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Extent of and Tactics for the Globalization of
the US Dairy Industry Managers Attitudes and
Responses
José E. Gobbée, M.S. graduate James M. Hagen,
assistant professor Andrew M. Novakovic, professor
Cornell University
Cornell Program on Dairy Markets and Policy -
Food Industry Management Program -
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Plan for presentation

• Global dairy background
• Inquiry on globalization attitudes
• Survey method
• Findings on
• What
• Why
• How
• Discussion points

Cornell Program on Dairy Markets and Policy -
Food Industry Management Program - Cornell
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Cornell Program on Dairy Markets and Policy -
Food Industry Management Program -
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Increasing fall of trade barriers and export
subsidies Increasing opportunities for trade?
Share of total world dairy exports in value 1996
In 1996 only 2 of total volume of dairy
production was exported and only 1 of the total
value of industry shipments was exported (USITC,
1998)
Cornell Program on Dairy Markets and Policy -
Food Industry Management Program - Cornell
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Cornell Program on Dairy Markets and Policy -
Food Industry Management Program -
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Food industries are globalizing. What will
happen to the dairy industry?
Cornell Program on Dairy Markets and Policy -
Food Industry Management Program - Cornell
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Food Industry Management Program -
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• Inquiry -- Three key issues
• WHAT?. Do managers believe that the
  industry needs to enter foreign markets to remain
  competitive? WHY?
• Application of international expansion theories
  in the dairy industry to better understand HOW?
  US dairy firms might evolve into foreign
  markets

Cornell Program on Dairy Markets and Policy -
Food Industry Management Program - Cornell
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Who is Doing What?
131 firms identified who had or seemed to have
dairy international activities
25 trading companies
106 manufacturers
25 Cooperatives
75 Not Cooperatives
Cornell Program on Dairy Markets and Policy -
Food Industry Management Program - Cornell
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Cornell Program on Dairy Markets and Policy -
Food Industry Management Program -
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Survey Method
106 manufacturers 24 foreign subsidiaries
Dillman (1975) Methodology
_
Sample of 200 firms
82 US dairy firms presumably involved in foreign
markets

118 US largest dairy firms ( measured in total
dairy sales) presumably not involved in foreign
markets (Accounted for almost 75 of US total
sales)
47 Response rate 93 responses
Cornell Program on Dairy Markets and Policy -
Food Industry Management Program - Cornell
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Food Industry Management Program -
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Characteristics of the 93 respondents
Cornell Program on Dairy Markets and Policy -
Food Industry Management Program - Cornell
University
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Characteristics of the 93 respondents
Which describes your company ownership?
Does your company have foreign activities?
N92
N93
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Food Industry Management Program - Cornell
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Findings
Do managers believe that the industry needs to
enter foreign markets to remain competitive?
Not interested in starting or expanding foreign
activities
WHAT?
7
Interested in starting or expanding foreign
activities
(61)
93
N93
N66
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WHY? Industry goes into foreign markets
because.

• Decrease of trade barriers (74).
• More market oriented US dairy policy (59).
• Consolidation trend in the US will increase
  foreign involvement (47).

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WHY? are the firms interested in starting or
increasing their foreign activities?
N 61 Firms
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WHY? are the firms interested in starting or
increasing their foreign activities?
N 61 Firms
Positive correlation with cheese firms
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WHY? are the firms interested in starting or
increasing their foreign activities?
N 61 Firms
Positive correlation with cheese firms
Negative correlation with fluid milk firms
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WHY? are the firms interested in starting or
increasing their foreign activities?
N 61 Firms
Positive correlation with ingredient firms
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WHY? are the firms interested in starting or
increasing their foreign activities?
N 61 Firms
Positive correlation with largest firms
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WHY? are the firms interested in starting or
increasing their foreign activities?
N 61 Firms
Positive correlation with Fluid milk firms
Positive correlation with Ice cream firms
Positive correlation with Ingredients firms
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• Conclusions
• Managers expect increasing deregulation of dairy
  markets and fall of trade barriers, resulting in
  greater need to enter foreign dairy markets.
• When managers think about the industry they
  think it should get involved to take advantage of
  opportunities, but when they talk about their
  firms they mostly go into foreign markets
  following customers, unsolicited orders, or as a
  response to competitive environment.

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Which kind of companies are interested in foreign
markets?

• Significant negative correlation with fluid milk
  firms
• No significant correlation with cooperative or
  non-cooperative
• No significant correlation with size

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Modes of future foreign activities under
consideration
HOW
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Stages model approach to the US dairy industry
Firms go into further stages of commitments in
foreign markets as they increase their
international knowledge
Indirect exports
Starting
Direct Exports
Expanding
Strategic alliances
Cornell Program on Dairy Markets and Policy -
Food Industry Management Program - Cornell
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Food Industry Management Program -
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Stages model approach to the US dairy industry
Firms go into further stages of commitments in
foreign markets as they increase their
international knowledge
Future foreign activities
Current activity
Cornell Program on Dairy Markets and Policy -
Food Industry Management Program - Cornell
University
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Food Industry Management Program -
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The role of Strategic Alliances in the US dairy
industry international expansion
Firms without international experiential
knowledge and networks may acquire both of them
by partnering with firms that already have them
40
International retailers
Firms willing to start Strategic Alliances with
International competitors
Firms that need knowledge
34
US non-dairy international firms
27
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Food Industry Management Program - Cornell
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ISSUES RAISED

• Expectations differ for industry versus for
  individual firms.

• Motivators for beginning or expanding foreign
  operations
• Fluid milk and ice cream slow domestic growth
• Cheese follow the customer escape domestic
  competition
• Ingredients freer trade

• Firms specializing in fluid milk are least
  likely to begin or expand foreign operations.

• Firms progress from indirect to direct export,
  but expectations of further progression is
  contrary to Stages Model (though reliant on
  strategic alliances to acquire international
  knowledge and networks).

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Food Industry Management Program - Cornell
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POLICY IMPLICATIONS

• Reasons for different strategies to participate
  in foreign markets may be obvious enough to
  industry but not so obvious to policy makers
• US policies to assist foreign entry will be more
  productive if conscious of alternatives to direct
  exporting and the rationale of different dairy
  food sectors and firms.

27
Cornell Program on Dairy Markets and Policy -
Food Industry Management Program - Cornell
University
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Cornell Program on Dairy Markets and Policy -
Food Industry Management Program -