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An Internal Analysis

• Asra Madni- 11317

• Aatir Hamood- 09090
• Barrya Hashmi- 05525
• Kashif Ullah Khan- 10939
• Ramsha Shiekh- 11245
• Raza Lakhani- 09102
Areas Covered

Mission and Vision Performance,

Brief History Businesses Major Competitors
Analysis Products and Brands

Internal Analysis- Internal Analysis –

Critical Success Internal Analysis – Operational
Strategic Capability Unique Capabilities/
Factors Unique Resources Efficiency of Arla
and Advantage Value Chain Analysis

Arla’s SWOT IFE Matrix Arla’s Actions

Brief History
Way back in the 1880’s, dairy farmers in Denmark and Sweden formed small cooperatives to
invest in common dairy production facilities.

By doing this they made efficient use of their milk and higher quality products.

The earnings they made from their milk were equally split between the dairy farmers and
together they built a good future for themselves and the next generation on their farm.

Over the years, the cooperative idea proved increasingly attractive. Small farmer
cooperatives merged and became stronger. They expanded from local to regional to
national cooperatives.

In 2000, the largest Danish dairy cooperative merged with its Swedish counterpart and Arla
Foods, the first cross-border dairy cooperative, was formed.

The cooperative idea also flourished in other countries and through recent mergers
cooperative owners in the UK, the Netherlands, Germany, Belgium and Luxembourg have
joined Arla Foods.
Mission Statement Analysis
Vision of Arla

"Creating the future of dairy to bring health and inspiration to the world,
Mission Statement

"Arla’s mission is to secure the highest value for our farmers’ milk while
creating opportunities for their growth."
Analysis of Mission
Does it include...?
Customers Products/ Services Markets

No Yes No

Technology Concern for survival Philosophy

No Yes No

Self-concept Concern for public image Employees

No No No

Does it mention values like...? Customer or product-oriented?

Citizenship Teamwork Product-oriented

No No
Excellence Integrity

No No 1.0/4.5
Financial Performance
Brands & Products of Arla
Brands and Products

1. Milk- Dano, Arla Ko

2. Cheese- Keso, Puck, Castello, Arla Buko, Arla Cheasy, Arla Natura, Arpentina
3. Butter- Lätt Och Lagom, Lurpak, Anchor, Arla Kærgården
4. Oats- Tre Stelle, Arla & More
5. Cream- Bregott
6. Yoghurt- Arla Skyr, Arla Yoggi
7. Organic- Arla Organic Kefir
8. Lactofree- Arla Lactofree
9. Cooking- Karolines Køkken, Kelda, Arla Köket
10. Protein- Arla Protein
11. Wellness- Arla Cultura, Arla Wellness
12. Flavored Milk- Cocio, Matilde
13. Milk Powder- Milex
Arla’s Competitors

▪ Nestle ▪ Fonterra Group Cooperative Limited ▪ Unilever

▪ AMUL ▪ Kraft Foods ▪ FrieslandCampina

▪ Danone ▪ Meiji Dairies Corp. ▪ Groupe Lactalis SA

▪ Dairy Farmers of America Inc. (DFA) ▪ Megmilk Snow Brand ▪ SanCor

▪ Parmalat ▪ Organic Valley ▪ Dean Foods Company

Strategic Capability & Advantage
For Strategic capability and advantage we will do analysis on the following four areas in dairy segment:

1. Critical Success Factors

2. Internal Analysis – Unique Resources Core

3. Internal Analysis – Unique Capabilities/ Value Chain Analysis Competencies

4. CSFs match Unique Capabilities or Not? If yes, then they become Competitive Advantage of Nestle.
Critical Success Factors in Dairy
Success Medium/Large
Factors Good/Excellent
Customer &
Brand Portfolio
and Well-
Consumer Behavior and
R&D Presence Positioned Relationships
Engagement Prices
Products through

