BUSM3200 Writing Effectively Strategic Planning

Management Is Essay

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Strategic Context of Bellamy: It’s History, Size and Business Scope

Bellamy’s organic is Tasmania based organic food company established in Australia in
2003 as first Australian certified organic baby food. The Australian market recognizes it as
largest organic formula and Baby Food Company. The image inserted below shows
strategic growth of Bellamy in Australia in last 13 years. Bellamy’s organic market is
expanded throughout Australia, South East Asia and China. Analysis of baby food market
shows that in 2014 it was valued around $50.7 billion and expected to be increased up to
$72.7 billion by 2020 (Bentley 2014). Rapid growth of organic food market is the result of
consumers’ preference for organic food, in Asian countries also there is a huge demand for
safe, high quality Australian organic food.

(Bellamy Operating for 13 Years Image-1) (Source)

Major Products

Demand of packed and organic food for babies is increasing in different societies and
cultures because of changes in life style and growth of urbanization. To meet the demand of
the consumers Bellamy has introduced more than 40 products for babies from birth to
three years. Bellamy as a premium quality organic food company, select only finest and
certified ingredient as well as certified manufacturers (Brantsæter et al. 2017) The
company is producing two infant formula and one toddler milk product, which is suitable
for the babies from birth up to three years of age. It is interesting to know that two
varieties of each product is manufactured one for Australian and export market and other
is specially designed to meet requirements of Chinese nutrition and regulations. Moreover
to meet the demand of Asian babies Bellamy has introduced ‘Aussie baby’ it will work as a
major step and marketing strategy to have strong hold and increase its profit in the Asian
market (Dunford et al. 2015).

Ownership

Bellamy’s Organic was originally founded in 2004 by a Tasmanian family, as they wanted to
arrange for a convenient and nutritious food choice for their children. They founded the
company keeping in mind that everything they produced was to be organic and completely
safe for babies. Its parent company is Bellamy’s Australia, who had taken over the family-
run business in 2007.

Major Markets

Bellamy has been labeled as a ‘premium’ baby food brand within the domestic market, and
its market share is over 14 per cent in the country. It has a well-established market in
Australia, with its products being sold in more than three thousand stores all over the
country. They are also involved in exporting a major part of their products to China and
other Asian countries, where its revenue growth has been as high as 900 per cent (Dagevos
2016).

Macro Environmental Analysis (special focus on Australia)

The macro environment aspects are those which are situated outside the industry. They
are also known as PEST framework, which classifies environmental influences into four
types- Political, economic, social and technological.

Political: The political factors such as free trade regulations have helped in the growth of
Bellamy’s organic (Henryks, Cooksey and Wright 2014). The improved trade relation
between Australia and the Asian countries, especially China and Singapore, ensures that
they have a good stronghold in those international markets.

Economic: The government in Australia is constantly working to improve the stability of

the working class people, and this has an influence on the inflation and taxation rates of the
country. The increasing labour costs will also lead to the increment of the final costs or the
selling price of Bellamy’s products (Illukpitiya and Khanal 2016).
Social: The social factors are perhaps the most important when it comes to any organic
food industry. Their attitude towards a food product depends on many factors, including
their ethnicity, cultural backgrounds and consciousness about the health issues. The
growing concern among the people for their infants is something that has contributed to
the growth of Bellamy’s organic. The food that they have developed is specially designed to
meet the requirements of the babies, and thus they have become a popular choice among
the people, especially those who are from the working classes.

Technological: Technology is an important factor in gaining advantage over the market in

this era of globalisation. They have a very successful online sales strategy, and their
products are sold over three thousand outlets in the whole of Australia, including the Coles
and Woolsworth stores. They also have an online portal for retailing their products, and
have the facility of delivering the products to their buyer’s homes (McCarthy, Liu and Chen
2014).

Key Factors
From the political point of view, the changing regulations pertaining to food standards and
marketing strategies, along with the renewed stability of the government is an important
factor for the market share of Bellamy’s organic. The awareness on the inflation rates,
along with the level of income of the families are the factors that the company needs to
keep in mind. They also need to source their raw materials from reliable suppliers with
respect to their rising costs. The added awareness and concern on the nutritional needs of
the babies, with an increase in the number of working women all influence the market
trends for Bellamy’s organic (culturalsurvival.org, 2017). The factors that can restrain its
growth would be the initiatives by the government to breastfeed the babies and to promote
home-cooked food. However, as the number of women in Australia who are engaging in
professional fields is increasing with every passing day, the need for baby formula is also
experiencing a sharp upward growth.

Key Opportunities

Bellamy’s organic is a very well known brand in baby food industry; brand is a factor which
has great impact on both head and heart. Overall, organic food industries are flourishing
now a day because people are more concerned about their health, because they have
already experienced the impact of chemicals and contaminated foods on their health (Osei
2014). Growth of urbanization and busy lifestyle are not allowing people to follow the
traditional food for babies, they think that organic based food products will be more
beneficial for their babies to grow and be healthy, because it will provide them complete
and full nutrition. Original and Organic products, Bellamy’s products are purely organic;
they claim that their products have no brand dilution conventional and only finest organic
ingredients are used. Deep Distribution, Bellamy has around 4,000 distribution points
across Australia; this makes them available to multiple consumers at their choice of retail
outlet (Paull 2014). The large number of distributors creates strong producer and
distributor partnerships. Bellamy has developed a global market through online direct
delivery.

