PRODUCT INNOVATION

IN DAIRY INDUSTRY: IN THE

CASE OF ARLA FOOD
Submitted by:

Nilima Barahi, Student No; 61756

Sarita Maharjan, Student No; 61653

Sangeeta Chaulagain Bhandari, Student No.61664

Lalita Rana, Student No.61657

Sharmila Paudel Karki, Student No.61785

MAY 31, 2018

Roskilde University

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Acknowledgement

We, the group of 5, the students from Roskilde University, are the researchers behind
this study. This research is a project at Roskilde University in Roskilde, Denmark and
was conducted during the spring semester 2018. This project is included in the second
semester of Economics and Business Administration. It is related with the subject of
innovation management.

We would like to acknowledge our supervisor Jorn Kjolseth Moller for his support,
valuable inputs, feedback and suggestions. Without his help our project would not be
succeeded. It has been a great pleasure to have him and work with him through our
research and completion of project. We are really thankful for his knowledge,
resources and encouragement towards us.

We would like to thank to Henrik Damholt Jorgensen, the vice president of Arla Foods,
for giving us his valuable time. He allowed us to take his interview through mail beside
his busy schedule. We are very grateful to him for sharing valuable information of Arla
Foods.

We would also like to thank to the other lecturers during the semester for providing
knowledge, information and valuable advice. We are also very grateful towards the
librarian who had helped us during the research regarding our project topic. Through
this we come up to know more about how to get through relevant information. Last but
not the least, we would like to thank to our classmates for giving their feedback and
suggestions during the seminars.

Thank you!

Roskilde University, May 2018

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Abstract

Innovation plays vital role for economic growth and development, there is need of
continuous effort to innovation as it is key to competitive advantages. In this research,
we have chosen Arla food as a case. Afterwards, we started with theoretical literature
on innovation and food industry. As problem formulation was set, scope of study is
within the innovation in relation to sustainability of business. Frame of reference is
description about the history on Danish dairy industries and how innovation are playing
significant role to promote sustainability in these industries. A detail view on definition
of innovation and sustainability helps to connect the theoretical framework with the
analytical part. The purpose of the study is to discuss the theoretical framework. We
have used different theories (business model, sustainable business model, value
propositions) to find out how our case company Arla business model has embedded
innovative ideas to sustain their dairy products in the business market. The
methodology chapter contains different approaches in order to answer the problem
formulation and related research questions. This study approaches on qualitative
study where the empirical data has been collected from interviews with the case
company and the rest of secondary data are collected through official website and
annual reports of the case company. The other data are also collected through reports,
journals, news article, books and e-books. The analytical section contains an in-depth
empirical data analysis and findings based upon theories used and results obtained
from Methodology. Business model shall be used as an analytical tool.

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Table of Contents

Abstract .................................................................................................................................................. 3
1 Introduction ......................................................................................................................................... 8
1.1 Background ................................................................................................................................... 8
1.2 Problem formulation................................................................................................................... 10
1.3 Research objective ...................................................................................................................... 10
1.4 Research questions ..................................................................................................................... 10
1.5 Limitation .................................................................................................................................... 11
1.6 Summary ..................................................................................................................................... 11
2. Frame of Reference ........................................................................................................................... 13
2.1 Introduction to Danish Dairy Industries ...................................................................................... 13
2.2 Innovation ................................................................................................................................... 14
2.2.1 Innovation Types .................................................................................................................. 15
Figure 2.1 : Innovation Types ................................................................................................................ 16
2.2.2 The Process of Innovation .................................................................................................... 17
2.2.3 Product Innovation Process ................................................................................................. 19
Figure 2.3 : Robert G. Copper's Five Stage- Gate Model ...................................................................... 20
2.2.4 Difference in Product Development and Innovation ........................................................... 21
2.2.5 Innovation in Danish Dairy Industry..................................................................................... 23
2.3 Sustainability ............................................................................................................................... 24
2.3.1 Sustainable Development. ................................................................................................... 24
2.3.2 Sustainability in Innovation Process .................................................................................... 25
2.3.3 Sustainability Management in Danish Dairy Industry .......................................................... 26
2.4 Summary ..................................................................................................................................... 27
3.THEORITICAL FRAMEWORK: .............................................................................................................. 28
3.1. BUSINESS MODEL: ...................................................................................................................... 28
3.2. SUSTAINABLE BUSINESS METHOD: ............................................................................................ 32
3.3. VALUE PROPOSITIONS: ............................................................................................................. 33
The concept of customer value: ................................................................................................... 35
The definition of customer value: ................................................................................................. 36
4. Methodology ..................................................................................................................................... 38
Figure 4.1: Research onion Model ........................................................................................................ 38

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 4.1. Research philosophy .................................................................................................................. 39
4.2. Methodological choices ............................................................................................................. 39
4.2.1. Research approaches ......................................................................................................... 39
4.2.2. Strategies ............................................................................................................................ 40
4.2.3. Choices ................................................................................................................................ 41
4.2.4. Time horizon ....................................................................................................................... 41
4.3. Data collection ........................................................................................................................... 42
4.4. Research design ......................................................................................................................... 44
4.5 Trustworthiness: ......................................................................................................................... 45
4.6 Research ethic: ............................................................................................................................ 45
5. EMPIRICIAL DATA AND ANALYSIS: .................................................................................................... 47
MISSION AND VISION OF ARLA FOOD: ............................................................................................. 48
5.1 Responsibility and Recognition ................................................................................................... 48
5.2 Innovation Department .............................................................................................................. 49
Figure 5.1 Research and Innovation Centre, Arla ................................................................................. 50
5.3 Code of Conduct.......................................................................................................................... 50
Alignment of Theories into Implementation in Arla Food ......................................................... 51
Business Model .............................................................................................................................. 51
5.4 Major Products and Services...................................................................................................... 51
5.5 New products/services in Arla: ................................................................................................... 52
5.6 Operating in consumer driven market ........................................................................................ 53
5.7 Sustainable farming: ................................................................................................................... 53
5.8 ANALYSIS: .................................................................................................................................... 54
5.9 Financial Performance of Arla .................................................................................................... 55
Figure 5.2 : Arla Annual Report 2017 .................................................................................................... 57
5.10 Business model of Arla:............................................................................................................. 57
5.3 Business model of Arla .................................................................................................................... 58
5.11 Criticism .................................................................................................................................... 59
Figure 5.4 Annual Report of Arla .......................................................................................................... 59
6.Conclusion .......................................................................................................................................... 60
7. RECOMMENDATIONS: ...................................................................................................................... 61
References .......................................................................................................................................... 62

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List of Figures

Figure 2.1- Innovation Types…………………………………………………………….15

Figure 2.2- The Process of Innovation…………………………………………………..18

Figure 2.3- Robert G. Copper's Five Stage-Gate Model………………………………20

Figure 3.1- Business Model Framework…………………………………………………30

Figure 4.1- Research Onion Model………………………………………………...…….38

Figure 5.1- Research and Innovation Centre, Arla…………………………………….50

Figure 5.2- Arla Annual Report,2017……………………………………………………56

Figure 5.3 Business model of Arla……………………………………………………….58

Figure 5.4- Arla CSR Report,2017……………………………………………………….59

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List of table

Table 2.1 Differences between Product Development and

Innovation…………………………………………………………………………………21

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1 Introduction
1.1 Background

Nowadays, rising complexity, rapidity in technological changes and shorter

product cycles are forcing firms to build innovative vertical and horizontal
agreements and obtain competency and flexibility in responding to market
changes (Rothwell, 1994). More and more firms are attracted toward product
innovation which facilitates them to get done sustainable competitive
advantages. For the long term success of the firm innovative product
development is very essential in the grounds of increasing competition in
globalized market, rising consumer demand, sharp rapidity in technological
changes. However, aptitude of a firm to impel new products from idea to
initiate promptly with fewer errors is very decisive (Cooper and
Kleinschmid,1991).

If a firm do not change an offering (product and service) and the way of
serving it to the world then, it is always in risk of being replaced by others.
Sustainability of every firm is the result of capability to regular and focused
change (Bessant and Tidd, 2015) further, Cooper and Kleinschmid (1991),
believe that company’s success or failure regarding innovation is based on
the process of applying innovative ideas into actions.
Innovative firms must identify social and environmental challenges and find
out ingenious means to tackle these challenges in a way as it would be able
to supply long term value for the environment (planet), society (people) and
sustainable business (profit). Innovations emerge due to the creativity,
competition decisiveness, transformation, and diversification and
entrepreneurship. Whereas, sustainability depends on process, leadership,
cooperation, trust, cultural identification and regional strength (Reine, 2013).

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The global food industry is moving in a way that need largely hardened and
expert food producers to reconceived their strategy for long term. Even
global retailers are more competent to disappointing fate of biggest
manufacturers by iconic brands.
In 90’s largest food manufacturers are highly influence by branding and its
corporate images. But, now survival of these firms depend on the ability take
risk of product innovation and being low-cost suppliers for retail channels.
Firms need to acquire specialised capabilities or resources to differentiate
their products in the market. In addition, with growing consumer awareness,
healthy and co-friendly food has become the vital point to consider while
producing the food items (Gehlhar et. al, 2009). In the context of food,
customer tries to avoid risk in consumption. If higher value is added, they
always look for healthy eating (Steve, 2004).

Innovation can grasp the key to sustainable advantages. Though, it is

already testified as riskier initiation as many companies gone through new
product failure in past. However, truly innovative products are at less risk to
duplicate and to present capabilities and resources applied by firm for
sustaining on competitive advantages. Therefore, instead of being guided
by market, to aware consumers and lead the market is more beneficial for
firm (Gehlhar et.al,2009).

