This is our research proposal about Fonterra which focuses on the problem that Fonterra has.
There are many problems that Fonterra are facing nowadays. The main problems that Fonterra facing is that the profit of the company is decreasing a lot as compared by previous year. The profit of the decrease by 16% from the previous year. The dairy prices are also falling down. We suggest the cutting costs method to make a profit for Fonterra because this one way of solution which is natural for any business, so it's a very difficult situation but good enough and we can see its performance clearly in short-term like a year and we could evaluate the company's performance in numbers (financial) and after that we can increase the payout to the owners of that business, which are the farmers themselves.
Main plan is to downsizing the business, decreasing labour cost without layoff, reduce Marketing budget and travel expense, investment to increase Profit and defer some capital expenditure also create the new market that make a difference in short-term and long-term both in progression also results .
The present company business model is clearly not working and must change, firstly to slow or reverse the defection of suppliers, which has seen Fonterra's share of milk production fall from 95% at merger to 86%, and secondly to resolve the conflict between farmer shareholder interests and capital requirements. Fonterra's situation with the lower forecast Cash Pay-out this year (2015) makes the farmers have been worried in their money back and Pay-out depends on the profit so our group decided to do research in this issue by one way of solution that we think it's good to solve this problem. With this goal, our question has been developed: Will costs cutting helps increase the net profit of the company? And how to use this method and review of potential for increasing the profit?.
The question we choose is important because the Fonterra company is totally depend on the profit of the company if the profit is not good there is lot of problem that Fonterra can face.