The above chart shows the growth of Bellamy’s organic in Australian International
Monetary Fund (IMF) Market. The Bellamy’s organic has designed a business model in such
a way that benefits all the stakeholders equally.

Customers: customers are the most important stakeholder in any industry to survive and
flourish. The customer satisfaction is provided through high quality infant formula and
baby food. Organic food is a differentiated offering by the company fulfilling its social
responsibility and sustainable growth.

Partners: the company is able to develop strong relationship with the suppliers. Bellamy
believes in the formula that ensures supplier growth as Bellamy’s growth. Tatura Milk
Industry (TMI) is Bellamy’s core manufacturing partner in Australia. They are working as
partners since 2006; Bellamy is third largest customer of TMI (dairyaustralia.com.au,
2017). Blend and Pack is Melbourne company main packers of Bellamy. To support its
future growth the company is constantly working to build relationships with suppliers in
Australia as well as globally (Seufert, Ramankutty and Mayerhofer 2017).

Investors: The Bellamy’s organic provides extensive opportunity of growth to its investors.
With high scale and leading market position it offers attractive risk return to its investors.

The above birth rate map of Australia shows that both the birth rate and consumption of
infant formula is stable in Australia. Hence, it can be seen that Bellamy’s organic has an
extensive opportunity of growth not only in Australian market but throughout the world.

Major Threats
Major threats to Bellamy’s organic in Australia are:
Potential loss of organic certification- 100 per cent organic status is the trade mark of the
company, in case of quality control issue and non satisfaction of certifying bodies, organic
certification may be lost (agriculture.gov.au, 2017).

Competitive Environment- booming of the organic industry is creating competitive market.

Some of the major competitors are- Nestle, Danone, Mead Johnston etc. the competitive
pressure will be increased if these companies introduce similar products and it has to
struggle to maintain its financial performance (Suh, Eves and Lumbers 2015).

Range of Laws and Regulations- the company needs to comply with range of laws and
regulations like- fair-trading and consumer protection, employment, property and
environment, taxation, tariffs, customs, food standard etc. if there is any regulatory change
may affect its revenue generation and increase product costs.

Shortage of Raw Material Supply- Bellamy’s does not own any farm; rather it maintains its
organic status by strictly controlling its supply chain. With rapid growth in demand of
organic products and instability of environmental factors a sudden supply shortage may
occur. The supply shortage or supply limitation may adversely affect Bellamy’s financial
prospects (Paull 2014).

Rising Input Costs- there is a certain chances that the input cost of Bellamy’s will
significantly increase because of extreme weather conditions in the agricultural producing
region in Australia.

Industry Competitive Analysis Using Porter’s 5-Force Model

Bellamy’s Organic is number one baby food company in Australia, which is providing a
wide range of products for new born babies up to age of three years and later on. It is only
company in Australia which is able to grab the certification of 100 per cent organic
products. Here is Porter’s five forces analysis of Bellamy’s Organic, which helps to
understand the competitiveness of the company.

Threat of New Entry

Baby food industry is the fastest growing industry in and around the world. With the
changing lifestyle and increase in number of working women is working as a catalyst to
increase the demand of baby food products in Australia. Bellamy’s baby food is very
popular and accepted and trusted brand by Australian mothers. The new entrants find
baby food industry in Australia quite attractive. But they have to fight the already existing
brands available in the market like Bellamy’s organic and Nestle to get reasonable amount
of share in the market. More over the government policies, access to supply and
distribution, retaliation from Organizations already in the market make difficult for the
new entrants to enter the market (Suh, Eves and Lumbers 2015). It is very much essential
for the new entrants to get the approval of FDA, works as discouraging factor.

Threat of Substitute

With the growing demand of organic baby food in Australia there are numbers of
companies manufacturing similar products that can substitute the products of Bellamy’s
Organic. However, there are companies which are gaining a steady market in the recent
years, especially Bubs and Holle, with their ‘premium’ range of organic baby food products.
Therefore Bellamy has to be innovative in products to increase customer satisfaction as
well as preventing them from going to substitution of their products. (Zainuddin and
Mercer 2014).

Bargaining Power of Buyers

The customers have access wide range of baby food products available in Australian
market increases their bargaining power. Moreover, it is very well known that bargaining
power of buyer increases when- buyers are concentrated, when they have low switching
costs, and they can provide their own inputs. In Australia, approximately 70 per cent of
Bellamy’s organic revenue is generated from large customers. Any change in the behaviour
of these large customers may significantly reduce sales of its products. Therefore, Bellamy
has to satisfy the demand and needs of the customers to counter their bargaining power.