In Denmark, organic food has become the issue of pride for whole nations.
High-end restaurants, groceries, hotels and retailer’s channel are offering
broad sections of organic food. Consequently, as a whole, consumers
usually prefer to expend more on organic products. Comparatively, organic
products are more expensive. So, broaden support from consumers for
organic product will provide opportunities to producers to append value
(Euromonitor International, 2018).

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1.2 Problem formulation
Arla food has built innovation centre with the aim of growth plan for next decades.
Where, innovation centre is playing vital role to collaborate with customer through
value added products and recreation of strategy for sustainability. A new agenda for
the innovation department is to provide natural and nutritional balanced product for the
healthier life by concerning the increasing health awareness of the people. Company’s
extension in global market has proved self-sustaining and delivered attractive profit
(Arla annual report, 2012). Arla food takes fifth position in the world’s dairy market. To
obtain that position how company is handling in the area of customer needs, market
extension and digitalization? As, firm has strategy of dynamic and change to tackle
global challenge. Thus, we have formulated a research questions as follows:

How Arla's Business Model has embedded innovative ideas to sustain their
dairy products in the business market?

1.3 Research objective

Since there is a need of studies within the innovation and sustainability in agri-food
sector which in this case is in dairy firm. This study aims to increase understanding of
innovation in dairy industry and what innovation processes might be vital to introduce
sustainability of business. However, this paper particularly seeks to analyse product
and process innovation in relation to the organizational sustainability, product value
and business model of organization. Therefore, applicable recommendation to
upgrade in this area is the major expected outcome of this study with the overall goal
to increase innovation and sustainability.

1.4 Research questions

What is their present business model?

Why has sustainability and organic products become an important part of business
model?

How can they organize their innovation to fulfil their objectives?

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1.5 Limitation
Since, this is a case study done in a single company that should be considered while
screening the finding. This research is carried on qualitative data and core ideas
applied to analysis is on the personal viewpoint of interviewee and published
information on company’s website. A large amount of data and information gathered
through article and company’s annual business report and, that information built in
data handling process moreover, it was not practical to present all gathered
information. As every organization has their secret business strategy, that predictable
risky factor influenced the innovation department in answering the questioners. In
additions, due to lack of time and access, it lacks the field visit and observation as
interview is accomplished through email questioners. Additionally, the findings need
more investigation of other dairy companies to be generalized. Besides, this study is
only investigated on the current business model of company.

1.6 Summary
This research is divided into seven different chapters. Chapter one begins with
background of this study and discuss about problem formulation in short. Then,
research questions, research objectives, limitations are introduced followed by
summary. Likewise, chapter two presents the frame of reference for this research. In
this section, researcher first presents the Danish dairy industry and subsequently, its
process, types and importance.

Afterwards, research is sited with deeper focuses into the connection between
innovation and sustainability. Chapter three presents the theoretical framework of this
study. Where, concept of business model, sustainable business model and proportion
is discussed.

Through the chapter four, researcher specifies the method applied in the empirical
study on Arla food which comprised questioner (qualitative), interview and secondary
data. At first, research philosophy is described followed by the methodological choices
of research. Ultimately, research approaches, strategies, case study, choices, time
horizon, and data collections method is explained. Next, 5th chapter consists the
analysis of empirical finding in this study. In the beginning, case of Arla food in relation
to fact of the study and innovation department is introduced. After that problem areas
founded in the research are discussed and analysed then, theoretical framework and

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frame of references is used to find the result. Consequently, Chapter 6&7 contains the
conclusion and recommendation of this study.

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2. Frame of Reference

This Chapter initially describes the innovation in the broad context. It explains on the
matter of innovation, its process and importance of innovation in the Danish dairy
industries. Further, it specifies the sustainability and the relationship between the
innovation and sustainability and how these two are related to remain the Danish dairy
industry to develop in the market. So, the innovation and sustainability development
in innovation are described in details in the chapter.

2.1 Introduction to Danish Dairy Industries

Danish Dairy industries have the main theme “More Milk - More Consumers - More
Innovations” which is promoted worldwide and this theme signifies more production of
entrepreneurship in the industry increases the number of consumers or buyers and it
will significantly increases the number of innovation(Danish Dairy and Food Industry,
2015, magazine, website, online).The Danish dairy industry consists of the
international dairy group Arla Foods and 30 smaller dairy companies, together
processing 4.7 billion kg milk from a total of 61 production plants in Denmark(Danish
Agriculture and Food Industry, website, online).
''Cooperatively owned by Danish milk producers, Arla Foods is Europe’s largest dairy
group''(Danish Agriculture and Food Industry, website, online). The Arla group
processes more than 90 percent of the Danish milk and dairy business and possess
the consumer's loyalty and sustain as the number one dairy industry .It also runs dairy
operations in a number of other countries, with Arla UK plc as its biggest
business(Danish Dairy and Food Industry, 2015, magazine, website, online).

The remaining 30 Danish dairies are evenly distributed between cooperatively and
privately owned companies. The small dairies typically specialise in various product
areas within cheese, butter and liquid milk production. A large part of their production
is exported by specialised exporters((Danish Dairy and Food Industry, 2015,

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magazine, website, online).The export of organic dairy products are particularly
accounted on cheese, preserved milk products and butter which contains more than
20 percent of export in all Danish agricultural exports. Danish dairy industries are
owned by their own farmers so there are membership boundaries in the industry and
it helps to gain civilization and unity in industry because of health consciousness for
the consumers and farmers supply their products to the retailers for the further
production of products which are organic nature .

Further, in this chapter there will be clarification how Danish dairy industries corporate
their innovation process. Mostly this section is the clear description of what Danish
dairy industry have possess their position in the market and how these industries are
sustaining their innovative ideas to consume customers value creation. The value
proposition of these industries are much focused in consumers health aspects and
animal welfare facilities which will be elaborated in details.

2.2 Innovation
The creation of ideas and to process such ideas into invention is innovation. So,
innovation is the result of creative thinking and knowledge based. Innovation is the
ability to connect, spot opportunities and maintain sustainability utilizing advantages
from those opportunities by exploiting radical breakthroughs in technology(Bessant
and Tidd,2015,p.7). However,'' innovation isn’t just about opening up new markets; it
can also offer new ways of serving established and mature ones similarly, equally
important is the ability to spot where and how new markets can be created and
grown''(Bessant and Tidd,2015,p.8).
Fagerberg.,et al,2005 have distinguished the meaning of invention with innovation
since these two terms are similar to some extent however, the idea and
implementation of skills might differentiate them. When the invention can be
everywhere but for fact innovation occurs specially in firms which need to have
production knowledge, market knowledge, a well functional distribution system,
sufficient financial resources and so on. For the invention to be able to get the level of
innovation, a firm need to combine several different forms of skills, capabilities,
knowledge and resources(p.5).
Creative ideas become innovation, ''innovative organizations support new ideas and
are experimental and creative for the search of new technology and improved

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practices''(Hisrich,2014,p.11). Accordingly, Hisrich defined innovation as the process
that starts with the idea, proceeds with the development of the invention and result by
the enhancement of the developed products, services and processes or technological
advancement in the organization(Hisrich,2014,p.10).
The term '' innovation matters very important in the case of development of anything
that may industrial, agricultural, dairy farm, social sectors and so on. Invention is the
meaning of development and the development of skills, ideas and enhancement of
invention is the new way of creating innovation. So, innovation and development are
the core concept that helps the economy of the nation to establish a new generation
of the global sustainability of economy as a whole. While entrepreneurs are
responsible for the substantial development of the technological innovations during
economic transformation and economic trade. So, entrepreneurship and innovation
play key role in establishing the economy by developing firms and also develop
existing ones which created new markets and opportunities that are the media to
contribute in economic growth, development, prosperity and competitiveness
(Hisrich,2014, p.15).

2.2.1 Innovation Types

The innovation differentiates with the difference in the creation of ideas and also varies
as per the industries. There are different types of innovation which will be discussed
in this part of the chapter.
The purpose of this study is to investigate the different types of innovation that are
predominant in Danish dairy industries, the degree of innovativeness, the practices
associated with the pursuit of innovation and their relationship with the industries.
Basically, there are 4 types of innovation that promote industry to run their business.

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Figure 2.1 : Innovation Types
Figure 2.1 shows the 4 innovation types different firms are going through for their
sustainable development. This types of innovation shows the determination of the level
of innovation on how they perform and what are they key important of the innovation
activities.
 Breakthrough Innovation
Breakthrough innovation started when people started to do something new,
way ahead of the next best thing, so the breakthrough product often combines
the functionality of several different products all into one. However, these
products face some difficulties to create because of the lack of resources, lack
of focus on creating perfect idea, lack of correct understanding from the end
user, and lack of technological competencies(Nielson,2013). For this case to
explore unconventional skills and resources, the strategy of Open innovation
can be highly effective because it can help to expose problem and retain
resources(Satell, 2017).

 Sustaining Innovation
Sustaining innovation occurs when there is need of improvement in the
current position of the products. Normally large companies are very good at
creating sustaining innovations because their resources, business processes
and cultures are setup in a way to enable sustaining efforts(Nielson,2013).

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 Sustaining innovation are performed because most breakthrough products will
not last long without sustaining effort behind them so the conventional
strategies like road mapping, traditional R&D labs should be made effectively
to set a new opportunities of resources and skills in an
organization(Satell,2017)

 Basic Research

In this innovation type, basin research are done on the basis of new market
innovations. New market innovations refers to applying a current products in a
new way by thorough research and sometimes even for a different segment of
customers. Basic research on a new market help the entrepreneurs or
innovators to have a business plan for the future, just as the approaches, such
as, design thinking, open innovation, business model innovation and so
on(Satell,2017).

