Group mates: Jeffery Zou(21103428) Tran Thi Hong Dugen(21101041) Huang Ting(21103974) Ajey Thomas (21104180)

Fonterra Co-operative Group Limited is a New Zealand multinational dairy

co-operative owned by almost 10,500 New Zealand farmers.

The company is responsible for approximate 30% of worlds dairy export (National Business Review, 2009) and with revenue exceeding NZ$19.87

billion (Fonterra Annual Report 2010, 2011), is New Zealands largest

company.

Different types of matrix including SWOT Matrix, SPACE Matrix and QSPM Matrix will be used to analyze the report. Lastly, the report provides a recommendation for investment decision based on the above analysis performed.

Their vision is to be the natural source of dairy nutrition for everybody, everywhere, every day.

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Consumer demand for products offering health and nutritional benefits and
convenience. Demand from customers for partnerships that offer technical support, intellectual property and lower-cost supply chains in addition to product.

The economics of New Zealand sourced milk supply, with New Zealand needing to
maintain its place as the lowest-cost dairy exporter.

Strategy refresh: Grow volumes and value, while improving working capital

Drive an improved return on capital

Improve Shareholder value.

Fonterras mission builds on their considerable strengths: access to efficiently

produced, high-quality milk; an integrated business model; strong global reach;

established customer relationships; strong consumer brand positions in selected markets; and great people. Looking forward, they have sharpened their focus and made choices around the geographies and product portfolios that will deliver the best growth opportunities, particularly those in the emerging markets.

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Fonterras mission focuses on seven key areas: Optimize their New Zealand milk business by improving their asset base, managing risk, maximizing sales value, and driving speed and agility along their supply chain.

Build and grow beyond their current consumer positions in by leveraging their
leadership positions and investing in new growth markets. Deliver on foodservice potential by concentrating on the key emerging markets of China, Asia and Latin America.

Grow their position in mobility by strengthening the leadership position of specific

products across Asian markets through portfolio expansion, driving growth in China.

Selectively invest in milk pools to maintain their global relevance and protect their New Zealand milk business. Align their business and organization to ensure that they are highly efficient with the right cost base and aligned to reflect their focus and priorities.

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Got a strong customer base around the world It controls one third of the world dairy business The company supplies 20 million litres of organic milk annually according to the most stringent standards

Milk brands meant for pregnant women got high visibility and consumer support rate

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It produces world's seven major international infant formula brands New Zealand as the main milk source base, harmless natural green environment, raises cows milk quality assurance Fonterras history makes it a fully integrated supply chain and a high degree of stability in the dairy supply

-New Zealands location- overseas trading is having an impact to product sales and

product quality
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Due to high cost of transportation Fonterras products are sold overseas at a high price

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The less population of New Zealand had affected the increased production. Cultural differences

Several finance concepts considered to be crucial to strategy implementation of Fonterra i.e., acquiring needed capital, developing projected financial statements, preparing financial budgets and evaluating the worth of the company.

Acquiring Capital to implement Strategies:

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Fonterra is functioning on co-operative principles, 90% of its shareholders are farmers. Now the company feels that, it is time now to consider further capital structure changes that retain 100% farmer control and ownership as well as strengthen the Co-operative to compete in a more volatile and competitive environment.

Step One, Strengthening the Share Structure, gave farmers greater flexibility in the number of shares they can own, up to 120% of their current or expected production.

Step Two, Restricted Share Value, involved changing the way Fonterra shares are valued to recognize the market is restricted to Fonterra farmers only.

A possible third step, trading among Farmers, is now being considered. Under this step, the obligation of Fonterra to redeem shares would end. Instead, farmers would trade shares among themselves on a Fonterra Shareholders Market. This is

considered to eliminate redemption risk.

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Step Four, Further Evolution. The Board has ruled out considering whether Fonterra should allow the public to own shares (voting or non-voting) via a public listing.

Projected Financial Statements:

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All institutions require at least three years of projected financial statements whenever a business seeks capital. A projected income statement and balance sheet allow an organization to compute projected financial ratios under various strategies implementation scenarios. When compared to prior years and to industry averages, financial ratios provide valuable insights into the feasibility of various strategies implementation approaches.

The SWOT analysis is a good indicator of the strengths, weaknesses, opportunities

and threats of Fonterra.

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They have strong background and history therefore it is not hard for them to enter the new market

Transportation and shipping cost increase, lead to their product prices increase, and with small population, their productivity is limited.

They should open their manufacturing in other countries to reduce shipping cost and product prices.

Internal Summary
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Good reputation and image

Loyalty customers Products are good resources and revenue, especially with the baby infant formula Technology is used to improve products

External Summary
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Karicare and Yi Ly are big competitors However, the emerging countries develop more and faster, which give Fonterra a lot

of opportunities to join the new markets.

Fonterras Financial Reports ($ million)

Nov 2007

Jan 2009

Change between periods

Change per Fonterra share

Value per share Jan 2009

Assets

16,005

17,960

1,905

$1.57

$12.76

Liabilities
Equity Equity less intangible Liabilities + Equity

11,059
4,996 2,505 68.9%

14,170
3,790 943 78.9%

3,111
(1,206) (1,562)

$2.56
($0.99) ($1.28)

$11.64
$3.11 $0.77

Fonterra is in the process of building a state of the art milk powder processing

plant, located just outside Darfield.

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Fonterra has signed an agreement with the Government of China to develop a new dairy farm in Yutian County, Hebei Province. It is expected to increase Fonterras overall milk production in China to around 90 million liters or 360 million cups of fresh milk every year.

To match our mission and vision statement, that can gives us a motive to accomplish and also give us the time frame. Motivation would drive the Fonterra to achieve these goals Minimal the weakness & threats and maximal the strength & opportunities

Although there are many factors beyond the control of Fonterra that may affect this

years Farm Milk Price and profit, the efforts of the last decade have put Fonterra in
a great place. The opportunities for dairy across both emerging and developed markets are immense. Fonterra is having a strong business footprint across these markets and a sound strategy to build on the best opportunities for future growth.