Sample Solution

Political factor is all about how and to what extend a government intervenes in the economy or a particular industry and how it affects business profitability (B2U – Business-to-you.com, 2019). In this case, in order to stay competitive A2 Milk need to consider factors such as government policies and contract law. Government policies will affect the supply of milk. If government wants to decrease the supply of milk, farmers needs to decrease the extraction of milk. This will affect the profitability of the business. Another factor would be contract law. Contract law is enforced by the government to ensure that companies know what they should do and what they should not. For example, some countries will prohibit milk that are not natural or some criteria needs to be fulfilled. This will discourage business and affect their profitability. However, to increase the profitability of business, China-Australia Free Trade Agreement (ChAFTA) was introduced in December 2015, aim to support economic growth, job creation and higher living standards. So this creates an opportunity for the company to grow and prosper (Austrade.gov.au, 2019).

Economic

Economic factor are determinants of a certain economy’s performance. This factor will have impact on how profitable the company is due to its purchasing power on consumers and demand/supply in the economy as well as how company price their product and services (B2U – Business-to-you.com, 2019). The Australia milk industry economic can be affect by some of the following factors such as growth rate, purchasing power of consumers and demand for milk. There are research that shows the demand for A2 Milk is gaining traction among consumers due to the health benefits (A2 Milk Market: Global Industry Trends, 2019). In addition, since consumers are adjusting their lifestyle, company such as Fonterra Co-operative Group Limited formed partnership with A2 Milk to further provide growth opp