 Disruptive Innovation

The innovators promoting disruptive innovation bear a question '' why do

successful firm fail?'' So, this innovation is simply essential because it is simple,
convenient and able to gain significant market acceptance for the products
through finding the user experience, by cost reduction and deducting number
of features in a product to a degree that allows the customers to adopt the
products in a large group. In present situation, many industries who followed
the disruptive innovation retain successful and more established and also turn
themselves as a leader in a respective market(Nielson,2013).

2.2.2 The Process of Innovation

This section represents the stages of the process of innovation which is the core
concept in sustainable development of the Danish dairy industry. There are basically
4 stages on the process of Innovation which will be discussed.
1. Idea Generation and Searching of Ideas
2. Experiment and select the good ideas
3. Commercialize and implement the selected ideas

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4. Implement and Capture the idea into innovation.

Figure 2.2 : The Process of Innovation(Tidd and Bessant, 2009).

Innovation Process 1: Idea Generation and Searching of Ideas
The innovators at first have to create idea of innovation by searching the customer's
needs and understand the customer's problem so that they can find the ways for the
organization to provide solutions. An entrepreneur in an organization needs to create
the ''customer journey maps to illuminate what your customers are doing, thinking,
feeling, and experiencing during every stage of the shopping, purchasing, and
consumption process'' (Power, n.d, website). Nevertheless not all ideas generated are
worth implementing sp advocacy and search of correct and factual ideas help to
evaluate it, so it will provide needed analysis on potential benefits and problems. This
will help to make a decision that can manage the future ideas(Neese,2017).

Innovation Process 2: Experiment and select the good ideas

The experiment stage test an idea in a form of prototype and business model canvas.
This process help the innovators to find out if the idea generated are suitable to get
implemented and if not it generate new idea for suitability in a particular organization
in a particular time period. It helps to answer the situation on what are the ideas to be
executed, if they are beneficial for future matter and why is it important for customers
satisfaction on products(Neese,2017).

Innovation Process 3: Commercialize and implement the selected ideas

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This process of innovation presents the idea to be implemented in a commercialized
form and innovators get the solution of ideas on how the selected ideas of innovation
are going to happen for implementation.'' Commercialization aims to create market
value for an idea by focusing on its potential impact(Power, n.d, website). This step
makes the idea appealing to the audience, such as by packaging an idea with other
ideas, clarifying how and when the idea can be used, and using data or prototypes
from experiments to demonstrate benefits'' (Neese,2017).

Innovation Process 4: Implement and Capture the idea into innovation.

Implementation sets up everything needed to develop and utilize or produce the
innovation. The use or application of the innovation should be demonstrated by the
end of this stage, along with acceptance of the innovation(Neese,2017).For the
innovation to succeed, it will need the proper resources, a marketing plan for
customers and an open culture with strong advocacy this final stage allows the
organization to determine the next set of needs for customers. In this stage by
capturing the idea of innovation , the innovators can get knowledge of how the
organization can get the benefit from the implemented innovation(Power, n.d,
website).

2.2.3 Product Innovation Process

The process of innovating new product development consists five stages which was
described by Robert G. Copper. Stage-gate model represents a new way of stages in
the product innovation process for the new products.
This section describes how the product innovation process plays an important role in
making decisions to elaborate the new dairy products in the dairy industries.

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 Figure 2.3 : Robert G. Copper's Five Stage- Gate Model

Stage-gate model has been popular system for driving the new innovated products to
the market(Cooper,2018). The goal of innovation process is to implement the ideas to
meet customer needs and it can be executed by addressing the needs of new product
innovation process, meanwhile many companies are adopting different business
strategies which helps them to generate lots of ideas and run their work quickly and
inexpensively determine which ideas can make their customers satisfy(Ulwick, n.d,
website).
The five stages gives an product innovation process idea that consists the preliminary
investigation of the idea in the first stage and also assessment of the market structure
and customer's problem and need on the specific targeted market. After the scoping
of the selected project of innovation, a detailed investigation is done including market
research, consumer's needs, concept, technical assessment. This stage is known as
business build case. Afterwards, development of business prototype and business
model is the third stage which are made for the key relationship and to maintain key
activities in an organization. The invented products goes through testing and validation
stage which initialize the product to be ready for the commercialization. At last stage,
the commercialized products are launched as well as the production of full products in

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market are launched; this launch includes full commercialization and implementation
of a market and production plan (Cooper,2008,p.215).
However, not all projects pass through each stage. There are some criticisms because
of the challenges faced in employing Stage-Gate, including governance issues, over
bureaucratizing the process, and misapplying cost-cutting systems such as Six Sigma
and Lean Manufacturing to product innovation(Cooper,2008).
In this project, the case of Arla Foods is shown and their product innovation process
giving an opportunity to the new way of success in dairy industry. Arla Foods has three
divisions for innovation; Nordic, international, and ingredients where each division has
a research centre. Product innovation concentrated on fresh milk and desserts are
done by the Nordic department, the international division concentrate on cheese and
butter and the ingredients division emphasize on milk powder products. The
knowledge created in a research centre is spread to the other research centres
through workshops and formal meetings (Bergfors and Larson, 2009, p.268).
So, as per the stage-gate model, the business need to operate the business as per
the step by idea screening, scoping of idea, perform business and innovate ideas,
develop new innovative products, but the products should be tested for further
development, and at last stage, the product can be launched depending upon the need
of the consumers.

2.2.4 Difference in Product Development and Innovation

There are some differences in traditional product development and innovation on the
basis of knowledge, structure, resources and risk management. These differences will
be shown in this section.
Table 2.1: Differences between product development and innovation
Traditional product development Innovation

Demands Knowledge transfer Demands Knowledge integration

Works well in established organization Demands new Structure

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 Less demand for resources Demands more resources, but also
different resources

Limited risk for management Higher risk, demands more

courage from management

Source: Lagnevik ., et al, 2004

In terms of differences, traditional product development and innovation are two

different terms in an industry which is shown in table 2.1.
Product development means doing task to develop a new product or service and the
human resources are assigned with the delicate task of developing and refining the
product using their knowledge, so here knowledge is transferred from one to another
within inside or outside the organization. The mission and vision are well defined and
worked within the existing corporate strategy which makes it simple and works well in
established organization since there will be backup from the management and
composed with the market intelligence. So, there will be less demand for resources as
the product development needs only knowledge transfer and there is only limited risk
in management because of the co-operative manner between the authorities and also
because the development are incorporated by the management (Lagnevik ., et al,
2004, p.32)
Regarding innovation, the process of innovation is inseparable from the company's
strategic and competitive context, so the use of knowledge are more complicated.
Hence, it demands for knowledge integration unless only transfer of existing
knowledge is not sufficient. A clear understanding on the potentiality of knowledge with
a new technology should be exploited which creates and integrate the existing
knowledge with the key areas of competence in the company. So, the combination of
old and new knowledge is the innovation. Meanwhile, innovation process have unique
aspects which demands new structure ; in such case, the existing established
knowledge centres can become useless which generate the need of new
organizational challenge to stimulate new thinking. The demand of new knowledge
automatically demands for new and more resources , but also different from the
existing one to establish competitiveness in the market. There is higher risk in a way

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that it demands for stress of bringing new knowledge into old organization which
sometimes not suitable as per the strategy and structure of the organization (Lagnevik
., et al, 2004, p.33).

2.2.5 Innovation in Danish Dairy Industry.

Danish Dairy industry is known to have a strong position in the innovation matter;
Danish dairy production and farming have always based their success on the ability to
innovate according to market trends, and be the leader when it comes to developing
new technologies and processes(Trepco Aps, Magazine, online).
This section in this chapter defines how and why the Danish dairy industries are
successful and known as the good example of innovative industry around the
worldwide.
According to Danish Agriculture and Food Council, ''they focus on taking care of the
dairy sector’s interests in relation to maintaining conditions which make it possible to
sustain a globally competitive production and to achieve the same terms of competition
as the other EU countries. They have currently striving to have milk producers’ stable
systems assessed from the documented animal welfare and antibiotics consumption
- and not based on rigid rules resulting in high costs for the arrangement of stables.
Another focal area for us is the work to ensure fair competition in all EU member states
and an effective enforcement of competition rules, which are a matter of great benefit
to the Danish dairy industry'' (Karen, CEO, Danish Agriculture and Food Council,
Magazine,2015).
Regarding innovation in dairy industry, there is the project named '' Water Efficient
Dairies'' which has the aim to find ways on reducing the water consumption within the
dairy industry. The motive to start the project remains as an increased milk production
and identification of significant potentials for water savings. This motive has the goal
which has to be achieved for the dairies' economy, for consumers health, food safety,
good working condition, environmental issues, and animal welfare (Danish Dairy and
Food Industry, 2015, magazine, website, online). In regards to Arla foods, Denmark
which is known to be highly dedicated and well-known dairy industry has launched
new innovation center in 2016 where there focus will be developed in the basis of ''new
health/nutrition-beneficial natural dairy foods, as well as energy-optimized and efficient
manufacturing, sustainable packaging, and microbiology to maximize our usage of

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strains and cultures across categories'' (Cornillon, Vice President, R&D Department,
Arla Foods).
The innovation trend in dairy industry are still ongoing but critically it shouldn't harm
any creature, environment. More or less, innovation must be legislative so while
performing the act the rule of government must specify the provisions which claims for
the development of social scenario. Because of social aspects and development of
social issues , the innovators are inspired to innovate new development so it should
benefit both the organization and the society

