MY STRATEGY
During my business and academic career I have developed a keen interest in the process of strategy formulation in international companies.
Having settled in New Zealand, started a career in farming and therefore becoming a Fonterra shareholder, the strategy of that company grabbed my immediate interest.
In order to assess the benefits of dairy cooperative Fonterra, of whom I became a shareholder, for my farming business, I wrote down my thoughts on that company’s strategy. This resulted in three comprehensive documents over the period 2009-2012, which I decided to share with the Fonterra Board and CEO.
These documents reflect my method of approaching strategy, and can be accessed from this website.
LETTER 1 – Strategy letter 2009 (click here)
LETTER 2 – Capital Restructuring and strategy 2010 (click here)
LETTER 3 – Strategy Comments 2012 (click here)
These three letters deal with strategic issues that I consider of importance to the future wellbeing of the dairy cooperative Fonterra, and that have, from my perspective, received insufficient consideration.
The letters concern:
- The concept of “Beyond Borders”. I question whether sufficient risk assessment has been carried out.
- The combination of a Commodity, Ingredients and Consumer businesses in one company. I wonder whether cultural differences have been taken into sufficient account.
- The choice for the present supply chain structure. I wonder whether substantial investments in farming in countries outside Australia and New Zealand is prudent.
- The seemingly strong reluctance to sell parts of the business in order to fund new ventures. I favour a more flexible approach.
- The capital restructuring solutions, including TAF. I feel that the complexity these add in an already very complex organization has received insufficient consideration.
New Zealand’s economy is heavily dependent on agriculture and agri-business, industries in which dairy cooperative Fonterra and its farmers play a dominant role. I hope that these letters and the thoughts that they contain are not just relevant to my own business, then, but may generate wider business and academic interest.
MY STRATEGY REVISITED
In this paper I will summarise my thoughts on Fonterra’s strategy as they have developed over the years. The recent developments such as the change of guard at the top, the unjustified gagging of former director Leonie Guiney, the Beingmate and Danone disasters, the scrapping of the final dividend and the disappointing 2018 annual results have given it more urgency than I originally thought.
I shall start by addressing the essence of a co-op, followed by my view on strategic management. I shall then touch upon the various strategies that Fonterra pursued over the last decade. Finally I will address the actions that should be taken to implement the results of my views in order to turn around the business and make it future proof again.