Macro-environment analysis

Discuss about the Strength and Business Operation of Bellamy.

The given report focuses on strategic analysis on Bellamy, An Australian organic food producer.  The company is founded in 2003 in Launceston, Tasmania and headquarter of the company is also allocated in Launceston, Australia. It is one of the largest organic food producers in Australia. This company was the first entrant in an organic food industry. In 2004, Bellamy produced first organically certified baby food and in 2005 it produced first organic baby formula. Bellamy is providing nutritious organic choice to children(Morgans, 2015). The company provides a range of organic food products for young children, babies, and toddlers. The basic philosophy company follows to teach good eating habits to children from the beginning. A healthy diet helps to develop the healthy mind. Bellamy is a certified organic which produces food products that do not include harmful chemicals. The company does not use chemical pesticides, chemical fertilizers, and artificial addictive and genetically modified organisms. All the organic food products are prepared and packed in Australia. Bellamy is known for its high-quality products. The company follows the concept of complete nutritious diet methodology that helps for healthy development. In only Australia, the company has more than 4400 outlets including Woolworths, Coles, Big W, Terry White and Costco (Bellamysorganic, 2017).

Laura McBainwas appointed as CEO. Previously shehas worked with numerous companies and got experience from different industries. The products of the company are distributed in Vietnam, Australia, Singapore, Hong Kong, China, Malasia and New Zealand(Bellamysorganic, 2017). The Company is operating from last 14 years and has developed the good reputation in the market. According to results of social media research in 2016, the company was recorded as the best baby food producer (Annualreports, 2016). The revenue of the company is increasing year by year. In Australia and in China the revenue growth was high. Some products of the company are toddler milk, infant formula, pasta, ready to eat pouches, cereals, baby rice, cinnamon breakfast, brown rice pasta, fruit snacks, vegetable macaroni, baby porridge and much more. Revenue of the company was recorded on 30 June 2015 as $125302000 and in 2016 the revenue of the company was $244583000 which means the revenue has been enhanced by 95% (Annualreports, 2016). The company is looking for expansion of its operations. Mainly the company’s revenue is coming from offshore. 

Macro environment analysis is very important because through this the organization can understand the strong and weak areas and work to get succeeded in the rapidly changing business world. It is very essential to recognize the factors that give impact on the organization. Organizations use PESTLE analysis that is a significant framework that helps to analyze political, environmental, socio-cultural, technological, economic and legal factors. The framework helps to recognize opportunities and threats of the organization that helps to make good strategic decisions in future (Ho, 2014). The knowledge of important factors helps companies to develop sustainable competitive advantage. PESTEL analysis of Bellamy Company is given below.

Political

Political

Political factors include government policy, tax policy, labor law, environment law, foreign trade policy, trade restrictions, and instability in overseas markets. The political environment is all about a degree a government interferes in the system. Political factors have the major impact on an organization because the organization has to follow all the rules and laws related the political environment of the country (Michaelidou & Hassan, 2008). Bellamy is an organic food production company that is facing some legislation like other companies. The company has to follow different government regulations related to trading and labor law. The company is mainly dependent on the agriculture sector. The government makes various policies related to agriculture sector because in many countries agriculture sector contributes to the economy. The government in Australia focuses on labor welfare. In Australia, there are chances of tax decrement in business. This will create the opportunity for Bellamy for next 3 years. If the government in Australia will introduce some unfavorable changes then the company may have to face some problems (Chenoweth, 2008).

Economic

Economic factors include disposable income of consumers, economic growth, exchange rates, inflation, and interest rates and so on. The decreased value of Australian Dollar is creating the positive economic environment for international customers. Bellamy Company can use this situation as an opportunity and can expand the business in the global and international market. It has been analyzed that the global financial markets are facing instability condition since 2009. Due to this situation, Australian customers are becoming price conscious and they like to purchase the product at the low price that is creating the threat for the company (Aertsens et al., 2009).