2.3 Sustainability
Sustainability refers the ability to maintain certain level and position in the competitive
market and gain profit as well as respect on the basis of the level.
Further this section specifies what sustainability matters in the innovation development
and what innovation gives important role in maintaining sustainability.
Sustainability has both threat and opportunity for the innovation matter so it became
the challenge to sustainability-led innovation. These days because of global warming
every corner are having crisis, in a same way because of climate change organizations
are facing some political and economic issues. This translates to increasingly strong
legislation forcing organizations to change their products and processes to reduce
carbon footprint, greenhouse gas emission and energy consumption (Bessant and
Tidd, 2015, p.100). But even though the opportunities are most considerable since it
promotes both product innovation and process innovation. Sustainability manages
innovation as the process generates additional revenues from better products or
enables companies to create new businesses. The provision of alternative goods and
services, more efficient approaches to resource and energy management and new
partnerships and ways of working could help establish a new era of economic
development (Bessant and Tidd, 2015).
2.3.1 Sustainable Development.
Sustainable innovation process and successful innovation development is the reason
behind the industries sustainable development.
Here, the concept that clarifies why sustainable development manages the level of
ideas in innovation will be discussed.
Sustainable development is the process of developing the today's needs and for future
desire by developing goals however it should not effect on the environment , natural

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systems and also without compromising the wants of future generations to meet their
future goals. Innovation and sustainability are two main key mediators that leads the
development to its goals. Sustainable development goals are mainly focused on the
ground of sustainability in environment, economic, and social aspects. Some goals on
sustainable development behind the development of these aspects (Bergfors and
Larson, 2009 ) are :
 Foster innovation and resilient infrastructure, creating communities and cities able
to produce and consume sustainably.
 Care for the environment combating climate change and protecting the oceans
and land ecosystems.
 Universalize access to basic services such as water, sanitation and sustainable
energy.
 Eradicate poverty and hunger, guaranteeing a healthy life.
 Support the generation of development opportunities through inclusive education
and decent work.
 Reduce inequality in the world, especially that concerning gender.
 Promote collaboration between different social agents to create an environment
of peace and sustainable development.
The need of sustainable development encourages innovators to innovate a new
product that can maintain reliability and sustain growth economically, socially and
environmentally. Innovation can promote economy by the means of innovation in
new sector of product and earn profit by consumer's benefit, socially it promote
social people by providing employment facilities, services promotion, social
programs, and innovation also helps to sustain environmental benefit by
promoting education on impact of environmental imbalance and creating natural
welfare programs. So, innovation manages to sustain development in an economy
and socially.
2.3.2 Sustainability in Innovation Process
Several factors are important to improve the integration of sustainability aspects in
innovation processes. Such factors contains the understanding, motivation, and
commitment from management and engaged personnel which can be achieved by
better knowledge about the needs for sustainable innovation and the possible benefits.
Such benefits are highly profitable and leading to increased sales or improved
efficiency leading to higher competitiveness(Staffas,2012).

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The link between innovation and sustainability has been discussed by Frans Berkhout
and Ken Green, 2002, they identify a number of limitations in the innovation literature,
and suggest potential ways to link innovation and sustainability research, policy and
management (Bessant and Tidd, 2015):

 A focus on managers, the firm or the supply chain is too narrow. Innovation is a
distributed process across many actors, firms and other organizations, and is influenced
by regulation, policy and social pressure.
 A focus on a specific technology or product is inappropriate. Instead, the unit of
analysis must be on technological systems or regimes, and their evolution rather than
management.
 The assumption that innovation is the consequence of coupling technological
opportunity and market demand is too limited. It needs to include the less obvious social
concerns, expectations and pressures. These may appear to contradict stronger but
misleading market signals.
Source: Berkhout, F. and K. Green (eds) (2002) Special issue on managing innovation
for sustainability, International Journal of Innovation Management, 6(3).

The reason behind sustainability in innovation is because of the knowledge and new
invention of ideas and the technology in innovation while the sustainability of any
organization depends upon the innovation and its process. While sustaining the
innovation within an organization the ideas are distributed among different actors
inside and outside the organization. The product development are focused on high
technology and remain in social welfare without having any harm. The technology are
used by entrepreneurs as per the demand of the market however details research on
the need of the consumers are required which will manage the

2.3.3 Sustainability Management in Danish Dairy Industry

This section in this paper discusses the new and innovative strategies the Danish dairy
industry are encouraging to sustain their innovation as well as to capture the
sustainable management in the competitive market.
The sustainability management in Danish dairy industry have remain with the
consumers health welfare, the new products available today is lactose-free milk, with
a taste similar to milk. The possibility to produce lactose-free milk with good taste

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opens up to new consumer segments, where lactose intolerance is an issue or where
consumers by choice avoid lactose (Danish Dairy and Food Industry, 2015, magazine,
website, online).The concept of mutual co-operation remain with all the farmers within
the industry which is the actual reason behind the sustainable relationship and
management in Danish dairy industry.

Arla Foods Denmark, known to be the top dairy industry in Denmark among other 30
dairy industry and sustainability management in Arla foods remain as the strategy to
sustain it worldwide. The strategy for sustainability of Arla Foods focuses on three core
concepts: Climate, animals and nature. It has a strategy which will reinforce its position
as a responsible company and assign the Arla farmers for their ongoing work around
climate, waste and animal welfare(Cornall,2016). Arla possess more raw milk in care
than before because their value proposition is considered on consumer's health and
welfare. This system of Arla has provided the opportunities for global growth to create
its value for their 12,700 farmers (arla.com, website). The overall focus for
sustainability remain in working together across the supply chain to improve animal
welfare, save resources, reduce greenhouse gas emissions and develop biodiversity
focused initiatives in the nation(arla.com, website).

2.4 Summary
This summary concludes the chapter 2 as a whole which influence the innovation and
sustainability management in the Danish dairy industry. The value proposition of all
the Danish dairy industry remain in the consumer's health and animal welfare so they
maintain the business model which shows their key activities. The innovation plays an
important role for the sustainable farming and development of dairy industry helps the
farmers to focus their knowledge in product development.

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3.THEORITICAL FRAMEWORK:

The theoretical framework is developed for the purpose of the research. This paper
discusses about the different theories (business model, sustainable business model
and value propositions).

3.1. BUSINESS MODEL:

“A business model describes the rationale of how an organization creates,

delivers, and captures value … The business model is like a blueprint for a
strategy to be implemented through organizational structures, processes and
systems” (Osterwalder & Pigneur 2009).

It is the way of understanding organization as a system. To understand the

Business Model first we have to think about few steps such as, who are you?
what value you create? With whom you collaborate? How do you capture
value? who you serve, what makes you unique/ different? And what makes you
sustainable.

Business model innovation is not about changing what you sell but it’s about
revaluating your products continuously.

Business model innovation plays a vital role to deliver social and environmental
sustainability.

“A conceptual tool that contains a set of elements and their relationships and
allows expressing a company's logic of earning money. It is a description of the
value company offers to one or several segments of customers and the
architecture of the firm and its network of partners for creating, marketing and
delivering this value and relationship capital, in order to generate profitable and
sustainable revenue streams” (Osterwalder, et al, 2014).

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 We view business model as an activity which are conducted to satisfy the
perceived needs of the customers and the market. It focuses on holistic
approach, on how business is conducted rather than focusing on its specific
functions like marketing or operations.

In reality as we know it, where financial resources are rare, business people
and directors must look beyond the product and process levels to focus on
approaches to enhance their business model. Which will help them to create
an opportunity to position themselves in the market.

A company should take four steps to innovate business model to survive and be
competitive in the market. The four I framework of business model are:

Initiation, Ideation, Integration, Implementation

Initiation: Organization must examine their present plan of action by noting the inquiry,
for example, who is your objective client and what do you offer to them how you make
incentive and how you produce income.

Ideation: Organizations can stand up to their advancement design by finding if your

item and experience offering design coordinating or not and gain from different
organizations and develop.

Integration: In this procedure organization need to analyze the unfaltering quality of

their plan of action by looking at all four inquiries whether the organization is steady or
not.

Implementation: It is the last stage where organization chooses one thought and
chooses to actualize it. It regards actualize one plan of action at any given moment
(K. Frankenberger, 2013).

Business model innovation is very important in an organization but it is very difficult to

achieve it. Through the help of Business model companies can generate new ideas
and technologies.

The Business model plays an important role in the company performances. This
concept is also seen as the domain of innovation and technology management.
Organizations generate innovative ideas and research through this business model.

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This model helps in product development and to satisfy customers’ needs and wants
(Zott, C. et al, 2010).

According to Osterwalder and Pigneur, Business models describes about how

Organization creates the value, deliver it.

Figure 3.1; Business Model Canvas

Source: Osterwalder and Pigneur (2010) Business Model

Framework.

Key Partners: Key partners is one of the overlooked elements in the business model
canvas. It is the network of suppliers and partners that makes the business model
work. It is very important in value network. Partnerships reduces risks and strengthen
the company.

Key Activities:This element depicts the most essential activities the organization needs
to perform with a specific end goal to satisfy the business model. This activity depends
on the kind of model but should support all the framework. Osterwalder and Pigneur

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has divided key activities into production related, critical thinking related or network
related.

Key Resources: In order to support the business model, the key resources play an
vital role which can be human, intellectual, financial assets. Only through key
resources companies can generate value propositions and revenue.

Cost structure: This element incorporates every one of the expenses used by the
complete business model. There are two types of cost approaches i.e. cost driven
business model, where all the costs are limited. Value driven business model where
value delivered to the customers are more important than the cost.

Value Propositions: in simple words, value propositions is a business statement that

an organizations uses to outline why a purchaser should buy the product or use as a
service. Companies use this statement to target clients who will profit most from
utilizing the organization's items, and which will help to maintain an economic meet.

Customer Relationships: The relationships which the companies want to build to its
customers is known as customer relationships.customers relationships can expand
the quantity of customers through customers acquisitions, keeping clients through
customers maintenance or moving customers starting with one of the value
propositions then onto the next customer transformation.

Customer Segments: It is one of the important part of the Business model. According
to Osterwalder and Pigneur, it is very crucial for an organization to understand
customer segment in order to survive in the market and be successful.

