Level 3 Exam Revision Booklet 2013

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Waiheke High School Senior Business Studies Case Studies

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Case Study Businesses:

1. Fonterra

2. Air New Zealand

3. Sistema

4. Villa Maria

5. Mainfreight

6. Whittakers

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Fonterra is the world’s largest global milk processor and dairy exporter. Through our integrated “grass to glass” supply chain we deliver high quality dairy ingredients

and a portfolio of respected consumer brands to customers and consumers around the world. Fonterra was ranked as the leading global milk processor by the International Farm Comparison

Network (IFCN). In the 2011 season we collected 15.4 billion litres of milk in New Zealand – representing 89 per

cent of the country’s milk production. This was complemented by 1.8 billion litres of milk sourced in Australia and 2.6 billion litres sourced in Latin America.

We have an extensive global sales network servicing customers in more than 100 countries. In Australasia, our brands hold leading positions in cheese, spreads, yoghurts and dairy desserts.

In New Zealand, our brands also lead the market in milk, flavoured milk and ice cream. In Latin America, our Soprole business is a leader in consumer dairy in Chile with the number

one or two positions across all major categories. Our joint venture with Nestlé , Dairy Partners Americas, provides consumer dairy products across Brazil, Venezuela, Ecuador, Argentina and Columbia.

Our global foodservice business has sales of more than NZ$1 billion and operates in 50 countries, providing a portfolio of cheese, cream, butter, yoghurt, pastries and beverages. Our customers include some of the largest restaurant chains in the world as well as hotels, cafes, airlines, work places, entertainment venues and institutions.

Fonterra is a co-operative owned by about 10,500 farmer shareholders.

PESTEL Analysis for Fonterra:

PoliticalGovt health guidelines advocating consuming more/less dairy as part of a healthy dietNegotiation of new trade agreements would open up even more potential export marketsDamage to political and therefore trading relationships between NZ and other countriesPressure group action over high dairy prices in the domestic marketChanges to tariffs/quotas imposed overseas on NZ productsIncreased/decreased support from agencies such as NZTE

EconomicGlobal financial crisis and recessions in key export markets will reduce demandValue of exchange rates could adversely or favourably affect them - making NZ exports seem more expensive or cheaper compared with rival countriesIncrease in interest rates could put financial pressure on farmers which could restrict investment and therefore long term increases in productivity

Social/CulturalAn increase/decrease in the birth rate in domestic and overseas markets could increase/decrease demand for milk products for babies/childrenIncreasing number of people discovering that they are lactose intolerant - need for additional production and promotion of alternative productsChanges in taste/consumer behaviour - shift towards less dairy in the diet e.g. drinking fruit/herbal teas

TechnologicalImprovements in infrastructure (roads/rail/freight) could reduce transport times meaning reduced costs, improved customer satisfaction and less shrinkage/wastageInnovations in packaging could benefit Fonterra for their finished goods range or see them lose out to competitors who adopt them as a USPImprovements in cow milking technologies could see a greater yield, less waste, faster and more convenient processing

Environmental/EthicalNatural disasters, freak weather e.g. flooding could affect cattle health & safety and therefore outputHold-ups with international distribution due to weatherDisease or pest issues that could harm the cattle or their environmentConsumer/government action to highlight unethical practices with regard to artificially high prices of dairy products in the NZ market (investigation by Commerce Commission)

LegalChanges to Health & Safety in Employment Act that would affect farm workersDairy Industry Restructuring Agreement is currently being reviewd by parliament - this act ensure that it is easy for dairy farmers to join and leave Fonterra and that a fair price is paid for their milkUnder Raw Milk Regulations, Fonterra has to make a certain quantity of it's milk available to sell to independent processors and must disclose financial information

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Brief History

Air NZ began in April 1940 as Tasman Empire Airways Limited It was then bought by the NZ government in 1965 and renamed Air New Zealand but then

privatised again in 1989. Air NZ became a full member of the Star Alliance group in March 1999 The company had to be rescued by the NZ government in 2001 and once again came back under

state ownership. Today the NZ government controls a 73% share ownership of the company. As of the 30th June 2012 there are 12 different Aircrafts ranging in size from the Beech1900D to

the bowing 747-400 The airline carries over 12 million passengers each year They have recently bought a 19.9% stake in Virgin Australia in order to expand their routes and

strength in the Australian market.