Socio – cultural

Previously fewer people were using separate and specialized baby food as the trends have been changed now people are becoming more concern about nutrition requirement of a baby.  New generation people like to prefer healthy food because healthy and nutritious food helps for child’s development (Senauer & Seltzer, 2010. The buying behavior of consumers is also influenced by the society where people live. Bellamy Company can use the consumer behavior theories to touch emotions of consumers. Health consciousness of people is an opportunity for the company. Now parents are giving more focus on child’s health (HamzaouiEssoussi &Zahaf,  2008).

For example, the socio economic factors in China can have a major influence on the overall business of Bellamy. Due to the environmental issues within the community of China, the people have become more aware about the food they consume (Zacharias et al. 2017). The organic forms of baby foods are highly popular due to the fact that most of the people are nowadays avoiding the artificially manufactured foods that can have potential harm on the health of the individual and also can cause long-term chronic illness during the time of adulthood.  Hence, this social factor of China can help in the overall growth of business in the region for Bellamy.  

Economic

Technological

Technological factors are related to change in technology or introduction of new technology. If a business is using old technology and competitors are using new technology then it is obvious that more customers will like to use the products and services of competitors because they are using the latest technology (Hjelmar, 2011). Bellamy Company is producing certified organic infant formula product and is known as the premium brand in Australia. Like various companies, Bellamy is also providing products online. Customers can check the availability of product and shop without going to store (Annualreports, 2016). This is creating opportunity as the company can get more customers online. Due to the decrease in pricing of international shipping, the company is facing some challenges (Crosse, 2017).

In the context of the external market of China, it can be said that it is one of the most technologically advanced nations of the world. Hence, it is possible for all business organization to take the advantage of the situation for the increasing the popularity of the business (Smith-Spangler, 2012). With the help of the technological advancement, it is possible for Bellamy to check the quality of the food they are selling and also provide detailed information about the nutrition components (Annualreports, 2016). The technology can also be used in the overall purpose of digital marketing of the company, which is the easiest ways to increase the popularity of business (Annualreports, 2016).

Environmental

People like to prefer organic fruits, vegetables, and products because the Organic food fulfills nutrition requirement of the body. Organic farming is the more environmentally friendly method of producing food. Bellamy Company does not use harmful chemicals for production because company mainly focuses on the health of people. The production process of organic food is also simpler than other food industries. The company does not use harmful materials that can create the problem for babies and the production process is also safe from environment point of view (Hughner et al., 2007). In organic farming, the crops hold the lower level of nitrates and the higher level of essential antioxidants which is beneficial for the environment. Today countries are becoming conscious of the environment and the country’s government is supporting the industries that are environment-friendly (Smith-Spangler, 2012). So this is the opportunity for the company.

Legal

The Australian government has supported the concept of unfair trade practices. The consumers’ rights should be protected. Company’s products should be safe and prices should be fair. Bellamy Company produces safe and healthy baby food products. To become successful a company has to follow legal rules and regulations. According to 2016 in the corruption perceptions index, Australia is counted as one of the least corrupted countries (Ey, 2016). Australian laws are clear and transparent that will work as an opportunity for the company. The company’s products are related to the health of babies that is good and a company is not producing any harmful product so the legal factors are supportive of the company (Pivato,Misani&Tencati, 2008).

Socio-cultural

The PESTLE analysis of Bellamy Company is given above.  Through the analysis, it can be concluded that political factors, technological factors, environmental factors, legal factors, socio-cultural factors and economic factors are affecting operations of the company and also influencing consumers purchasing decisions. Technological factors help to generate more revenue for the company. The company is producing safe and healthy food products and customers like to purchase products because the products are good in quality. It can be analyzed through PESTEL analysis that company has many opportunities and company can use those opportunities to get growth in the market.

Michael E. Porter has given a five force model for competitive analysis. The five forces help to identify the strength and weakness of the industry. Porter’s five forces also help to analyze the competition in the given industry. The knowledge of competitive analysis helps to formulate business strategy. An attractive industry attracts many entrepreneurs as the industry can be profitable for future. In an unattractive industry, the combination of porter five forces gives negative or unprofitable results (Bose, 2008).