Channels: Through channels companies can reach to different customers with their
value propositions. It includes all the possible ways business keep in touch with the
customers such as distribution channels, marketing channels and through other
means of communications.

Revenue Streams: In this section, we find out what revenue stream is represented
for the entrepreneur and how to make sure this category is effectively addressed.
According to Osterwalder and Pigneur, a good business has a way to capture value
from the structure.To capture value is one of the essential elements of business model.

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Since, we will look around sustainability in a dairy business, more data about business
models for sustainability in an organization level will be discussed below.

3.2. SUSTAINABLE BUSINESS METHOD:

Before talking about sustainable business model lets first define “sustainability”,
sustainability is the procedure of progress, in which the exploitation of resources, the
direction of investments, the introduction of innovative advancement and institutional
change are all in agreement and upgrade both present and future potential to address
human issues and goals. As we all recognize sustainability plays an important role in
every sector. So, what if companies could use sustainability as the main driver for
innovation.

Many literatures defined sustainable business model in different ways. According to

Lüdeke-Freund, F, a sustainable business model can be defined as a business model
that creates, delivers, and captures value for all its stakeholders without depleting the
natural, economic, and social capital it relies on (2014).

Sustainable business model is about integrating matters of both societal and

environmental into the vital business of a firm or organization (Schaltegger and

Wagner

2006). Sustainable business model helps to improve the financial performance of the
business but It is hard to know how to adapt sustainability in business model in an
organization.

How sustainability can save company?

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Here are some points to look through in order to make company more competitive and
long lasting.

 Companies should communicate the concept to the employees instead of

looking at product life cycle they should look at the value life cycle. Such as,
by value sourcing and collection in the product and value collection and
recovery in the material.
 Companies should value product for the system by creating great product with
added consumer benefit.
 Using the product which is trustful i.e. where sources are known and suitable
for users.
 They should make sure to design as per the users’ needs by taking care of
health and happiness (doing more good instead of bad).

3.3. VALUE PROPOSITIONS:

Some of the different categories which customers thinks as an important, which leads
to the development of customer value propositions. Value propositions is a promise of
value that you deliver in exchange of whatever you are asking. It is basically a
statement which explains the questions about, what is it the user will get? Which
problem do you solve for the user? Why should the user buy from you instead of other
competitors?

A value creation or proposition is all about customers and meeting specific customer
needs and satisfaction. Precisely saying, when attributes of a product for instance,
price, design, packaging, service and post service facilities matches into what a
customer is thriving for then a value is created. Likewise, value proposition is also all
about customers but only for organization’s internal assessment and use. Generally,
companies’ perception of value proposition is somewhat different than what is should
be. Instead of recognizing customers true needs they only assess what can they offer
the customers.

Out in the market there is a display of pool of offerings to customers. Every day new
companies are established with varieties of products and services to stand out in the

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crowd. In the end of customers too, they are everyday looking for something or the
other product to meet their requirement and needs. This way, both the customers and
business houses are dynamic. Only means for companies to survive in this ever-
changing demands and needs is to be innovative. Innovation as per the new needs
and necessities only can lead organizations towards the path of survival. Hence,
companies should try to be as much distinctive as possible to fall into the eye of
customers. Only not distinctive but also trying to be a match for their need can lead
them towards longevity. Lindic, J. & Marques, d.S. 2011, "Value proposition as a
catalyst for a customer focused innovation", Management Decision, vol. 49, no. 10,
pp. 1694-1708.

For any company to succeed, proper customer value proposition is a key. A well
worked out CVP can help in selling both product and services. There are certain key
points to a proper customer value proposition building according to Clint Trevor
Reeves (2015):

1. Not trying to be everything to everyone

2. Being unique don’t always make best seller
3. Consistent and content marketing campaigns
4. Internal culture resulting into external appearance
5. Explore odd roads, conventional CVP might not work for all businesses.

According to Michael Treacy, in his book "The Discipline of Market Leaders,’’ he

defines the four types of basic value propositions. They are:

1. Lower price:
To implement the value propositions, a company must lower the price of their
product so they can sell their product in lower price. It can be done through
outsourcing from a country/ place where labor costs are cheaper.

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 2. Unique product:
To make the product unique from other competitors, a company should think
about the customers’ needs what they want and why they should choose your
product over others. It can be done through market research by interviewing
people asking about their wants. As long as the product is unique company can
avoid price wars among the competitors.

3. Make things easier:

A company can create value propositions by providing the product easily to the
customer to buy or to use. In result, customer will pay more to save their time.
The advantage of “making things easier”, value proposition is that the client stops
reasoning about your item or benefit and just gets it.

4. Take ownership of customer results:

The benefit of customer results value propositions is that once you're tucked
away in the cient's activities, it can turn out to be restrictively costly to replace
you.

The concept of customer value:

• The concept of value can be understood as a referential phenomenon – it can
both be referred to as a noun (a value), as a verb (to valuate) and as an
adjective (something of value). As such it is a widely used term in our everyday
vocabulary and is deeply linked to practice (Sørensen, 2008).

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According to the research, customer value plays an important role in any business/
organizations and it has gained a lot of attention in worldwide. It has been considered
as a key for the success of an organization. The abilities of the organizations to satisfy
customers and needs and wants and loyalty towards them also comes under the
concept of customer value (Smith and Colgate, 2007; Blocker et al., 2011).

The definition of customer value:

Different writer has defined customer value in different way. Here are some of the
definitions defined by different writer:

“a customer perceived preference for and evaluation of those products attributes,

attribute performances, and consequences arising from use that facilitate (or block)
achieving the customer’s goals and purposes in use situations” (Woodruff ., 1997).
Customer Value is the perception of what a product or service is worth to a Customer
versus the conceivable options. Worth means whether the Customer feels s/he or he
got advantages and services over what s/he paid.

The two main aspect of customer value are desired value and perceived value. It is
the differences between what a customer’s gets from a product and what he / she has
to give in order to get it.

Customer value can be examined in many level such as, in low level it can be the
attributes of the product that a client sees to get whereas in a more higher level,
customer value can be seen as the passionate result and accomplishment of a goals
or wants.

In this research paper, the first concept will be used as the concept of customer value.
The objectives of our research paper is to understand what factor is creating value for
the customers.

According to Scherer et al. (2015), it is very important to know a company neither

creates a value nor deliver it, but rather the company provides the value propositions.

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In order to create value, you have to first understand the concept of customer value,
what customer sees as a value and how customer value change over the time.
Company must know that individuals purchase an item or service that makes the most
value over contending choices.

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4. Methodology

The methodology chapter contains the research onion model where it contains
research philosophy, methodological choice, research design, trustworthiness and
research ethics.

Figure 4.1: Research onion Model

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4.1. Research philosophy
It is regarded as a system of belief or assumptions about the development of
knowledge. It also can be referred as what could be done when embarking on research
developing knowledge in a particular field (Saunders, et al, 2016,p-122). This research
philosophy includes ontological assumptions defining about the realities encountered
in the research, epistemological assumptions regarding human knowledge and
axiological assumptions about the values that influence the research process
(Saunders, et al, 2016, p-124). Ontological assumption shows about the nature of
reality where the research objects are seen and studied. This also reflects on how the
world of business and management are viewed and how the research is done for the
projects (Saunders, et al, 2016, p-127). Similarly, epistemology concerns with
knowledge assumptions on how acceptable, valid and legitimate knowledge can be
communicated to others. Likewise, axiology emphasizes on the role of values and
ethics within the research process. This philosophy reflects on the values made on
selecting data collection techniques (Saunders, et al, 2016, p-128). The above
assumptions enable to shape the research questions, methods used and interpretation
of findings and analysis.

4.2. Methodological choices

Here, research onion is used as tools for addressing methodological framework and it
also helps in describing the research method in detail.

4.2.1. Research approaches

Under this, these approaches are built namely deductive approach, inductive
approach and abductive approach. There is use of different theories to answer
research questions and present the findings and conclusions. Hence, deductive
approach is used to design a research strategy to test the theory whereas inductive
approach is often used in the form of a conceptual framework in order to explore,
generate or build theory (Saunders, et al, 2016, p-145). Similarly, abductive approach
is used to generate new or modify an existing theory and also it is tested through
additional data collection. However, deductive approach is more suitable or relevant
for this project as it is based on existing literature and gives comprehensive insight of
what innovative ideas are embedded in dairy industries to sustain their products in the

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business market. Based on these, different theories related to business model and
sustainable business model are viewed.

The research project involves the use of theory from given course literatures. These
theories are adapted to present the findings and conclusions. The development of
theory is very important as it enables to take a more informed decision about the
research design, techniques through which the data are collected and analysed
(Saunders, et al, 2016, p-148). Further, it also helps to provide good answers to the
research questions as different evidences are gathered and interpreted. The
approached to theory development help to think about research strategies and
methodological choices as well as enable to adopt the research design to cater for
constraints (Saunders, et al, 2016, p-149).

4.2.2. Strategies
Research strategy refers to planned action which is designed to achieve a specific
goal or objectives. It entails a broad approach that has as a clearly identified research
problem (Denscombe, 2014, p-3). The strategies could be surveys and sampling, case
studies, experiments, ethnography, phenomenology, grounded theory, action
research, systematic reviews and mixed methods (Denscombe, 2014, p-4). Hence,
case study is chosen in this project as a research strategy to get better understanding
about innovation and sustainability aspects of a dairy company to embedded into their
business model.