Global Presence

Air NZ has a very wide well known global presence. Air NZ currently offers flights to multiple regions within Australia, Pacific Islands, Bali, USA, UK, Europe, China and Japan. This is evidence to prove that Air NZ is globally known as for its wide range of services to desired destinations.

PoliticalSelling off the business as part of state asset sales - likely buyer would be Quantas or another large rivalGovernment led boost in spending on promoting NZ as a destination for international touristsImproved political relations with other countries could increase tourist numbersChanges to taxes on fuel/departure tax could affect ticket prices (cost-plus pricing/inflation)

EconomicChanges to interest rates could increase/decrease disposable income of consumersExchange rates - could make Air NZ seem more/less expensive to overseas customersGlobal price of oil will have a large effect due to need for fuel for planesStageof the business cycle that key destination markets are inLocal/regional economies - if booming will boost business travel to those areas

Social/CulturalIncreased awareness of carbon emissions and trend towards travelling by rail/sea insteadMore travel shows on TV/in the media may encourage more people to travelIncreased number of international students studying in NZ or NZ citizens studying/moving overseas

TechnologicalMove towards greater automation e.g. self check-in machines means less staff requiredFaster, more fuel efficient plane models - can travel greater distances with ease - fewer stopsInnovations in facilities available on boardSocial media feedback on quality of service

Environmental/EthicalCO2 emissions from planesWeatherVolcanic eruptions - ash cloudsNatural disasters/conflicts could reduce potential destinations

LegalEnvironment Act - Ministry for the Environment monitors activities that could be destructive to the natural environmentClimate Change Response Act - NZ promised to adhere to the Kyoto Agreement reducing emissions and the effect on the environmentHealth & Safety in Employment Act - safguarding passenger and airline staff safetyFair Trading Act - for marketing activity

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Sistema Plastics exports its stackable plastic container range to 19 countries and boasts displays in some of the world’s best-known supermarkets and stores. It won best use of design in international business at the 2012 New Zealand International Business Awards.

Founder Brendan Lindsay launched the distinctive blue-latch Sistema food storage products which are ubiquitous in New Zealand kitchens and lunchrooms and are quickly gaining a foothold around the world.

Started exporting to English speaking countries only first to make things easier/quicker Now active in 19 countries and earning more than two-thirds of its revenue offshore 2011 revenue was $65 million, of which $50 million was from international sales Well-known international stockists include Macy’s in the United States, Coles in Australia and

Costco in the United Kingdom Still committed to manufacturing in New Zealand Sistema is a leader in a market segment dominated by Chinese and Korean manufacturers Products take advantage of several trends, including increased use of microwave cooking, a

tendency to eat on the move and a home baking resurgence requiring storage for ingredients. First company in its category to move to 100 percent BPA-free materials A pilot on a United States home shopping channel produced sales of 14,000 units in 27 minutes. They are also a supplier to Michelle Obama’s fighting obesity campaign.

Lindsay says new exporters should not underestimate the power of their New Zealand heritage and the goodwill built with clients when they see you are willing to travel halfway around the world to meet them in person. Sistema recently secured $1 million worth of business because a powerful retail executive overheard Sistema export director Allin Russell’s accent as he passed a meeting room, struck up a conversation and was impressed by the product. “The respect for New Zealand in the marketplace is immense. Make the most of it. It allows doors to be opened.”