Threats of new entry (low)

Bellamy is a nutritious organic food provider for child care. Bellamy infant formula is suitable for babies from their birth to 12 months. It includes certified organic cow’s milk that is mixed with essential vitamins, minerals, and fatty acids. The threat of new entry into organic food industry is low due to low margin and high-cost involvement. Bellamy organic has Strong distribution network that is required to supply food products. If the distribution network is weak then the transportation of goods will become more expensive and some goods will not reach to end consumers. High investment is also required to create the strong distribution network for organic food distribution (Smith, 2008). Organic food producers should have the certificate from the authorities and the procedure of getting the certificate is complex. Bellamy is a certified organic food producer company. People do not like to take the risk especially when the matter is child’s health. Bellamy has developed a strong brand image in Australia. People like to purchase organic food products from a known brand. Companies have to invest so many resources to create a strong brand image. In organic food manufacturing especially in producing food products for the child, companies contain high learning curve which means new companies have to spend the good amount of time and money to study the market before taking the entry. The high learning curve is giving high profit to Bellamy. So it can be concluded that the entry barriers are high in this industry (Crosse, 2017).

Technological

Bargaining power of suppliers (medium – high)

The bargaining power of suppliers is medium to high as the input materials for organic food products production are supplied from a small number of suppliers. For the production of organic products, unique input materials are required. Switching cost among suppliers is also high, like in a manufacturing process certain enzymes are being used which are supplied by specific supplierand if the company starts to get input materials from another supplier who does not provide that enzyme then the food manufacturing company has to change complete manufacturing process according to the availability of input materials (Lang, Barling&Caraher, 2009). The process can be very costly thus in organic food industry power of suppliers is high. Suppliers know the information about prices, market demand, and product’s cost so the probability of negotiation with a supplier is less. The supplier can directly contact to consumers because with some efforts supplier can become the competitor (Annualreports, 2016). Bellamy Company has many suppliers that are supplying essential input material for the production of baby food products.

Bargaining power of buyers (Low)

The power of buyer is low in the organic food industry as the number of the organic food manufacturer in Australia is low. Only some companies in Australia are producing organic child food products and the customers are large. Buyers have to purchase products from the available companies so they have little option. Bellamy organic is one of the well-known child food producer companies. The company’s products are in demand because of the quality of the products. The price of products remains fixed and the customers cannot do the bargaining for prices. It has been seen that in China and in other Asian markets, consumers’ demand for infant formula is increasing (Godfray et al., 2010).

Threats of substitutes (low)

Customers like to use organic food products as the products are good for health and they do not like to switch from organic products to other products. Bellamy is producing high-quality food products and customers prefer organic products as they are produced with natural ingredients. Today people like to use natural and organic food products because they are becoming more conscious towards the health (Bellamysorganic, 2017). People like to use certified organic products because certified products are trusted products. Especially when the topic is related to child’s health the parents prefer to use the products that are healthy and safe (Falguera, Aliguer&Falguera, 2012).

Industry rivalry (Medium)

The organic food industry is a competitive industry as the companies are trying to increase their market share by introducing new products and services. Introduction a new product in the market and to make the product popular is very complex tasks as much effortwill be required to attract customers(Paul &Rana, 2012). Major competitors of Bellamy areBlackmores, Devondale, Aussie baby, Farm Daisy, Bubs and Viplus(Annualreports, 2016). Bellamy organic has the advantage as the company is mainly focusing on baby food products and competitors are focusing on other products as well. In Bellamy, customers can place the order for the product on the website also.

The analysis helped to understand the inter connectors of competitive forces. The analysis also helped to establish the link between competitive force and macro environment. It can be concluded from the above description that the bargaining power of suppliers is high and other forces like bargaining power of buyer are low, threats of new entry and substitutes is low and industry rivalry is medium.

Competitive advantage

A company that uses the resources and competency properly and also responds to the opportunities gets the sustainable competitive advantage. One effective framework is VRIO that includes elements like valuable, rare, costly to imitate and organized to capture value. The framework can help to analyze Bellamy’s strategic capabilities. Company’s resources and competencies can give the competitive advantage over competitors(Porter, 2009).

