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BS 942 International Business Mr.

Mohan Dass

TABLE OF CONTENTS

Executive Summary………………………………………………………… 2

1. Introduction………………………………………………………………… 3

2. Country Factor analysis ………………………………………………… 4


1(a) Economic benefits of country factor analysis……………………… 4
1(b) Economic risks of country factor analysis………………………… 4
1( c)Economic costs of country factor analysis………………………… 4
1(d) Economic trade off of country factor analysis…………………… 4
2 (a)Political benefits of country factor analysis……………………… 5
2(b) Political risks of country factor analysis……………………………… 5
2( c)Political costs of country factor analysis……………………………… 6
2(d) Political tradeoff of country factor analysis………………………… 6
3(a) Cultural benefits of country factor analysis………………………… 7
3(b) Cultural risks of country factor analysis…………………………… 7
3(c) Cultural costs of country factor analysis…………………………… 8
3(d) Cultural trade off of country factor analysis………………………… 9

3. CONCLUSION…………………………………………………………… 10

4. REFERENCES…………………………………………………………… 11

ID 404011 1 Supriya Meesala


BS 942 International Business Mr. Mohan Dass

BUSINESS SCENARIO EXECUTIVE SUMMARY:-


Name of the Product:-Milk Products
Name of the Business :-Multiple products manufactured by milk
Name of the Company:-Sylvia Corp Dairy Foods
Name of the Industry:-Different products manufactured by milk
Name of the Country:- India

Food safety is a growing concern globally, with the innovations in processing technologies,
packaging techniques, agricultural practices and change in food habits, industry and the
enforcement authorities are facing newer challenges everyday. To keep in pace with this, it is
required to have a multi-dimensional approach in food safety related matters. Governments across
the globe are facing this challenge by harmonizing the food laws and enforcement patterns in the
interest of public health and greater consumer confidence. As a global player in export of food
items, India is also facing these challenges, with the view to safeguard the food export business and
public interests related to food safety, domestically, it is essential to review the food safety policies
and enforcement patterns in India.

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BS 942 International Business Mr. Mohan Dass

INTRODUCTION

India is the largest producer of milk producing more than 100 million tons of milk per annum. Yet,
her per capita milk consumption is around 250 g per day. India has a population of more than 1
billion with diverse food habits, cultures, and traditions and religions. Regional variations within
the country can be mind boggling. On one hand, the country has plains with long tradition of milk
production and consumption. On the other hand, there are forest and hilly regions with no tradition
of dairying.

Most of coastal belts also do not have much of dairy tradition. Cow is holy for Hindus who make
up more than 80 per cent of the population of India. Buffalo enjoys no such holy status. Cow
slaughter is banned in many states of India. There are no restrictions on buffalo culling. All this
makes India a very complex dairy country. Till about year 2000, India was not on the radar screen
of most international dairy companies, since India was neither a major importer nor an exporter of
dairy products. Through the 70’s, 80’s and 90’s India used to take some milk powder and butter oil
as aid. Exports from India were insignificantly small. From 2000 onwards, Indian dairy products,
particularly milk powder, casein, whey products and ghee started making their presence felt in
global markets. The decade of 2000-10 will be recorded in dairy history as the decade of exports.
But the next Decade will be different. Signs of change are already visible. India is finding it
difficult to sustain exports. The day is not far when India will become a net importer of dairy
products, particularlyof dairy fats. India’s milk production will grow at about 3 per cent per annum
in spite of difficulties due to stagnant livestock herd size and shortage of fodder. Due to increasing
population, per capitaavailability of milk will increase by only about 1.5 per cent per annum. For an
economy growing at about 8 per cent per annum, this increase in availability will be grossly
inadequate. Production growing Transformations in the global food system are causing changes in
food production and marketing in India at a slower rate than elsewhere in the developing world but
there is a growing domestic market for horticultural produce, in both traditional and exotic
vegetables. Production and marketing arrangements are responding to changing demand driven by
urbanizations and diet change. Government-sponsored schemes in horticulture have mixed results,
generating more jobs than cereal production but reaching larger rather than smaller farmers and
landless households.