1. Excellent R&D department: R&D helps in constantly finding healthier and tastier products for consumers.
2. Consumer engagement: Showing that the consumer is important is a key for success. Well-established brands can benefit of high market
share also because of their consumer engagement and keep its importance at the core of the business.
3. Geographic presence: Successful firms are present all around the world and compete increasingly against each other to gain market share in
every country.
4. Large product portfolio: Offering a big variety of products is important to be successful. Any firm can substitute whatever product in the
market with its own one. It is important to target profitable segments and apply a heavy and specific marketing strategy.
5. Consumer Behaviour: With a fast-changing sociocultural behaviour and ageing population, it is crucial to innovate products and adapt them
to the market. Consumers look for the healthiest and cheapest solutions.
6. Suppliers Relationships: Farmers will have vested interest due to continued co-operative structure.
Internal Analysis – Unique Resources
• Farmers Owned: Arla is completely owned by around 11,200 in 7 countries farmers who are the very essence of the company and Dairy

• Geographic presence: Arla foods is operating at 30 countries with over 19,000 employees. The company is comprised of around 13,000
farmers who are the actual owner of the company.

• R&D: Arla has Innovation Centre, along with product development teams in the UK, Sweden, China, Germany, Netherlands, Finland and the US.
They do this with state-of-the-art science and consumer labs and a 2000 m2 pilot plant. Another initiative is Arla Food for Health, which was
founded in the spirit of exploring the competences between the four stakeholders to carry out best-in-class dairy health and nutrition
research and become a platform for knowledge sharing, training and education.

• Diversified portfolio: Arla has more than 30 brands covering all the dairy categories ranging from Milk, Cheese, Butter, Cream, and
Yoghurt. Its product profile has more than 80 products and 438+ SKUs. The product range is enough to meet the dairy requirement of
people around the globe.

• Brand reputation: Arla sets it self to be the best dairy provider and it is well received specially in Europe and Middle East. Its strong
brand image is one of the reasons behind its higher sales.
Nestle’s Value Chain Analysis
• Arla owns and controls the
full value chain. Its farmers
produce milk which it buys
and then sells or turns into
other dairy products which
it then sells worldwide.
Quality and provenance are
not issues — and this is very
powerful in the food
Inbound Logistics
Arla is owned by 11,200 farmers and the way company’s inbound logistic works is:
• Collection of milk from farmers
• Either forwarding the milk to other markets or changing in to value added
products and then selling
• The collection is done from different regions of Europe, there are 13 collection
points overall.

How is value created by in bound logistics?

1. Arla pays the farmers in advance.

2. The payments are based on average earning generated across all markets
and product categories.
3. Due to this value creation in payments, farmers have vested interests in
providing milk.
• Arla create economies of scale and streamline its operations internally.

• They operate their entire value chain with a continuous focus on efficiency and optimization of their raw materials.

How is value created by Operations?

1. Their focus on operations promotes growth among Current Owners

2. Inspires new members to pursue their future with Arla

3. All of this drive a sustainable increase in milk supply and value creation per kg of milk for their own owners.
Outbound Logistics
• Arla is committed to Delivering the right goods in the right quantities at right time for customer satisfaction.

• For this reason they have created value for customers as well as their owners.

Arla is:

➢ Using automation – Including robotic order picking – to improve its logistics performance.

➢ Using Tachomaster digi cards for their drivers. The digi cards take away the need to have both the digi card and the finger scanner. So, Drivers when driving only need to clock in on one

➢ Using the Astro WMS (Warehouse Management System) from Consafe Logistics in all Group fresh food terminals within the Nordic countries for speed, flexibility and precision.

➢ Using voice picking at its fresh food terminals since 2005. This has resulted in significant improvements, both in terms of quality and safety, and some improvement in productivity.

➢ Using sustainable bio-fuel in trucks

➢ Training drivers to drive in an environmentally friendly way

➢ Promoting to Increase fuel efficiency by 1% annually

How is value created by outbound logistics?

1. Fresh produce on time for the customers.

2. Distribution centers work on efficiencies lowering down the costs

3. The drivers are at ease while delivering the products which results in higher efficiencies.

4. To date, they have succeeded in decreasing their CO2 emissions by 12% since 2005, despite increased production.
Marketing and Sales
• Arla’s marketing and sales organizations have focused on increasing volumes in profitable positions in both core markets and markets outside the EU.

• Arla has proactively made the decision to maintain their investments in marketing and innovation with the objective to push more milk into retail and foodservice and reduce industry
commodity sales.