Physical resources

Bellamy organic is producing the range of baby’s health care products that include necessary vitamins and dietary supplements. The products of Bellamy are the infant formula, toddler milk, follow-on-formula, baby porridge, baby rice, apple, brown rice pasta, grain, fruit snacks, baby macro ni, teething rusks, vegetable macro ni and ready to serve meals. Bellamy’s products are produced for three specific age groups like 0-6 month’s age group, 6-12 month’s age group and 1-3 years age group. Infant formula milk power focuses on new born baby(Bellamyorganic, 2017). Till today the company has launched various baby food products in the market and has established a strong brand image in the market. The products of Bellamy are available in many Australian outlets and also available online.

Bellamy Company has got certified organic from National Association for Sustainable Agriculture Australia. It is authorized by United States Department of Agriculture. The major competency of Bellamy is, the brand is popular in Australian markets and company products are Austrian made and also provide the guarantee to customers. Bellamy has also got Chinese certification for organic milk to provide services in China(Aaltonen et al., 2015). 

Financial resources

Bellamy Company has strong balance sheet position. Direct sales also increased in the Chinese market. Sales and profit are increasing year by year. Net operating cash flow trend is also increasing. From the reports of the company it can be analyzed in 2014 to 2016, the shareholders of the company have earned high profit.

The company achieved financial competency by reducing working capital requirement and by maintaining the operating cost. The company also achieved growth in shareholder returns (West, Ford & Ibrahim, 2015).

Human resources

In the team of the company highly talented and passionate people are working. Bellamy Company has established the good relationship with supply chain members. Bellamy is working with best organic farmers, suppliers, and manufacturers. Bellamy team is mainly based in Launceston and the sales teams are located in China, Perth, Sydney, Singapore, Melbourne, and Brisbane. Team members mainly focus on customers’ demand. The number of employees is increasing and the number of women in the team is also increasing (Annualreports, 2016). 

The team in Shanghai is supporting operations in China business and team in Singapore is supporting operations in South East Asia business. Supportive human resources are helping to face dynamic environmental conditions. Bellamy’s customer representatives also provide the personal consultation to customers. Bellamy has done the partnership with a Baby tree, the popular website in China (Annualreports, 2016). 

Bellamy Company has built the strong relationship with partners. The company will expand the operations in South East Asia and in Australia. The products of Bellamy will be available across Australia and the company is going to open several Austrian outlets to increase distribution. The company will have growth opportunities in Philippines, South East Asia, and Indonesia and also will expand market share in Malaysia, Vietnam, and Singapore (Annualreports, 2016).Bellamy is also focusing on strategies to increase demand for organic products. The VRIO analysis of Bellamy is shown here.

Value

Bellamy has focused onfour strategic points: Company is improving digital existence in Asian markets by using direct sales method via e commerce. The company is focusing to increase demand for products in Chinese market. Bellamy has the goal to become the world leader in organic baby food products. The company is maintaining its leading position by introducing new products and holding market share more than 50%(Bellamysorganic, 2017). Company products are available in medium to high price range.

Rare

To meet the increasing demand from Australian markets and Asian regions, the company is using unique operational capacity. The company is focusing to increase the capacity to meet new requirements.The company has also invested in additional plants and equipment to sustain high-quality production (Willer&Lernoud, 2016).

Imitability

Bellamy Company has a high global presence in around 15 countries that need good amount of time and high resources to imitate. Bellamy is specialized in producing child food products. For competitors, it will be very hard to create the strong distribution network in China as there are so many regulations related to sales and distribution of health products in China (Annualreports, 2016).

Organized to Exploit

Bellamy is increasing its distribution facilities and also planning to launch new products. The company is focusing to expand its supply chain by connecting new members. The company is using effective data management system to maintain agile workforce (Zanoli,Gambelli&Vairo, 2012).

Conclusion

Bellamy is an Australian organic food producer, marketer, and supplier of 100% organic child food and mainly focusing on infant formula milk powder. The company produces various food products, babies and toddlers. The products are available on both platforms online and offline. In the report company’s information is given. The macro environment analysis of the company is also included in the report. Macro environment analysis helps to find opportunities and threats for the company. The competitive analysis of Bellamy Company is also shown in the report with the help of Porter’s five forces. At last company’s competencies and resources that are giving the competitive advantage to the company are shown. The VRIO framework for Bellamy is also depicted in the report.

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