Bargaining Power of Suppliers

All of the Bellamy’s products are manufactured from agricultural and dairy raw materials.
It is well known that growth of any organization is very much influenced by the bargaining
power of suppliers. The bargaining power of the supplier increases when they are
concentrated, and provide special or rare input, and most importantly when the switching
costs to another supplier are high. In case of Bellamy’s organic, the bargaining power of
suppliers can be high because the company does not own any farm, and to maintain its
certified status it has to depend completely on its suppliers. With the growing demands of
organic produce and instability in the environmental factors, influencing organic goods
production may lead to sudden shortage in raw material supply. This shortage of organic
goods/raw material will increase the bargaining capacity of the suppliers but increase the
price of goods also (Smith, Galtry and Salmon 2014). Therefore, Bellamy needs to have
sufficient number of suppliers to get high quality raw material so that it can manufacture
high quality products; at the same time it needs to take efforts to retain its best and reliable
suppliers like Tatura Milk Industry (TMI).

Extent of Competitive Rivalry

Bellamy’s organic is able to gain the leading position in Australian baby food market, still
there are many competitors working in the same industry like- Organic Baby, Plum
Organics, Nestle, Little Ducks Organics, Oh Baby Foods. This tough competition is actually
healthy because the customers get best quality products in best price. Bellamy is able to
maintain high its high quality 100 percent organic baby food products to satisfy the need of
mother in and around Australia (Rödiger and Hamm 2015).

Implications of five forces analysis

The above-mentioned Porter’s five forces analysis helps to understand and identify the
attractiveness of organic baby food industries in Australia. Health consciousness, changing
life style is resulting into expansion of organic food industries. According to Porter’s five
point analysis Bellamy is an undisputed leading company in Australia, specialist in the field
of organic baby food products. Limited availability of organic goods, limited suppliers and
consumers trust in Bellamy’s products for being 100 percent organic is building a huge
barrier for new entrants. These five forces may have different implications on different
organizations (Liu, Salamova and Hites 2014). Large firm are able to deal with barriers
more easily than small one.

Special attention to the purpose of this analysis

All the forces mentioned above are very much interconnected because the power of buyers
is dependent on number of available competitors and new entrants. On the other hand, the
power of suppliers or distributors are majorly dependent on the demand of the products,
range of products and availability or scarcity of raw materials. Moreover, the new
companies can only enter the market if the consumers are open to try newer brands and if
they are able to give attractive incentives in terms of high quality and low price (Liu,
Salamova and Hites 2014). When it comes to the threat of substitution, Bellamy’s organic in
Australia has earned people’s trust in the company as 100 per cent organic certified
product for their babies. In case of competitive rivalry, it can be said that there are a
number of other organic baby food companies, but Bellamy’s organic has been able to get
the leading position in Australian market because of the consumers’ trust in their products.

The macro environmental factors combined with competitive forces and their overall
impact on the industry in general and Bellamy’s organic in particular are the main driving
forces in the competitive market. Therefore, the analysis gives a positive sign of growth of
Bellamy’s organic in baby food industry in Australia.

Resources and competences of the organization those are likely to provide suitable
competitive advantage

The VRIO analysis tool was developed by Barney (1991) in his famous work ‘Firm
Resources and Sustained Competitive Advantage’. In his work the author has mentioned
four attributes must be possessed by resources to get competitive advantage. The four
attributes of resources are- value of resources, rare quality of resources, imperfectly
imitable and non-substitutable. Here, as far as Bellamy’s organic resources are concerned
they perfectly fit into the VRIO criteria. Firstly, Bellamy’s resources are organic, and value
of organic resources is increasing every day. Secondly, its organic resources are rare
because it cannot be produced anywhere and their production is very much influenced by
the environmental instability, which makes them rare. The organic resources cannot be
substituted perfectly, and hence cannot be substituted easily (foodstandards.gov.au 2017).
Finally, it can be said that the resources and competences f the company can be regarded as
its strategic capabilities.

Conclusion
Bellamy’s organic is the number one organic baby food brand in Australia. The company is
able to maintain 100 percent organic certification with 100 per cent Australian. Bellamy is
the only company in Australia offering range of infant organic baby food products. Organic
products are the fastest growing industry around the world. The baby food industry is
considered as one of the stable industry not getting much affected by change in economic
conditions of the country, because people child related products gets high priority
irrespective of financial position. As far as PESTEL analysis of the company in Australian
market is concerned, it is seen that macro environment is providing favourable condition
for the growth of the company. The political, economic, social, technological, environmental
as well as legal factors are allowing the company to grow at fastest rate. Because of on an
average demand of organic products has been increased up to 10-15 per cent. Again,
Porter’s five forces analysis helps to understand and identify the attractiveness of organic
baby food industries in Australia. The five challenging factors that is competitive rivalry-no
equal competitor is there in the market, supplier power- having long term and deep
relationship with the suppliers, buyer power- able to maintain brand name and people
trust. Threat of substitution the range and quality of the product is not easily substituted.
Entry of new similar product company is not very easy because of limited availability of
raw materials, their cost, marketing and other expenses. After the overall discussion, it can
be said that Bellamy has a great future in the Australian organic food market.

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