Case 2: New Zealand Butter Battles European Bureaucracy
Fonterra is the world's leading exporter of dairy products and responsible for more than a third of international dairy trade. A recent case study (Starch & Everett, 2010) published in Czinkota, M, Ronkainen, C. and Beal, T (2011), “International Marketing”, 2nd Asia-Pacific Edition, illustrates to us how much of a market share a company can have before governments step in too input quotas and regulations.
The case study essentially is about how Fonterra’s European market of New Zealand products was limited suddenly by European forces. Its market was shrunk by almost half in order to stop Fonterra’s control over ...view middle of the document...
The Agreement’s regional rules of provide opportunities for Australian exporters to tap into global supply chains creating expansive business opportunities. The agreement between the NZ government and the European Union in 2006 with an input of Quota on Butter exports to European nations has benefited European milk producers with guaranteed high dairy prices and increasing demand (Starch & Everett, 2010). Agreements between governments are essential to day to day trading between economies as they can outlay regulations and can also provide business opportunities as seen through the examples above.
Fonterra’s control and access to the European market and all markets around the world was at an all time high do the fact of over 95 per cent of its production was being exported (Starch & Everett, 2010). This figure alone gives you the indication of how Fonterra saturated the European Market with its Product. This period also illustrated Fonterra’s dominance and overall market share of the European market. Because of this Dominant control over the European market a quota being introduced it might have limited the total imported amount of Fonterra Butter Products into the market, however it did allow Fonterra with such a huge customer base continue ongoing business into the European markets. Through this you can see the preferential status the European Union has given Fonterra’s Butter products into the European market by not totally eliminating its supply but by limiting it to a certain amount of 14000 tons per quota (Starch & Everett, 2010).
Reasons for the Loss of the Butter Quota & Legal Factors Affecting The Conduct
On the basis of this case, Fonterra lost a significant part of the butter quota because the European Court of Justice judged the regulations governing for importing New Zealand butter were invalid, illegal and discriminated against firms outside of Britain, since all imports were handled by Fontana’s British subsidiary (Starch & Everett, 2010). On the aspect of Germany and Poland, there were some complaints about the monopoly of Fonterra in importing butter, originating mainly form Egenberger. It is a German company which wished for acquiring licenses and importing some New Zealand butter in 2003. Finally, the Egenberger Company succeeded in court. The major reason which caused the complaint was that license applications could only be made to UK authorities. And just these UK authorities, which control New Zealand butter exports, agreed and comforted to make the deal of breaking up the quota (Mercer, 2006). The European Commission responded to the judgment of the European Court of Justice immediately by taking action of suspending all New Zealand butter imports, this decision was incredible and irregular. As a result, almost a third of the New Zealand’s butter exports have been blocked (NZPA, 2006). Absolutely, this problem was a political issue. European Union is the world’s largest dairy market. But with the protective...