• Arla is now also focusing on ecommerce and online sales of its branded products. It recently entered the e-commerce space by partnering with different online retailers such as Amazon.

• Arla Foods has never pursued a homogenous brand communication strategy for the Arla brand across countries or sub-brands but has instead employed more fragmented marketing
strategies to leverage the sub-brands’ local strength.

• Arla Foods has primarily been selling to traditional retailers, especially supermarkets and hypermarkets. Sales through these constitute ~75% of Arla Foods’ revenue, with major clients
including ICA, Lidl, Tesco, Aldi, Coop, to name a few.

• These retailers also own or distribute to smaller convenience stores.

• Arla presents its dairy products and recipes in all its advertisements in a way which does not attempt to mislead consumers.

• It supports the role of parents and other appropriate adult role models by providing information on the nutritional profile of healthy products, where relevant

• It does not represent products as substitutes for meals when they are not intended as such.

Value Created by Marketing and Sales:

1. Consumers, specially millennials needs are now met easily as they consume more frequently in small quantities.

2. As the global retail market is going towards ecommerce, Arla’s products are now easily available for their customers.

3. With rapid replenishment at larger stores, customers get what they want.

4. Through science-based nutrition products, Arla helps enhance the quality of people's lives by supporting health and providing care for consumers with special needs (lactofree).
After Sales Service
Arla’s focus to customer service has been to process the orders and requests as fast and as error free as possible.

For this reason, arla has not disturbed the manual order placing cycle of its customers, however, it has used the services from OmPrompt.

Now, Arla’s customers continue placing orders as they did before, by fax or mail sent to the customer service team in a wide variety of formats. Orders are auto-
forwarded to the OmPrompt Sentient Supply Chain platform, which identifies order fields in the document and extracts the required data, and then uses logic to
validate the information.

This ensures that all the necessary fields have been received, are valid and comply with Arla’s business rules, such as minimum quantities, units of measure and
product codes. Clean, valid orders are then sent by the OmPrompt platform to Arla’s ERP system.

Value Creation by After Sales Services?

Not only has the project improved customer service by eliminating order processing errors, but it has freed customer contact resources who can now spend
more time on value-added activity:

1. Calling customers to advise when a delivery is going to be late

2. Tracking vehicle availability

3. Promoting Arla’s products.

Firm Infrastructure
• Arla aims for a conservative capital structure matching that of a robust investment grade company.
• Arla has a strong core banking group based on long-term relationship banking.
• The group funding is obtained from diversified sources:
➢ Mortgage backed bonds
➢ Corporate bonds
➢ Supra-nationals
➢ Commercial paper
➢ Facilities with the core banking group.
• Funding and cash management is centralized at group level.
• Under the new capital structure 4.5 per cent (around double the previous amount) of Arla earnings will be invested in the
• Consolidation will increase Arla’s equity by approximately DKK 4‐4.5 billion over a six‐year period.
• The extra capital will allow Arla to raise connection with acquisitions with more ease and it will also be used in connection
with investments related to continued growth.
Human Resource Management
• Arla has approximately 19,000 employees globally.

• Arla has attempted to further enhance the skills and well‐being of its employees through three major activities by the use of:

➢ Lean to improve work satisfaction and efficiency,

➢ Leadership training programmes for middle managers

➢ Administration of a new colleague survey.

Lean improves efficiency and job satisfaction

Arla has adopted Lean as a method to develop business and make long‐term decisions since 2009. The method focuses on change management and facilitates continual
improvements through actively engaging employees

Leadership training for middle managers

Training is offered to middle and first line managers in Denmark, Sweden and the UK in the aim to help managers with better linking the cooperative’s ambitious strategy for
growth and their responsibilities.

New colleague survey

Arla’s global colleague survey, Barometer, was conducted and completed by 12,650 employees in 26 countries in 16 languages. The results for 2017 reflected continued positive
development in overall satisfaction, high employee commitment and a good understanding of the company’s objectives.
Technology Development
Research Innovation

• Research and innovation is of fundamental importance to Arla Foods, and the company’s innovation range covers milk‐based products such as milks, yoghurts, desserts, cheeses, butters, spreads, soups, sauces,
milk powders and milk‐based food ingredients.