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BS 942 International Business Mr. Mohan Dass

3. COUNTRY FACTOR ANALYSIS:-

1. (a) The Economic benefits in the Country factor Analysis:-The economic benefits in the
present world the people are becoming more health conscious and want to eat nutritious foods. One
way to begin eating healthier is to consume three servings of low-fat dairy products per day. The
market data shows that increasing dairy foods may increasing dairy foods may help protect against
the accumulation of excess body fat while a low calcium intake may increase the risk of obesity.

(b) The Economic risks in the Country factor Analysis:-Studies have shown low-fat or fat-free
dairy products to be beneficial to eat because they help with weight management when combined
with a reduced calorie diet and exercise. Studies have also shown that the risks of high blood. The
economic risks identified by the farmers are not having an animal (buffalo) in lactation in any one
year, the death of a lactating buffalo, having to pay for straw (which is the main feed source), and
that the main income earner falls ill (and therefore cannot generate an off-farm income).Occurrence
of any of the identified risks can lead to a reduction of household income by 50 percent.
Occurrence of any of the four risks related directly to the dairy enterprise will lead to a reduction or
cessation of this activity as the required investments financed with a loan at 50 percent interest are
financially not viable.

( c) The Economic costs of the Country factor Analysis:-The cost of milk production of farm
IN2 amounts to 25 US$/100 kg and is thus significantly higher than the cost incurred by farms IN4
and IN22. This can be explained by economies. Yields and poor breeding management (one calf
per buffalo only every second year). Without major improvements farm type IN2 will, in the longer
run, have difficulties competing with the larger farm types. At the moment, however, the main
purpose of IN2 is to produce milk for home consumption by converting practically free feedstuffs
into milk, livestock, and fuel and secondly to provide the female members of the family with an
income-generated.
(http://www.fao.org/ag/AGAinfo/programmes/en/pplpi/docarc/execsumm_wp02.pdf)

(d) An Economic trade off in the Country factor Analysis:- A fundamental factor in determining
trade-offs between milk safety and economics in traditional and emerging dairy markets is how to
ensure that consumers are being supplied by milk that is “safe” by the standards considered

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BS 942 International Business Mr. Mohan Dass

appropriate by them. Public contribution here should be through education to allow informed
choices. This would allow consumers to make informed choices to allow the battle between formal
and informal milk markets to be fought on the basis of quality and price and not on perceived
health risks which are in any case significantly reduced or eliminated by the common practice of
boiling milk before consumption. A policy of training and certification of small traders, allowing
them to operate legally, is likely to result in both higher milk quality and better service to consumer
preferences.
(http://www.fao.org/WAICENT/FAOINFO/AGRICULT/AGA/AGAP/lps/dairy/lactoper.htm)

2. (a) The Political benefits in the Country factor analysis:-The political benefits is that India is
the largest producer of milk producing more than 100 million tons of milk per annum. The per
capita milk consumption is around 250 grams per day. India has a population of more than 1 billion
with diverse food habits, cultures, traditions and religions. Regional variations within the country
can be mind boggling. On one hand, the country has plans with long tradition of milk production
and consumption
(http://www.highbeam.com/doc/1G1-180376855.html)

(b) The Political risks in the Country factor analysis:-The political risks in India which has
occurred in the year December 2001, the naxals damaged one of the company’s plants. Though
plant properties are fully insured, the disruption does cause temporary loss or profit.
(http://impetusadvisors.com/Heritage%20Foods%20-%20Impetus%20Advisors-Part1.pdf)

As a fall-out of the tainted baby milk scandal in China that has affected nearly 50,000 children,
India has banned all imports of dairy products from China for the next three months. According to
the World Health Organization (WHO), so far three deaths have been confirmed in China due to
contamination of infant formula with melamine, while over 40,000 children have sought medical
treatment.

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BS 942 International Business Mr. Mohan Dass

Chinese state news agency Xinhua put the figure at over 53,000 children, who have been left with
various urinary tract problems, including kidney stones. About 13,000 infants are still being treated
for complications in hospitals.

The toxic chemical melamine, used in pesticides and in manufacturing plastics as a source of
nitrogen, was apparently used in baby milk to hoodwink quality controls. The level of nitrogen is
often used as a marker for protein content in baby food.