Current export markets:

- Argentina - Australia - Brazil -Chile- Colombia - Cook Islands - Czech Republic - Denmark- Fiji - France - Germany - Hong Kong- Hungary - Indonesia - Ireland - Israel- Japan - Malaysia - Mexico - Netherlands- Norway - Philippines - Poland - Samoa- Saudi Arabia - Singapore - Slovakia - South Africa- Spain - Switzerland - Thailand - Turkey- USA - UK - Ukraine - Venezuela

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The winery was founded in 1961 by George Fistonich and is now one of the leading producers and exporters of New Zealand wine.

Two wineries in New Zealand – one close to Auckland airport and another in Marlborough, both targeted at the tourism market

Vineyards in 4 areas of New Zealand – Auckland, Hawke’s Bay, Gisborne and Marlborough Currently employ over 250 permanent staff Started exporting to the UK in 1988 Now export to over 50 countries “New Zealand’s most awarded wines”

Current Export Markets:

Sustainability:

Long term commitment to sustainable practices Believe in a responsibility to ensure that resources are protected for the next generation. See sustainability not as an end point but as a journey

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Has been a member of Sustainable Winegrowing New Zealand (SWNZ) since 1995. Is audited yearly by SWNZ to provide a key platform for continual improvement. All Villa wineries are compliant with the environmental management system - ISO14001 Conducting energy audits Heat recovery plants use heat generated by refrigerators for the fermentation process ‘Night air cooling’ is used – cool air trapped and used for chilling bottles during the summer Wineries are designed so that natural light rather than electrical lighting is used Use of organic principles, not pesticides Sales team use hybrid cars to reduce carbon footprint Storm water is collected and filtered before being released into natural waterways Waste grape matter is used as animal feed, rubbish is sorted and recycled and 70% of the

packaging for their Private Bin brand is recycled materials

PoliticalFree trade agreements with new/existing marketsTrading blocs such as the European Union - harder to compete with European productsInternational relations between countriesInvestment in infrastructure - especially roads. rail, sea ports

EconomicWorld oil prices (due to it being required as a raw material for their products and for national and global distribution)Exchange rates changing - due to large numbe rof export marketsBusiness and consumer confidence

Social/CulturalConsumer tastes & fashions - resurgence in home baking, people wanting storage solutions for home organisationTrend towards eating on the go, packed lunchIncreased birth rate - childrens productsOutdoor livingConsumer awareness over dangers of BPA in food storage products

TechnologicalImprovements in capital goods/machinery to refine quality or improve efficiencyStock management systemsUse of ecommerce/TV selling/social mediaDevelopments in material composites to produce more sustainably

Environmental/EthicalWeather/natural disasters affecting distribution of products globally - could fail to deliver ordersLack of availability of natural resources needed for productsSustainabiiity of resources

LegalFair Trading ActConsumer Guarantees ActEuropean Union regulations and laws for each separate export market could change or require products to be amended

PoliticalGovt policy with regard to discouraging alcohol consumption for health reasonsGovt spending on promoting tourism to NZ increased or decreased can affect visitor numbersOverseas govts may change tariffs/quotas improving or restricting export market access

EconomicStage of business cycle both in NZ and overseas markets will affect demand for their productsChanges in interest rates will affect consumer's disposable income and likelihood to travelExchange rates will affect the value of products in overseas markets plus will either persuade overseas visitors to come to NZ or dissuade themAvailability of labour - skilled and unskilled workers

Social/CulturalPatterns of tourismAttitudes to consumption of alcoholTrends with regard to wine/grape preference

TechnologicalBottling plant machinery improvementsEcommerceDevelopment of mobile appsSocial mediaWine production techniquesStorage and transportation systems

Environmental/EthicalLand use issues - growing grapes rather than healthier cropsWaste productsUse of chemicals during wine making processDamage to soil & natural habitats of native animalsUse of pesticides

LegalNew legislation requiring greater use of recycled packaging and/or limits on waste that goes into landfillIncreases to minimum wageFood Safety Act - changes have suggested that supermarket staff may require extra training and/or qualifications to handle foodResttrictions on sale of alcohol could reduce potential target marketChanges to permitted opening hoursChanges to rest breaks/holiday entitlementsChanges to immigration laws/policies may restrict migrants and travellers on working holidays (fewer potential seasonal workers)