• Arla’s research and innovation activities are carried out at its three major innovation centers in Denmark and Sweden and two innovation satellites in United Kingdom and Finland.

• Company’s research and innovation activities are organized into three interacting portfolio areas of research:

➢ Technological development

➢ New product development

➢ Radical innovation.

• Through these activities, Arla is providing the basis for competence development and knowledge transfer to the remaining innovation chain.

• Arla Foods sponsors and participates in a wide range of research projects.

• There are also several different types of collaborative partnerships that Arla engages in, including:

➢ Direct partnership between Arla and a research institution

➢ Projects where a major proportion of the funding comes from the Danish Agency for Science, Technology and Innovation within Food and Safety and the remainder derives from participating research
institutions and companies

➢ Projects where around half the funding derives from the Danish Dairy Board’s Research Fund and the remainder from public funds
Technology Development
Research Platforms
• Arla Foods employs around 200 skilled individuals within the area of innovation that range from basic research to new product development.

• These research activities are organized within six major research platforms that represent significant elements in the milk value chain. These

➢ Milk composition

➢ Flavor and functionality

➢ Food safety

➢ Consumer preferences

➢ Process development and control

➢ Wellbeing

• Each platform includes a research coordinator as well as key representatives from organizational units in Arla Foods.

• The research platforms value effective internal communication, agreement and coordination of research‐based knowledge and needs.
Procurement is always on the lookout for cost saving opportunities which is the foundation for
achieving Good Growth. Having a unified approach to strategic sourcing allows Arla to maximize cost
savings on a global scale that add value to the organization as a whole, and in the end, to their

Arla is dedicated to acting responsibly towards the environment and the communities that they are
part of. They ask suppliers to sign their Code of Conduct for Suppliers and expect suppliers to support
them in their commitment towards sustainability. Having high standards sets the direction of the
business in seeking alternative ways and becoming more sustainable.

Operating in a dynamic business environment requires a continuous focus on risk reducing activities.
Procurement seeks to mitigate commercial and operational risks by assessing and sometimes
auditing suppliers. Arla wants its suppliers to meet its requirements for quality, environment, safety
and health as well as complying with their Code of Conduct and their terms and conditions.
How Value
chain can
look like
Good Growth
• The Good Growth Strategy 2020
is focused around external
threats, risks and change.
• It was introduced in 2015 and is a
5 year plan for Arla.
• It is focued around Growth and
Development of Arla.
• In 2018 Arla commenced their transformation
programme, Calcium which will accelerate their

Calcium Programme strategy by transforming the way they work, spend

and invest.
• Calcium will strengthen their bones, create efficiencies
and release cash to reinvest in their growth.
Efficiencies by Arla
• Like other successful manufacturers, Arla Foods continues to face price pressure from global markets, forcing constant reduction of
production costs.

• Time-to-market and time-to-volume remain critical factors in meeting customer demands for increased complexity in product mix and
timely supply.

• Arla Foods, since 2002, has executed a global strategy called “One Arla,” with the objective of standardizing its business processes into
a single system and integrating high-level business information systems with the plant-floor information systems.

• Arla Foods has launched an internal transformation programme called “Calcium”, which is set to deliver more than 400 million euro of
savings by the end of 2020 through improved efficiency in all areas of the company. The programme looks to boost Arla’s performance
to the benefit of its farmer-owners and further strengthen the company’s investment capability.

• Ongoing cost savings and efficiencies are a vital part of Good Growth 2020 strategy, and “Calcium” which will change the company by
creating significant efficiencies with two main purposes in mind:

1. To improve returns to its farmer-owners and maintain a competitive milk price

2. To reinvest into business areas that fuel growth

Competitive Advantage of Arla

With farmers as the

Along with sourcing,
owners, the biggest
issues of quality of
competitive Speed to Market
milk goes out of the
advantage of Arla is
question as well.
that of sourcing milk.
Arla’s Risk Landscape
SWOT Analysis
• Collective ownership by over 12,000 farmers

• Innovation in dairy technology, particularly in nordic countries

• Existing, proven marketing plan with variety of dairy goods

• Established presence in worldwide developed locations- Arla Foods has extensive dealer network and associates network
that not only help in delivering efficient services to the customers but also help in managing competitive challenges in
Strategy & Execution industry.