Several countries have already banned imports from China, including Vietnam, Nepal, South Korea
and France. (http://www.thaindian.com/newsportal/business/india-bans-imports-of-chinese-dairy-
products_10099997.html)

(c) The political costs that affect the country factor analysis:- The cost of milk production will
be one of the major factors driving the direction of production and also the trade of dairy products
in the future. The following section analyses cost of milk production in the typical farms of the
major milk producing countries.

The analysis is based on the IFCN method. It is using the concept of typical farms, the small farms
in each country. The larger farm type is analyzed to show the economies of scale and to give a
picture of how competitive milk production might be after structural changes. The farm size ranges
between two and 2400 cows per farm. Besides the inter-country differences, significant size
differences can also be found within the countries.
(http://www.milkproduction.com/Library/Articles/Milk_prices_and_costs_of_milk_production_in_
2003_A_global_comparison.htm)

(d) The political tradeoff that affects the country factor analysis:- The great confront facing
political leaders today is to persuade the public that continuing to liberalize trade will bring more
benefits than costs. Be suspicious of globalization has probably never been higher in the past 60
years. China and India are among the reasons. There is widespread fear that globalization means
job losses and lower wages as the export power of these huge nations grows. So countries are
becoming more protectionists, more unwilling to deal with change and make adjustments. This is
why the Doha Round of trade negotiations under the World Trade Organization is stalled, even
though the enormous gains in living standards over the past 60 years are due in large measure to
multilateral trade liberalization.

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BS 942 International Business Mr. Mohan Dass

Yes, trade liberalization entails trade-offs, and we will face job losses in some industries with freer
trade. But we will also have greater opportunities as the new export powers, such as China and
India, become wealthier societies and hundreds of millions of people are lifted from extreme
poverty. There will be winners as well as losers. (http://www.thestar.com/
comment/columnists/article/166599)

3. (a) Cultural benefits that affect the country factor analysis:- Dairying is practiced by millions
of dairy operators - smallholders and small traders – in many of the countries of the Asia-Pacific
region, where milk and dairy products often fulfill important cultural and social functions as well
as providing nutritional and economic benefits. Over the past two decades most countries in the
region have been implementing economic reforms, leading to rapid growth and increasing
urbanization. The adoption of market liberalization policies, in addition to heavy farm subsidies in
the industrialized countries, has resulted in the domestic markets of some countries in the region
becoming increasingly dependent on highly competitive, but increasingly volatile global dairy
commodity markets.

(b) Cultural risks that affect the country factor analysis:- When it comes to feeding the
newborn, human milk is, from an evolutionary perspective, the biological norm, the time-tested
standard of care. The health benefits to the infant of breastfeeding have been amply documented;
numerous studies strongly indicate significantly decreased risks of infection, allergy, asthma,
arthritis, diabetes, obesity, cardiovascular disease, and various cancers in both childhood and
adulthood. Among the more fundamental disadvantages of not being breastfed is a loss of
immunologic protection afforded by maternal colostrums, a "pre-milk" fluid secreted only during
the first days after delivery, as well as numerous other bioactive factors that help protect the infant
through the first two years of life, when the immune and nervous systems are incompletely
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BS 942 International Business Mr. Mohan Dass

developed. Nevertheless, given the tendency for persistent organic pollutants (POPs), pesticides,
heavy metals, and other contaminants to accumulate in human milk, researchers and parents alike
are asking whether the nursling's exposure to these pollutants might reduce or even override the
health benefits.

The benefits of human milk for human infants are undeniable. But what happens when the nursing
infant is exposed to contaminants in human milk? The number of such contaminants is unknown,
but the extent of their presence is rapidly growing. Given the potential risks posed by the presence
of these toxicants, is there any evidence that the bioactive components of human milk may
somehow compensate for these milk-borne pollutants and other toxicants to which a child is
exposed.( http://www.ehponline.org/members/2008/116-10/focus.html)

(c) Cultural costs that affect the country factor analysis:- India's milk production is expected to
go up to 108 million tonnes next year from an estimated 105 million tonnes this year, according to
the US Department of agriculture.(USDA).

