Requirements Read the Case Study and address the following requirements: 1. Construct an Industry Value Chain. Identify the most lucrative part of that value chain. Justify your selection. 2. Conduct...

65994 – FINAL SOLUTION
(Milk Processing Industry)
1. Construct an Industry Value Chain. Identify the most lucrative part of that value chain. Justify your selection.
Though Australia is the small producer of milk, yet is the third largest exporter of the milk in the world, almost 50% of the milk produced in the country is exported to the various International markets. As Milk being a perishable product and has a limited shelf life, therefore the milk that is produced is subsequently converted into different products like cheese, yogurt, cream, butter and etc so as to increase the shelf life of the product and realise better price by adding a value to the base product that is Milk.
The Value Chain helps a firm to act a line in the chain which enables a product to move from the pre-production stage to the stage of final consumption. There are various constituents the make up the typical value chain in any industry which are typically- input providers, producers, processors, packagers, suppliers and the retailers. This typical value chain flow can be understood with the help of the above diagram.
The farm input suppliers would consist of the suppliers that supply fodder and grass to the animals, which in turn helps in the quality milk produced by the animals. The quality of the fodder and the grass eaten by the animals is a decisive factor in the quality of the milk. Next the milk producers produce the milk with the help of various machines installed in their dairy. The milk produced is either consumed and the surplus part is sent to various processing units to convert the produced milk into the various products like cheese, butter, curd, cream- which adds value and increase the shelf life of the product. The processed milk and the milk products are sent to the various retailers spread across various regions and the finally consumed by the end consumers.
Most Lucrative Part of the Value Chain
As we know from our basic understanding that the dairy industry involves various methods and value addition processes in order to convert the raw product, that is Milk into some other product by various processing techniques, so as to make a value addition to it and increase the shelf life of the product. The raw product, that is milk is converted into various other products like- Butter, cheese, Milk powder and etc- which are according to the customer need sand the requirements and enable the producers to get an extra value for the product by changing the raw product into various other forms.
The value chain and the profit margin in the Dairy is Industry is as follows
It can be seen from the above analysis that Processor and the retailers are the ones who earn the most profits on their products. The main reason for the above conclusion can be attributed to the fact that processors are the ones who convert the raw milk into various other useful products which are highly priced in the market and have a higher demand in the market due to the increased shelf life and their better usefulness.
2. Conduct an Analysis of the Milk Processing segment of the Industry using a Five Forces analysis and comment.
Five Forces Analysis if the Milk Industry
Five Forces Analysis or the Porter Five Forces is the set of strategic management tool that helps to understand and analyse the particular industry by their profitability. These Porter Five Forces is the comprehensive strategic framework that helps in analysing and taking strategic decision considering the present competition in the industry as well as the future dynamics of the industry.
The Five Forces are as follows -
a) Threat of new entrants
) Bargain power of Suppliers
c) Bargain power of Buyers
d) Rivalry among the existing suppliers
e) Threat from substitute products
a) Ba
iers to Entry & Threat of new entrants
It is looming threat that is faced by every firm in every industry. The cu
ent firms of the industry are always wo
ied that if a new entrant enters into the industry, then the profit margin decrease for the industry and the cost of raw material increases due to the more demand of raw materials due the increasing number of firms. Therefore, it is a situation where the cost for the firms increase and the profit margins decline as...