uropean level till year 2)2)& As well -hina is developing their own special etwor% of mobile telecommunications that have different standard then other countrys in the world& as well it is predicted that -hina in the future will not be a factory country anymore but will turn into a Qlaboratory a country that is being lead by research and development. :3 &onclu%ion o $ES/
During G!/, analyses we understood that there is a lot of factors that could influence -ompany A6A for successfully penetrating mar%et with product -#-I#. 9irst of all there is a lot of Golitical factors that Arla should be aware about& for example the taxes& there is many taxes that could affect import of product -#-I# in the mar%et& and as well the government is very strict when it come regarding food& 6i%e said before -hina recently banned ew ealands mil% powder from the mar%et because of the bacteria found in it. As well -hina recently have developed their rules of -onsumer protection& and they are very strict when it comes to misleading the costumers with mar%eting tric%s& so that should be ta%en in to consideration when entering -hinese mar%et. If we loo% at the economical factors than we can say that it is 4uite stabile& at this point -hinas economy is speeding up& but it is predicted that it ?DG rate might drop by ).:T in year 2)1;& and as well inflation rate is getting bigger& as Well we should ta%e in the consideration the consumer confidence index& that is getting lower by every year. /ocial 9actors could be one of the biggest issues to Arla when entering the mar%et with cocio& of course Arla already wor% in -hinese mar%et& but not with its brand cocio& as found out in our research& -hinese people dont drin% so much coffee of chocolate drin%s comparing to an average !uropean consumer& and that is 2) times less coffee per year. Doing analyses on ,echnological part of -hina& We found out that -hina is Investing incredible amounts of money in PD& and A6A could see this as an benefit I thin% especially when -hinese government are supporting development& so Arla could get some help With PD. S@8/ analy%e% Strengt(% •
Arla is a big company with a strong structure.
:3 httpBBwww.youtube.comBwatchEvS6rL*yH=3'g (Innovation driving -hina0s economy i' Wire $arch 11&2)13 #,H -hina+ :;
• •
• • •
•
Is a well%nown brand in the World 5ave a big experience wor%ing world wide& more than in 1)) countrys all around the world.:: Already started wor% in -hinese $ar%et :; 5ave strong PD Department:= 5ave good $ar%eting Department that is developing and waiting for new birth minds and ideas.:> ,he -hinese mil% in many areas is highly polluted as a result of hyper production in the region& so Arla could be a good alternative as ecofriendly and healthy choice.
@eakne%%e% • • • •
6ac% of %nowledge about -hina. Dont have connections in -hina to distribute the product Groduct is made for !" mar%et and should maybe be developed for -hinese mar%et Dont have a factory in -hina& which may rise the cost of the products
8ortunitie% • • • • • •
#pen showrooms& degustation stands in eiing 9ind distributers in -hinese $ar%et !stablish production in -hina !stablish logistics Do $ar%eting regarding new product -lose contracts with other companies that provide services& li%e coffee shops.
/(reat% • • •
,hreats of competitors that are wor%ing in china for long time Gossibility that their product will not be appreciated in eiing -onsumers will choose an alternative product from companies li%e $engniu:@
:: httpBBwww.arla.comBAboutusB (about arla+ :; httpBBwww.arla.com.cnBArlabrandsB$il%andcreamB-ocioB (Arla in -hinese $ar%et+ := httpBBwww.foodnavigator.comB9inancialIndustryBArlaunitesDresourceswithnewmil% proteincentre(Arla opening new PD facility+ :> httpBBwww.arla.comBobandcareerB$eetArlaB#urbusinessB/ales$ar%etingB ($ar%eting opportunities+ :=
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G and Image
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&onclu%ion S@8/
During the /W#, analyses we understood that Arla have a lot of strung points because it have been such an successful company for all this time and have established business in numerous countrys all around the world and have been in investing in research and development and manufacturing a lot of assets& but company have it wea%ness as well they have not wor%ed in -hinese mar%et long enough to understand it and they dont have a factory in china and consumers are totally different by the buying power and culture in china comparing to !urope& ut still Arla have a numerous of opportunities that they can use to penetrate this mar%et& thats is establishing a factory doing more research and so on& but there are some threats as well in such a big country as china there is a lot of competitors that are in the mar%et already for a long time and consumers have already trust for their products& and they might not be so successful with their products in -hina.
&u%tomer %egmentation •
Gerhaps customer segmentation is the most powerful mar%eting tools& in view of the purchasing power of customer is not e4ual. ,hus the profitable and effective customer segmentation is leading to the whole companies profitability directly. We are targeting -hina which is the biggest mar%et all over the worldN therefore& appeal to potential customer and then li%ely to become loyal customer afterwards. We are using a exist product to enter a new mar%et& mar%et penetration would be underta%en (Ansoff $atrix 1*>;+& ,he company should adust its mar%eting to wealthy buyers& because it offers %ind of foreign luxury products& well 4uality which are usually more expensive than competitors offers. ,o win mar%et share& therefore& a company must ensure that their offers meet customers needs better than any other at a price they perceive as providing superior value for money (which does not necessarily mean it has to be the cheapest+. ,he firm can identify its clients as people belonging to middle and upper classes who can afford to buy more expensive food (social class segmentation+. 9or instance our mil% powder focus on baby who is under 2 years old& our main product -ocio and mil% sha%e target : to 2; years old group. Due to the analysis from social phenomenon& based on the pie chart in 2)12& modern -hinese people and -hinese family would li%e to pay more money for childrens health and education. /o the most potential consumer group is teenagers (: to 2)+
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,he awareness of brand differs from different ages.
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Source ,i%t
Armstrongs 5andboo% of human resource management practice& 12 th edition& 2)12& p 22; talent management& 3)* leadership and development >@1 usiness Analysis ,echni4ues >2 !ssential ,ools& ames -adle& Debra Gaul& Gaul ,urner& 1*@@& pp *11;; 9randsen ,.& /alesP$ar%eting& A of International /alesP$ar%eting $anagement& !dition 1 2)13& pp 1;> ames Gost& 6ee Greston and /ybille /achs (2))2& $anaging !xtended !nterprise& ,he new sta%eholder Hiew& page 1@ $anagement accounting& financial management and planning ( with financial and mar%eting perspective+ & 2))@& !ri% 2*3 $irvis ?oogins& 2))=& -iti'enship
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