In its latest report on India’s dairy and dairy products, it said: “Strong farm-gate prices along with
rising domestic demand for a variety of milk products supported by growth of the Indian economy.
The report also said, Punjab, Karnataka, Gujarat and Andhra Pradesh are giving special emphasis to
cross-breed cow development programmes leading to improvement in the milk productivity rate in
these states. The report also highlighted that the average performance rates of cross-bred animals
— mostly local breeds with Holstein friesian —
In Punjab are quite encouraging as milk yield is 40-55 litres per dairy animal per day. Around 70-
75% of the indigenous cattle and buffalo population cannot be categorized under any well-defined
breed or are non-descript and their milk yield levels are much lower than that of pure dairy India’s
non-fat dry milk powder production is likely to increase by 7% to 370,000 tonnes in 2009-10 on
increased demand for reconstituted milk during the lean production season. Butter production is
projected to rise by 10% at 4.1 million tonne on the back of growing domestic demand and the
greater purchasing power of the average Indian consumer.
Identifying the reasons of the growth of processed dairy products such as milk powder, cheese,
butter, yogurt (dahi), ice-cream and ethnic milk sweets (mithai), the USDA report said the change
in work culture — a growing number of women in the workforce — and demographics — smaller
families and cosmopolitan culture —

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BS 942 International Business Mr. Mohan Dass

Over 90% of India’s milk production is contributed by 14 states, and the top five are Maharashtra,
Uttar Pradesh, Punjab, Rajasthan and Andhra Pradesh. An average milk producer retains around
34% of his production and the rest is sold. Out of the 66% of milk sold by producers, around 16%
is procured by co-operatives and the remaining 50% is bought by the unorganized sector.
(http://economictimes.indiatimes.com/News/News_
By_Industry/Cons_Products/Food/Major_rise_in_milk_output_seen/ articleshow/3710643.cms)

(d) Cultural trade off that affect the country factor analysis:- Organic labels can be confusing
to consumers, especially if different labels signify different production standards. Establishment of
minimum standards through national or international accreditation of certifiers are expected to
clarify the meaning of “Organic in the market place. However, most accrediting organization’s
permit certifiers to affix their own labels in addition to the accreditation label. This may not
necessarily improve clarity for the consumer. Examples of multi standards and labels are found in
some of the largest organic markets. Until 2000, china had six grades of reduced chemical foods,
including organic, all carrying the same label. China recognizes several classes of green food
including organic. In Germany and the United States, there are so many regional and local
certification agencies that learning about each is burdensome, so consumers choose the most
familiar label. This is typically the first one that appeared in their regular shopping place or the one
promoted by the most aggressive advertising efforts. Internationally recognized accreditation logos.

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BS 942 International Business Mr. Mohan Dass

CONCLUSION :- Milk and milk products are not only a valued source of nutrition and provide
income and employment to a large section of Indian population . Several years of strategic
planning and effective programmer implementation by Government and public sector agencies
have ensured that India emerges as a leading producer of milk in the world. However, the rising
population and plateau in crop production trends necessitate that a renewed impetus is given to
Indian dairying to meet projected demand. Some of the issues that need to be tackled on priority are
genetic improvement for quality animals, improvement of animal health , enhancement and
enrichment of commercial dairy farms and provision of institutional financial support. The World
Trade Organization scenario provides India with an opportunity to market its products in the other
part of the world.

ID 404011 10 Supriya Meesala


BS 942 International Business Mr. Mohan Dass

REFERENCES

1. (http://www.fao.org/ag/AGAinfo/programmes/en/pplpi/docarc)
2 (http://www.fao.org/WAICENT/FAOINFO/AGRICULT/AGA/AGAP/
lps/dairy/lactoper.htm.)
3. (http://www.highbeam.com/doc/1G1-180376855.html)
4. (http://impetusadvisors.com/Heritage%20Foods%20-%20Impetus%20Advisors-Part1.pdf)
5. (http://www.thaindian.com/newsportal/business/india-bans-imports-of-chinese-
dairy-products_10099997.html)

6. (http://www.milkproduction.com/Library/Articles/Milk_prices_and_costs_of_
milk_production_in_2003_A_global_comparison.htm)

7. http://www.thestar.com/comment/columnists/article/166599)

8. ( http://www.ehponline.org/members/2008/116-10/focus.html)

9. (http://economictimes.indiatimes.com/News/News_By_Industry/
Cons_Products/Food/Major_rise_in_milk_output_seen/articleshow/3710643.cms)

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