• Able to hit different price points with different products and different locations- Arla has built expertise at entering new
markets and making success of them. The expansion has helped the organization to build new revenue stream and
diversify the economic cycle risk in the markets it operates in.

• Committed to automated labor- which has lead to decreasing labor costs

• Merger with MUH and British Bink- making Arla the sixth largest milk producer

• Increased net profit- from 2006-2018 steadily (+133%)

• Arla strategic innovation center- has a diverse pool of employees representing many of their markets

• Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any
supply chain bottlenecks.

• New markets have lower purchasing power compared to developed markets

• Business structure is very spread out, could create disconnect between specific areas

• Arla has much less milk production in developing countries, where over 80% of future growth is projected to come from

• Lack of diversity with senior executives, almost all Danish or Swedish

• Disconnect- Arla wants to consolidate brands, but at the same time, they demand revenue comes from new product launches

• Business Model of Arla Foods can be easily imitated by the competitors in the Dairy industry.
Key Internal Factors Weight Rating
Collective ownership by over 12,000 farmers 0.1 4 0.4
Innovation in dairy technology, particularly in nordic countries 0.08 3 0.24
Existing, proven marketing plan with variety of dairy goods 0.05 3 0.15
Established presence in worldwide developed locations 0.04 3 0.12
Able to hit different price points with different products and different locations 0.07 4 0.28
Committed to automated labor 0.05 4 0.2

IFE Matrix Increased net profit from 2006-2018 steadily (+133%)

Strategic innovation center has a diverse pool of employees representing many of their markets
Reliable suppliers
Successful track record of integrating complimentary firms through mergers & acquisition. 0.05 3 0.15
New markets have lower purchasing power compared to developed markets 0.08 2 0.16
Span of control and organizational structure 0.07 2 0.14
Lack of diversity with senior executives, almost all Danish or Swedish 0.05 1 0.05
Dissconnect in Brand Consolidation and Expectations of Revenues from New Products 0.02 1 0.02
Business Model Easy to replicate 0.06 1 0.06
Not Present in Developing countries 0.1 1 0.1
Total 1 2.68
• New trends in the consumer behavior can open up new market for the Arla . It provides a great opportunity for the organization to build
new revenue streams and diversify into new product categories too.

• The new technology provides an opportunity to Arla to practices differentiated pricing strategy in the new market. It will enable the firm to
maintain its loyal customers with great service and lure new customers through other value oriented propositions.

• The market development will lead to dilution of competitor’s advantage and enable Arla to increase its competitiveness compare to the
other competitors.

• New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This
investment has opened new sales channel for Arla. In the next few years the company can leverage this opportunity by knowing its
customer better and serving their needs using big data analytics.

• Local Collaboration - Tie-up with local players can also provide opportunities of growth for the Arla Foods in international markets. The local
players have local expertise while Arla Foods can bring global processes and execution expertise on table.

• Increasing customer base in Developing Markets - There is an absolute potential in developing economies for dairy products and

• Trend of customers migrating to higher end products - It represents great opportunity for Arla Foods, as the firm has strong brand
recognition in the premium segment, customers have experience with excellent customer services provided by Arla Foods brands in the
lower segment. It can be a win-win for the company and provides an opportunity to increase the profitability.
• Changing demographics - As the baby boomers are retiring and new generation finding hard to replace their
purchasing power. This can lead to higher profits in the short run for Arla Foods but reducing margins over
the long run as young people are less brand loyal and more open to experimentation.

• Changing political environment with US and China trade war, Brexit impacting European Union, and overall
instability in the middle east can impact Arla Foods business both in local market and in international market.

• Competitors catching up with the product development - Even though at present the Arla Foods is still
leader in product innovation in the Strategy & Execution segment. It is facing stiff challenges from
international and local competitors and from private labels also.

• Shortage of skilled human resources - Given the high turnover of employees and increasing dependence on
innovative solution, Arla can face skilled human resources challenges in the near future.