Case study:

The case studies emphasize on instances of a particular phenomenon with a view of

providing depth knowledge of events, relationships, experiences or processes. These
are widely used in social research, practice and small scale projects aligning with
qualitative research rather than quantitative research (Denscombe, 2014, p-54). In
order to be a case, it needs to be fairly self contained entity and has distinct
boundaries. Hence, the case study should focus on just one particular instance that
has to be investigated (Denscombe, 2014, p-54). This project considers a dairy
industry named “Arla Foods” as a case of study. The case study describes what is
happening in the setting such as events, processes and relationships. It also helps to

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explore problems or opportunities in a case study setting (Denscombe, 2014, p-57). It
also compares and explains the causes of events, processes or relationships within a
setting. The case study is used to illustrate a particular theory that could apply in real
life setting and also used to experiment changes to specific factors (Denscombe, 2014,
p-57). However, there are some advantages of the case study approach. On one hand,
case study is suitable for small scale research by taking a holistic view. On the other
hand, the case study facilitates the use of multiple research methods in order to
capture the complex reality (Denscombe, 2014, p-63). Moreover, it makes use of
naturally occurring settings so that the researcher does not have to impose control or
implement changes to key factors or variables. The case study is also considered as
flexible approach as both theory building or theory testing research can be used
(Denscombe, 2014, p-63).

4.2.3. Choices
There could be two choices either quantitative research or qualitative research in order
to analyse data. The choices are used to describe, explain or interpret the data
(Denscombe, 2014, p-244). Quantitative research shows numbers as the unit of
analysis whereas qualitative research is associated with words ro visual images as the
unit of analysis (Denscombe, 2014, p-245). Quantitative research tends to be
associated with researcher detachment and used in large scale studies whereas
quantitative research tends to be associated with involvement of researcher and used
in small scale studies (Denscombe, 2014, p-245). Quantitative research is based on
analysing specific variables and is associated with data analysing after data collection.
Likewise, qualitative research is based on holistic perspective and is associated with
data analysis during data collection (Denscombe, 2014, p-246). Therefore, qualitative
research method has been used in this project with strategy of research as case study.
Here, the data has been collected through questionnaire interview.

4.2.4. Time horizon

Time horizon indicates the plan or time period for the research. It consists of cross
sectional studies and longitudinal studies (Saunders, et al, 2009, p-155). Cross
sectional studies a particular phenomenon at a particular time. This can be done
through qualitative method or case studies based on interviews conducted in short

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period of time. Similarly, longitudinal research is carried out for a longer period of time
and it has capacity to study change and development (Saunders, et al, 2009, p-155).
Thus, cross sectional study is useful for the project as it studies the case company
and analyses data through qualitative method and conducting interviews.

4.3. Data collection

Data is collected through both primary and secondary resources. Primary data
collection is done through questionnaire interview to the vice president of the case
company, Arla food regarding their innovation in dairy products. Similarly, secondary
data is collected through different journals, articles, newspaper, reports, books, e-
books and so on.

a. Interview:

Research interview is regarded as method for empirical data collection as it focuses

on self report on what people say they do, they believe and opinions they say they
have (Denscombe, 2014, p-184). Interview is conducted through the agreement
between interviewer and interviewee in a formal piece of research. The interviewees’
words can be used as research primary data both on record and for the record
(Denscombe, 2014, p-184). The interview is conducted to understand opinions,
feelings, emotions and experiences in depth. It is organized to solve complex issues
regarding how things work, how factors are inter-connected or how systems operate
(Denscombe, 2014, p-186). It also helps in grabbing opportunity to speak with key
players of certain company or associations who can give valuable insights and
information based on their experience or position. However, the structure of interviews
can be structured interviews, semi-structured interviews and unstructured interviews
(Denscombe, 2014, p-186). This project conducts semi-structured interviews where
the interview has a clear list of issues to be addresses and questions to be answered.
In semi-structured interviews, interviewees are led to develop ideas and speak more
widely on the issues raised by the researcher or interviewer as the answers are open
minded emphasizing on elaborating points of interest (Denscombe, 2-14, p-186)

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Interviews can be one to one interview, group interviews, focus interviews and online
interviews. This project is based on online interviews without direct visual contact
between interviewer and the interviewee. It is organized through email
correspondence with a sequence of written questions prompting follow up answers
form the respondents (Denscombe, 2014, p-197). The online interview in this project
is conducted by sending mail to the concerned person in which some questionnaires
are asked to answer based on the theme of the project. This method of data collection
is beneficial as the responses are provided in written or digital format where there is
no need to transcribe verbal statements (Denscombe, 2014, p-198). Hence, these
responses can be downloaded directly into a word processor. We have asked some
questionnaires to the vice president, Henrik Damholt Jorgensen of Arla Foods and it
is listed as below. These interviews had been reviewed in finding and analysis part.

Questions raised in Arla company for questionnaire interview:

1. How would you explain Arla food on the basis of innovation?

2. How is risk measured while innovating new products?
3. Does innovation from Arla foods effect on the health aspects and animal
welfare?
4. Is there employees’ involvement in innovation process? If yes, how?
5. What sustainability aspects are important for dairy companies?
6. How do you meet the customers’ need through innovation in local products?
7. Do dairy companies also take social and environmental responsibility into their
business in order to improve their sustainability?
8. Do you have any strategy in sustainability for innovation?
9. How do you combine sustainability and profitability?
10. What role does Arla’s strategy play for the development of Farmers?
11. What is the current situation for creativity and innovation, at the Innovation
Department?

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 b. Secondary data:

Secondary data refers to those data collected initially for some other purposes. These
data collected initially for some other purposes. These data include both raw data and
published summarises. These data are obtained in order to answer the research
questions and meet the objectives (Saunders, et al, 2016, p-316). The secondary data
are further analysed to provide different knowledge, interpretation and conclusions.
These data are used to provide main data set, longitudinal data and area based data
and to compare with the research findings (Saunders, et al, 2016, p-344). Moreover,
the researcher should evaluate the precise suitability of the secondary data during the
research. In this project, the secondary data is collected through course literatures,
journals, news article, reports, eBooks, books and so on.

4.4. Research design

Generally, research design refers to the plan of how to answer the research questions
and contains clear objectives, derived from it (Saunders, et al, 2009, p-137). It should
contain clear objectives and aims of the research. It should specify the sources
through which the data are collected and discuss the ethical issues. This chapter
contains the three layers of research onion: research strategies, research choices and
time horizons. The answers to the research questions will be influenced by research
philosophy and approached used. Before getting started, we in group, come up with
research question and combine discussion of sustainability with innovation in Arla
Foods. Then, we investigate to see changes in Arla’s business models through
sustainability development and innovation processes. Hence, we chose Arla Foods as
our case. To generate depth understanding, multiple data collection methods are
used. We based our project both on primary and secondary data. We conducted
questionnaire interview with the vice president of Arla Foods and collected necessary
information from its official websites. We also combined the case with a theoretical
framework in order to generate a sustainable business model of Arla Foods.
Considering both primary and secondary data , we developed findings and analysis
that answer the research question. Finally, we derived conclusion and also provided
suggestions for improvements for dairy companies.

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4.5 Trustworthiness:
Trustworthiness in the research is ensured while considering reliability, validity and
credibility. These are to be considered to match the evidence and the conclusions that
stand up to the closest scrutiny (Saunders, et al, 2009, p-156). In order to get right
answer of the research questions, research design should emphasize on reliability and
validity. Reliability measures the extent to which the data collection techniques or
analysis procedures will yield consistent findings. In this project, reliability is checked
during the interview conducted with the interviewees. Here, the participants may be
biased as they only provide positive information what they are told by their bosses and
do not provide the negative side. Thus, the researchers should be aware of this while
designing research (Saunders, et al, 2009, p-156). In addition to this, validity is
considered to check whether the findings are really about what they appear to be about
(Saunders, et al , 2009, p-157).

In order to ensure reliability, validity and credibility, we gathered data and information
from different sources like newspaper, journal, previous reports, books, qualitative
data from semi-structured interview. We also went through official website of Arla Food
to gather more information and compared with other resources.

4.6 Research ethic:

In general, research ethic refers to appropriate behaviour shown in relation to those
who becomes subject of the work or are affected by it (Saunders, et al, 2009, p-183).
In other words, it can also be defined as norms that guide moral choices about
behaviour and relationships with others. It is concerned with how the research topic
has been formulated and clarified, how the research has been designed and
assessed, how the data has been collected, processed and analysed a moral and
responsive way (Saunders, et al, 2009, p-184). Research ethics are to be considered
in all stages of the project when seeking access, during data collection, analysing data
and finally while reporting the findings. A researcher has to maintain privacy of
possible and actual participants and as well as maintain confidentiality of data provided
by others (Saunders, et al, 2009, p-185).

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By concerning these research ethics, we have adopted the concept of no-harm to
participants in our project. We also conducted open questions to interviewees for
discussion and did not force them to answer to all our questions. We also obeyed laws
and rules and respect other people’s belief and norms. We also behaved properly with
the interviewees. Moreover, we also paid attention to avoid plagiarism in this project
and made sure that we have used citations correctly with the correct references.

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5. EMPIRICIAL DATA AND ANALYSIS:

This chapter contains an in-depth empirical data analysis and findings based upon
the theories used and the results obtained from Methodology. It shall be analyzed
with an analytical tool, Business Model. Also, an overall Arla’s business model is
reviewed.

The purpose of this part is to analyze and discuss the theoretical framework compared
to the empirical findings, in order to ultimately reach an answer to the research
question.

on the basis of interviews questionnaire, annual report, information from Arla’s website
and case study on Arla we intended to find out the ability of Arla Foods to embed
innovative ideas in Arla food to sustain their dairy product in the world of dairy market.
In order to analyze it we have used Business model theory, sustainable business
model, value propositions.