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Mainfreight offers managed warehousing and international and domestic freight forwarding Branches across Australia, China, Europe, New Zealand and the United States Listed on the New Zealand Stock Exchange Company has a 100 year vision Began its operations in Auckland, New Zealand, in 1978, soon growing into New Zealand’s most

extensive freight network 1984 saw the opening of the first Mainfreight International branc Entered Australian market in 1989 - treats New Zealand and Australia as a single market Continues to expand in both markets – often through acquisition of smaller competitors in order

to access strategic (important) locations In 1999 they acquired businesses in both Asia and the United States In 2012 Mainfreight acquired the business of Wim Bosman Group providing further

opportunities to expand Mainfreight's international global network with branches throughout Europe.

Sustainability:

Are committed to exceeding minimum environmental standards where practicable Sustainability initiatives have often resulted in reduced costs; so the bottom line and the

environment are both winners They accept that that their business is based on an activity that generates carbon emissions

but recognize they need to work long term to reduce these They lobby (put pressure on governments) for the ability to move more domestic freight by rail

particularly throughout New Zealand and Australia, because the simple fact is trucks emit 4.6 times more CO2 per tonne km carried than trains

They have 13 rail-served sites in New Zealand and importantly, these sites are on the main freight corridors of New Zealand

Mainfreight (Holding Company)

MFNZ

MFAUS

MFASIA

MFUSA

WIM BOSMAN(European

Operations)

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Sustainability initiatives to reduce emissions:

Moving capacity from road to rail and coastal shipping Route planning – using GPS in congested international cities Truck size management – using smaller trucks for distribution within cities and larger trucks

between cities Promoting off-peak distribution, particularly between cities and from ports Efficient driving techniques promulgated through our driver training programmes Vehicle maintenance guidelines for owner-drivers to promote efficient running of their trucks The conversion of gas and diesel powered forklifts operating on our docks to electric, and the

use of manual pallet trucks to replace forklifts where practicable

They have looked at biofuel opportunities in New Zealand, but cannot obtain sufficient guaranteed supply therefore will continue to look at this as an option in the future. 

PoliticalIncreased focus by govt on use of renewable/sustainable fuel sources - may increase tax on fuel furtherRegional councils may restrict access to residential/urban areas of heavy goods vehicles during certain hoursEnvironmental action pressure groups

EconomicWorld price of oil - cost plus inflationStage of the business cycle - if business confidence is low, they may reduce output therefore require less haulage/transportInterest rates - increased pressure on business if they have borrowing, could reduce investmentExchange rates - due to international operations

Social/Cultural Attitudes towards road transport and the environmentAdverse publicityChanges in the market place - eg. people choosing to shop local because of concerns over 'food miles' or carbon footprint of goods

Technological Innovations in energy sourcesUse of more fuel/cost efficient vehiclesDevelopment of stock management computer systems to improve efficiency of processing stock

Environmental/EthicalCO2 emissionsNoise pollution from large vehiclesPhysical terrain within their delivery routes - makes delivering on time difficultNatural hazards - earthquakes, landslides, floodsUse of non-renewable energy sources and lack of alternatives

LegalChanges to rest times and driving hours their staff are permittedChanges to road duties/taxes or vehicle inspection requirementsChanges to minimum wage legislation

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In 1890, James Henry came to NZ and began making chocolate in his own home in Christchurch. He began by door to door sales. Later on he moved to Wellington and since 1896 has been creating Whitakers chocolate for New Zealand and Australia. In 1913 a partnership was formed with James and his two sons Ronald and James. The company is operated by the Whitaker family and today is operated by family members Andrew and Brian. The company as a whole is very family owned and specialises in providing delicious fair trade chocolate made with fresh cocoa beans sourced from Ghana. Whittakers Marketing Mix

Products:

BlocksSanteChunksToffee MilkK-BarsMini SlabsSlabsPipsSquaresIce cream tubs

Prices:

250g Block $4.29

50g Slabs $1.48

180g 12pk $4.69

3pk $3.15

75g 3pk $2.09

Ice Cream $7.99

Flavours:

Fair Trade Creamy Chocolate Milk MacadamiaWhite Raspberry Fruit and Nut Peanut Butter Almond GoldHokey Pokey Cashew NutBerry & Biscuit Peanut BlockDark Ghana Hazelnut Ghana Peppermint Coconut BlockDark Cacao White MacadamiaDark Almond Raisin and PeanutDark Caramel Super Peanut Dark Block Super Dark PeanutDark Orange Rum & RaisinKiwifruit Toffee MilkMilk Madagascar White ChocolateMilk Caramel

Place:

Whittakers products are produced at their factory near Wellington and are widely available in supermarkets, dairies, service stations, specialty shops, cafes and leisure outlets such as cinemas in both New Zealand and Australia.

Whittakers export a selection of their product range to Singapore, Malaysia, Indonesia, Philippines, Vietnam, Hong Kong, India, China, South Korea and Taiwan. Whittakers products are also stocked in a small amount of stores specializing in New Zealand products in the UK and other countries.

In their major markets of New Zealand and Australia the company uses the modern (manufacturer to retailer) channel of distribution for selling to large retailers and the traditional route (manufacturer to wholesaler to retailer) for supplying smaller outlets.

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How does Whittakers meet societal and culture expectations?

Whittakers are a family owned business, because of this they tend to look after their customers and make sure they are always happy with their products. They make sure you are happy, you can return your product if you are not happy with it. The majority of their chocolates are made with dietary possibilities in mind; their dark chocolate bars do not contain milk like most other chocolates which makes it edible for vegans and lactose intolerant people. Whittaker’s chocolate is halal accredited apart from the rum and raisin. Their chocolates are gluten free apart from the kiwifruit block, berry biscuit and toffee milks. The hokey pokey contains glucose derived from wheat, but still the final product does not contain gluten. Their products are kosher and do not contain palm oil. Whittakers are committed to making sure all their customers are happy and can enjoy their chocolate products whether it be dietary or cultural.

PESTEL Analysis for Whittakers:

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Political Govt focus on healthy eating or reducing obesity could hit salesChanges to tax - GST Pressure groups pushing for 100% Fairtrade productsChanges to quotas imposed by New Zealand government may mean reduced quantities of ingredients can be importedIncreased tariffs in imported goods could increase costs of productionNegotiation of free trade agreements with countries they source their ingredients from could save time and money

Economic Stage of the business cycle - are luxury products so wil be affected by consumer confidence Interest rates - demand will fall in line with reduced disposable incomeGlobal economic issues could reduce demand for exports in overseas markets Change in supply or price of imported ingredients could lead to cost-plus pricing

Social/Cultural Chocolate going out of fashion or customers wanting to consume less for health reasons Incresed travel among consumers - may start to prefer overseas brands/tastes more or may demand innovative products Consumers may react positively or adversely to Whittaker's or competitors promotions An increase in consumers choosing NZ brands out of loyalty

Technological Improved production technology (Computer Integrated Manufacture) could improve efficiency and reduce costsUse of ecommerce and mcommerce by competitors could give them an advantage (Whittakers products not currently available online) Social media could provide positive relations with consumers or promote negative feedback about their products/company

Environmental/Ethical Lack of availability of ingredients due to natural disasters overseas Delays to shipments of ingredients due to poor weather Reduction in quality of ingredients due to adverse conditions Media coverage of unethical or damaging practices previously unrecognised (e.g. Palm oil before the damaging effects were known about)

Legal Increase in the Minimum Wage could increase costs of production Changes to Health & Safety legislation could increase their responsibilities and/or require more equipment/training for employees Packaging/labelling requirements may change forcing time and resources having to be used to comply with these (Consumer Guarantees Act & Fair Trading Act)Govt could introduce legislation to tighten up on their impact on the environment - reduced emission levels from factories, packaging must be recyclable etc.