• Saturation in urban market and stagnation in the rural markets - For Arla Foods this trend is an ongoing
challenge in the Strategy & Execution segment.

• Matching Structure With Strategy to serve the rural customers than urban customers given the vast
distances and lack of infrastructure.
Arla’s Dealing with Risks
• The risks for Arla’s in 2019 are identified in 6 different areas, these are:

1. Market Risks and Global Instability

2. Financial and IT Risks
3. Milk Price and Volume Volatility
4. Supply Chain
5. Changing Consumers demands and Digital Disruption
6. Business Ethics, Legal and HR Risks.
Market Risks and Global Instability
The uncertainty caused by Brexit negotiations and the potential consequences after the UK leaves the EU have been identified
as their most critical risk. They have undertaken extensive analysis to understand the potential implications for they business and
further developed their plans to prepare for scenarios, including a no deal.
Financial and IT Risks
• Arla’s main financial risks relate to exchange rates, interest rate changes and pension liability valuations. To
manage this risk, the Group hedges expected future cash flows for selected key currencies. Furthermore, they
constantly monitor and review worldwide tax matters to ensure their compliance in all locations.
• To minimize IT risks, they continuously review their activities and search for vulnerabilities in their systems.
Furthermore, in 2018 they strengthened their data privacy efforts to ensure compliance with GDPR, which
commenced on 25 May 2018.
Milk Price and Volume Volatility
• Continued milk volume and price volatility strongly influence their sales volumes and profit respectively.
• Arla’s Good Growth 2020 strategy focuses on value creation through their strong brands and products, which
aim at continually reducing exposure to commodity pricing. To reduce these risks, thy have further enhanced
their price performance management in 2018.
Milk Price and Volume Volatility
• Guaranteeing food safety is their key priority.
• Clear and professional crisis management processes and actively applied structured root cause analyses ensure
their ability to improve product quality and prevent reoccurring failures. Their quality assurance programme,
Arlagården and their comprehensive quality, health, environment and safety model safeguards the highest
quality for all their products.
Changing Consumers demands and Digital
• During 2018 environmental implications of food choices became important for an increasing number of
consumers. In particular there’s an increasing number of consumers who eat mostly meat free or plant based.
• War on plastic and waste became a topic for many more consumers in 2018. They are already working to
respond to these consumer trends.
• They mitigate this risk by being open in their communication, and increasing their digital engagements with
their consumers.
Business Ethics, Legal and HR Risks.
• In 2018 Arla Foods continued to make good progress towards its environmental Ambitions
• To mitigate this risk they strive to create a positive corporate culture and work environment.
Arla Exploiting Opportunities
• Arla in December 2015, launched their corporate strategy for the next five years called Good Growth 2020. This
strategy is their response to the changing world and opportunities.
• The three points of focus are:
1. Products and Categories
2. Regions and Markets
3. Globalization
Products and Catergories
• Excel in eight categories
• The global dairy industry is developing at high speed and is characterized by a constant evolution of consumer
habits and preferences. Matching these trends to their own strengths, they have identified eight product
categories that are the core focus for their efforts to shape the dairy market. Their key categories are:
➢ Milk and powder;
➢ Milk-based beverages,
➢ Spreadable cheese,
➢ Yoghurt,
➢ Butter and spreads,
➢ Specialty cheeses,
➢ Mozzarella and
➢ Ingredients.
Products and Catergories
• Regions and Markets Six regions represent the markets in which we
believe Arla has the biggest potential to grow a long-term profitable
business. Arla has a strong position in Northern Europe as the
preferred dairy company for consumers, and in the Middle East and
North Africa where our brands are among the strongest in the food
industry. Arla is continually expanding market positions in growth
markets such as China, South East Asia and Sub-Saharan Africa, whilst
further engaging in opportunities in the US and Russia.
Products and Categories
• Arla’s ambition is that all of its 19,190 employees work from ONE strong common platform.
• Unity is ever more important as their strategy is accelerated by their transformation programme, Calcium.
• Arla can’t win without addressing the most pressing issues of the times, therefore they have a strategical focus
on sustainability and aim to significantly reduce their ecological footprint.

References •
Thank you!