Case Building:

In Denmark, Arla has its headquarter in Sønderhøj 14, 8260 Viby J. In this project
work, we chose to research upon Arla Food and its innovations. As a case company
for Arla is sought after the most innovative, fourth-largest dairy company in world and
largest producer of dairy products in Scandinavia (arla.com).Arla is a dairy corporation
that is owned by farmers (arla.com). These farmers are the producers of majority
portion of milk in Arla. It is owned by 12,700 farmers in over seven countries. Arla is
concerned for the betterment and development of farmers through their cows milk’s
better pricing and recognition. In this matter, Henrik showed his agreement stating;
“Our farmers are also our owners as Arla Foods is a farmer owned cooperative. The
mission of our Good Growth strategy is to secure the highest value for our farmers’
milk while creating opportunities for their growth. Hence, development of our farmers
is fundamental in our strategy. ”

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Since, we have the project work based on innovation, Arla Foods seemed to perfectly
fit the research genre. Arla has tried to push the boundaries of science and technology
a bit and has merged the traditional work analogy into latest technological inventions
to obtain the perfect fusion of science and nature.

MISSION AND VISION OF ARLA FOOD:

The tag line or vision of Arla is “Create the future of dairy to bring health and inspiration
to the world, naturally” (Arla Annual Report 2017). Arla has always tried to bring the
best out of the fusion of science and nature. It aims to stand tall in the field of dairy by
providing the most competitive dairy products in terms of innovation be it on
packaging, nutrients, ingredients, packaging or a total new product with the optimal
use of nature and science. One of the best example we could talk about is Arla Farm.
In this farm, the farmers produce the milk out of cows that too using high-tech to milk
the cows. The feed is also prepared by themselves. This ensures the food safety,
product quality and animal friendly environment as a whole(arla.com).

The mission of Arla as stated on Arla Annual Report 2017, “To secure the highest
value for our farmer’s milk while creating opportunities for their growth”. Today is the
day of becoming new common. And new common is everyone trying to be healthy,
eating healthy and living sustainable life. In this situation, Arla has continuously trying
to address the dynamic consumers’ needs. There is always a challenge in product
innovations. Customers seek for product differentiation along with reasonable prices.
In order to attain all these requirements and stand tall in the crowd is an achievement
for Arla. Unlike others, Arla opts for Sustainable dairy farming which means taking
care of climate, animal welfare and nature all three while doing business (arla.com)

5.1 Responsibility and Recognition

Arla is as conscious to take steps towards common business goal with equal
responsible behavior in each step. Arla is also equally liable towards society and
Henrik added; “Arla Foods takes social responsibility seriously. Specifically related to
our business, carbon footprint and packaging are pivotal subjects.”

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Arla foods also has been recognized for its hard work and innovative products.
Recently, Arla Foods UK achieved an award “Product of the Year 2017” in the milk
category awarded by consumer survey on innovation. Some others like, British
Cheese Awards 2017, gold award by ArlaSKyr at the DBA Design Effectiveness
Awards in the category of 'design driving change in a global business', are Arla Food’s
achievement. There are lot more awards and nominations that Arla has in its bag
(arlafoods.co). Since, on this project we chose to write on Product Innovation, Arla
Foods being the most innovative on Dairy Products came spontaneously on our minds.

5.2 Innovation Department

An innovative company like Arla Food always makes sure to keep innovation as its
centric point. Arla works towards creating the future of Dairy with close association
with its all stakeholders. It works in a close coordination with its farmers, institutions,
suppliers, universities and technologists. Employees in Arla are also equally proactive
when it comes to innovation and this is supported by the statement from Henrik, Arla
who says; “Innovation opportunities are developed and carried out by our employees”.

Each one’s role is valued and appreciated. Arla follows open innovation process
whereby each one is welcomed with their ideas and opinions. Those ideas are later
shaped and integrated into Arla Food innovation process wherever possible and best
fit(arla.com).

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 Research and Innovation, Arla

Figure 5.1 Research and Innovation Centre, Arla

The Innovation center of Arla makes sure to keep innovation happening. The open
innovation process makes it easy to innovate be it innovation in farm or factory or
consumers insight.

”Arla Foods is investing strongly in innovation. As you might be aware, we earlier this
year announced a EUR 527 million investment in production capacity and innovation
for 2018. Also, in May 2017 we opened our new innovation centre.”-Henrik, Arla

This center achieved first position in EU for the commercial investment in food and
research & development. In relation to this, the interview from Henrik, Vice President-
Arla Food added; “Arla Foods is ambitious in terms of innovation. Our good growth
strategy, investment level, and Innovation Centre are all good examples of this”.

5.3 Code of Conduct

In Arla, all staffs, farmers, board and even suppliers have to follow code of conduct
compulsory. As a food industry it is in no way acceptable to undertake unhygienic and

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irresponsible act that could bring hazard in people’s health. Upon a question asked,
“How do you ensure that the ingredients you use are produced in a safe and
sustainable way?”, Supplier Assurance Specialist, Elif Dayioglu Davidsen, from Arla
said that Arla makes sure it is purchasing from legal and safe supplier that is abiding
by code of conduct and also ensures the raw materials are hygienic. A regular dialogue
is maintained and in case of any issue raised or breach of code of conduct the contract
is paused or terminated based upon the nature of issue (Arla CSR report 2017 Pg.23).

Alignment of Theories into Implementation in Arla Food

Business Model:

This segment shall contain the analysis and close examination regarding the Business
Model. Arla’s Annual Report, CSR Report, Website Information are accessed in this
section. The information gathered from questionnaire forwarded to Vice President,
Henrik from Arla is also utilized and are taken help of to answer the research question.

5.4 Major Products and Services

As per Strategy Good Growth 2020, Arla foods has pool of products in the market. To
sustain and maintain their quality and reputation they have their own priorities.
Customers needs and preferences are given adequate value before any innovation.
As per Henrik from Arla; “In terms of meeting customers’ need through innovation in
local products Arla Foods work with local brands and location specific milk types.”

As they are the most innovative in dairy sector they keep on innovating and
experimenting their products. Some of the major products are Lurpak, Arla Cream
Cheese, Arla Baby and Me, Arla Protein, Matilde, Arla Lactose free and lot more
(arla.com). According to strategy Good Growth 2020, Arla aspires to grow as a leading
dairy cooperative both by increasing the value for farmers’ owners milk and adding
value and eating quality standards into people’s lives. Arla to achieve todays’ position
have gone through a lot till date. In future, to maintain and excel as a global food
company they plan to come up with new and innovative ideas to reach new and
existing market. Need not only the ideas they work shall require to be new also be

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promising and capable to keep up with the quality of food and goodwill. Further, Arla
aims to excel in eight main dairy products in which they want to lead the market. They
are milk and milk powder, Milk based drinks, Cheese, Yogurts, Butters, Special
Cheese, Mozzarella and other ingredients. Second thing on which Arla is focusing is
to grow in the six regions where Arla believes that they have potential to grow and
generate long term profit for their farmer-owners. Arla holds a very strong position in
Northern Europe, one of most liked brands in Middle East. Further, they aim to extend
their business in China, Nigeria, USA and Russia as their targeted future markets. To
achieve this target of going global as a leading dairy food company, third most Arla is
mergers. Arla went up to 6 mergers alone in Central Europe. Together they shall have
common objective of attaining global brand recognition and customer excellence
professionally assuring radical innovations (Arla Food Strategy 2020).

5.5 New products/services in Arla:

In 2009, Arla launched Twintell Application program to serve its customers with
customised and fast to market ingredient solutions. Hence, this service facilitates the
customers (Euro Monitor, 2018, p.8). similarly , it has introduced new functional milk
proteins in its Nutrilac portfolio, Nutrilac IC-3570 and IC-4535. This new product was
created for the low fat ice cream market in 2011 (Euro Monitor, 2018, p.7). In the same
year, it had also introduced Variolac 850, a new sweet bulking agent for the South
American market. In 2012, it had created Nutrilac CH-4560 that increases the yield in
full fat cheese by 5.00% to 18%. It had also come up with a new functional milk protein
that helped to reduce the salt content of cheese (Euro Monitor, 2018, p.7). Likewise ,
in the same year, it introduced LacProdan DI-7017, a new generation whey protein. In
2013, Arla had launched a natural improvers toolbox to offer optimized production
processes, quality end products, reduced waste and cleaner labels to bakers and
these are made under Nutrilac brand in Europe and China (Euro Monitor, 2018, p.7).
In 2014, Arla Foods Ingredients established Nutrilac Fastripe for cheese makers to
reduce ripening times. Therefore, these above shows the new products and services
launched in Arla Foods during the year.

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5.6 Operating in consumer driven market
Nowadays, people all over the world are conscious on getting a healthy lifestyle.
Hence, concerning these Arla foods focus on creating innovative products for the
consumers in order to have a balanced and healthier life. For the innovation of different
products, it has crossed the boundaries of science and technology and built a bright
future for dairy and natural food (Annual Report of Arla, 2017, p-3, online). This shows
that Arla operated in an extremely consumer driven market where there is high
demand and growing interest of consumers in dairy products. Beside these, people
are also concerned towards how Arla treats their cows and how they operate their
farm in relation to environmental issues. On the contrary, Arla being a farmer owned
cooperative, has succeeded in maintaining connection between consumers,
customers, farmer owners and the cooperatives (Annual Report of Arla, 2017, p-6,
online). To aid balanced lifestyle, Arla has expanded its product portfolio from high
protein to low sugar and on-the-go. Likewise, Arla is also creating the future of dairy
through digitalization where sale are done through e-commerce channels in many
countries (Annual Report of Arla, 2017, p-20, online). It has created digital platforms
to combine social responsibility, brand and corporate communication programmes to
enhance its identity (Annual Report of Arla, 2017, p-23, online).

5.7 Sustainable farming:

In Arla, sustainability means a great deal. Any company today is likely to embed
sustainability into their business model, if not it is quite hard to sustain. A dairy
company needs to be accountable towards the environment, animal welfare, quality
products and company itself. In this regard, Arla has to come up with as many
innovative ideas to sustain as a competitive dairy sector in the market. This paper,
therefore as far as possible has tried to see what kind of innovative ideas has Arla
embraced to cope up with the roaring competition in the dairy sector.

For this purpose, Arla is one of a kind in its own. It is a dairy cooperative, where 90%
of farmers are owners. To enhance the sustainability, milk quality, farm sustainability,
health of cows and competitiveness, Arla farmers produce the feed of cows by

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themselves. This ensures the quality of their feeding which in return ensures the
quality of milk to be produced. Another innovative idea is to start Arlagorden-animal
welfare program as a solid foundation. In these workshops Arla’s farmer owner share
their experience and ideas to set the benchmark of animal welfare even higher
(sustainable dairy farming, Arla).

Animal welfare and sustainability has always been a priority in Arla. In this context
Henrik, Arla addresses this issue as ”Innovation in Arla Foods include focus on
animal welfare and development of our Quality Programme, Arlagaarden ® ”

To meet this purpose, a global strategy for Sustainable Dairy Farming in Arla was
agreed by Board of Directors in 2014. This strategy has 3 main features Climate,
Animals and Nature. To reduce carbon footprints of milk production, maximization in
cow’s welfare and protecting and taking care of nature as a whole. This step in clear
terms seems innovative in line to protect nature and animal welfare (Strategy Good
Growth 2020, Arla).

5.8 ANALYSIS:
In this segment, an overall view of Arla’s Business Model shall be analyzed and talked
about. A business model describes the rationale of how an organization creates,
delivers, and captures value, in economic, social, cultural or other contexts. Any
organizations without a practical business model is less likely to work out and success.
Like in the business model theory, it’s not only about changing what you sell but it’s
about revaluating your products continuously. Not only innovation can make company
survive but to make continuous check, follow up and consistent production of already
better doing products in market is key to business revenue. If one innovation is to talk
about Arla food, they have introduced their products by adding extra features to meet
customers’ needs and wants. They have added new elements in their existing dairy

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product in order to satisfy customers and grab their attention on their products which
makes them unique from other competitors.

Business model has created an opportunity for Arla to position them in the market.
They create the product which customer wants for. They know whom to serve their
product and who is their targeted customers. The business houses that innovates and
modify its products as per time, market and changing customer tastes and preferences
only can sustain in this dynamic market. Dairy market is a huge market in itself.
Competition is raising, however Arla has managed to keep its’ position steady and
sustain remarkably. Some of the outstanding innovation regarding tastes and
preferences can be viewed as given:

i. When it comes to Arla, if you are lactose intolerant and eating dairy
product cause digestive problem, they have a solution. Arla foods have
introduced lactose-free products which are not sold in all market which
makes them unique and innovative in the market. According to PR
newswire New York, 2017, Arla foods have committed to provide
nutritious, tasty and affordable food products all over the world including
Nigeria.
The research and development team work together collaborating technology,
consumer needs, laws and knowledge in order to meet ever changing
costumer’s wants. For instance, Arla introduced ArlaProtino, range of fresh
dairy products with combination of high protein and energy in relatively small
portion. It was especially designed for people with low appetite. (Research &
Innovation, Arla)

5.9 Financial Performance of Arla

At the end of the Fiscal Year, a business houses’ performance is measured through
its’ financial success and stakeholders profit maximization. Arla, being a cooperative
it has to be aware to make value and profit for all of its stakeholders be it board,

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shareholders, suppliers and farmers itself. On contrary, sustainability is as much
important as profitability in order to outstand in the competition.

’We believe that sustainability goes hand-in-hand with good business. We

continuously conduct and develop our business with a long-term perspective with
consideration of sustainability.”- Henrik, Arla

This is not an easy task especially for a cooperative, however Arla has managed to
generate more profit on 2017 compared to 2016 and 2015 respectively. One bold
move Arla made during 2017 was to open an Innovation Centre in Aarhus with around
150 employees from all over the world. Its core focus shall not only be on sole
innovation but overall improvement relating from inventory till hands of customer. Be
it improvement in technological aspects like easy transportation to identifying new
markets.

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Figure 5.2 : Arla Annual Report 2017

As per Arla’s Annual Report 2017, the financial performance of Arla has grown from
30.9 to 38.1. This was all not possible if the decisions and innovation were not made
as per customers’ needs and wants. The innovative ideas embedded into new
products made Arla so successful and ranked Arla food into world’s most innovative
company in organic foods.

“Innovation is the engine for growth in Arla. We create new products that delight
consumers and help them live a balanced, healthier life. At Arla, our R&D teams push
the boundaries of science and technology to build a bright future for dairy, and food
for everyone.” (arla.com)

However, there are different kinds of risks in business. For example, credit risk,
commodity price risk, commodity placement risk, interest rate risk and other kinds
of derivative risks. In Arla, risk is accessed, measured and mitigated according to
the type of innovation. Regarding the measurement of risk in Arla, Henrik has
provided information as ‘’ The issue of risk varies relative to the specific innovation.
We asses innovation opportunities on the appropriate parameters.’’

5.10 Business model of Arla:

Arla being a farmer-owned cooperative, is the world’s largest and leading organic dairy
producer. It is the fourth largest dairy company in the world based on milk (Annual
Report of Arla, 2017, p-38, online). It has created and improved value through
investment in innovation and brand and also embedded value from cow to consumer.
Its entire value chain focus on quality, efficiency and optimization of raw materials,
capital and human resources (Annual Report of Arla,2017, p-38, online). Arla is a dairy
industry and its primary raw material is the raw milk delivered by the farmers. Thus, it

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emphasizes on one milk pool that allows the use of raw milk across Arla. Beside these,
Arla has set one milk price for its farmer owners across the countries. This means the
prepaid milk price for raw milk produced during the year and is set with the ambition
to reach range of 2.8 to 3.2 percent annual result net profit (Annual Report of Arla,
2017, p-38, online).

Arla’s dairy activities are global and earnings are different according to individual
markets and across product categories. Based on the cooperative principle, the
average of all earnings determines the milk price paid to farmer owners. However, the
business model of Arla is shown in the diagram as below:

5.3 Business model of Arla

Arla Foods have extensive product portfolio concerning the needs and preferences of
consumers. They are able to provide opportunity to their consumers and customers to
live a healthy and balanced lifestyle. Arla foods operate with 18973 employees across
120 countries to ensure world class food safety standards in their product line (Annual
Report of Arla, 2017, p-39, online). In Arla foods, both owners and suppliers are
farmers and it is obliged to collect milk from them at One milk price with a commitment
to add value to it. Similarly, Arla also focuses on innovation to meet the growing
demand for more and better natural dairy products. It concerns innovation towards
dairy farming, milk expertise, nutrition science, product and packaging design to bring

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new and exciting products in the market (Annual Report of Arla, 2017, p-39, online).
Likewise, in order to achieve a competitive milk price, Arla creates value per kg of milk.
This is done through innovation, brands, cost programmes, international growth and
economies of scale (Annual Report of Arla, 2017, p-39, online).

5.11 Criticism
Arla is a well renowned for their innovative products that attracts customers and also
has helped live healthier and balance life. Nevertheless, being a global dairy Company
and world’s largest producer of organic dairy products and leading innovator, Arla has
not yet been innovative enough on managing their Dairy Food Waste. They have been
criticized on this front. However, Arla has Waste Food Reduction as their major
Priorities on 2018.

Figure 5.4 Annual Report of Arla

Source: Arla CSR Report-2017

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6.Conclusion

In conclusion, this project entitles the problem formulation regarding a case company
Arla Foods. It also derives the research questions related to the topic. The answers
are derived through different theoretical framework and methodological approaches
and based on these findings and analysis are derived.

Arla as a dairy food company seems to be very innovative. Both regarding in terms of
the health and balanced lifestyle, Arla has varied innovative products that has
combination of both nutritious ingredients and mix. As per our research, the Arla
products have gained a remarkable position in both market and people’s life.
Concerning the theoretical approach of Business model and sustainable business
model, Arla is found to be consumer oriented and innovates product to meet the
consumer needs. For instance, the lactose free products, Arla Protino for people
having low appetite. With considering innovation in products, Arla has also focused on
maintaining sustainability and social responsibility considering environmental issues
and animal welfare. The longevity of Arla Food as a successful cooperative is also a
result of harmony and mutual cooperation between farmers.

Even though, on few aspects Arla need to improve. One of the aspects Arla needs
to work upon is to act as soon as possible on the Waste Product Management. This
shall also display Arla’s effectiveness and consciousness towards food, people and
nature.

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7. RECOMMENDATIONS:

For the purpose of recommendation, we would like to recommend the whole Danish
Dairy Industry to take inspiration from Arla Food as on to design the business model
in such a way that contributes both towards the sustainability and innovation sector.

As a case company, we have taken Arla Food and therefore we would like to
recommend Arla in few areas. For instance, Arla should once in a whileconduct open
innovation to get possible new ideas and technology through consumer involvement
for the betterment of the company. Similarly, they should also focus on digitalization
and should extend their market all over the world as they are mainly based on Europe
having headquarter in Denmark. Further, we recommend Arla to review their
company’s news via various medias and take due course of action in order to dig their
core problem and solve it. By the help of our research we came to know that during
the manufacturing process food wastage is high in Arla. Hence, would like to
recommend to bring effective plans and policies regarding waste food management in
future.

At last, for future researchers this paper leaves some scope. Other aspects like value
co-creation and customer satisfaction level, stakeholder and employee management
can be taken into consideration by future researcher. Adequate amount of information
can also be derived from this paper as well. Since, this research paper includes
information on business model of Arla and how it has embedded sustainability and
innovation through it in order to sustain in the dynamic business market. Therefore,
the upcoming researchers can take advantage from this research paper and work
further.

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