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Murray Goulburn Co-operative and Woolworths Supply Denial Stakeholder Impact3

Murray Goulburn Co-operative and Woolworths Supply Denial Stakeholder Impact.

Murray Goulburn Co-operative and Woolworths Supply Denial Stakeholder Impact.

The Murray Goulburn Co-operative is among the largest milk processors in Australia. Hence, its business activities play a core role in the economy of the nation. Therefore, any given issue that affects the organization impacts the company’s stakeholders. A stakeholder relates to any individual, group of persons or institutions that have given desire and interest to an organization or are affected directly by the activities and running of the company. As such, the miss out on the Woolworths supply contract by Murray Goulburn (MG) company is expected to have an impact on the stakeholders of MG inclusive of the suppliers, customers, employees, competitors, government and the investors in some ways discussed below.

Suppliers

The denial of a supply contract by the Woolworths mainly affected the stakeholders within the vendor’s section. The act of denying MG supply contract to the Woolworths means that MG has no other option but to reduce the milk it gets from the farmers. The action will have an adverse impact on the farmers since it means their level of income reduces since they mainly depended on MG milk processing organization as its primary buyer.

Investors

The Murray Goulburn firm has many investors who normally hope to acquire high returns on their investment towards the company after the culmination of every financial year. Nevertheless, the denial of the contract denial by Woolworths affects the investment stakeholders negatively since the cancellation of the supply contract is expected to cost the Murray Goulburn (MG) nearly a hundred million dollars annually and a loss in revenue estimated at one hundred and eight million dollars (Neales and Neales, 2016).The situation means there will be low returns on investors’ investment.

Employees

Many of the Murray Goulburn company employees depend mainly on the organization as their source of income. Hence, the losses expected to be incurred by MG Company after the loss of the Woolworths supply contract could necessarily require the firm to consider laying off some workers to ensure they have a constant profit return. MG might also be forced to reduce the salaries of the employees. Both salary reduction and laying off of workers would affect the employees negatively.

Government

The Australian government as a stakeholder depends on the MG firm as its source of revenue through taxation. The miss out on the supply contract to Woolworths would ensure the state would be negatively affected since MG is to suffer losses close to about a hundred and eight million dollars (Heffernan, M 2016). The losses would mean that the Australian government will also have to incur a reduction of the revenue it acquired from MG in the form of taxes issued towards the firm.

Competitors

The competitors would be the greatest beneficiary of the supply mishap by MG, specifically the company which Woolworths picks to provide for its products. Ranging from products like cheese, cream, adult milk powder, and UHT. The chosen firm will get a source of income since it would have gained a buyer of its products.

Economic theories applied towards the MG and Woolworth experience

A market relates to an institution or group of buyers and sellers (Hooy and Goh, 2014). In this case, the customer used to be the Woolworths and the seller MG Company.

The law of demand

The law of demand states that the less the price, the increased the quantity demanded (Mc Taggart et.al, 2003). The law of demand can be exhibited in some ways within the MG and Woolworths through:

1. The substitution effect

The Woolworths firm acquires a supplier who might charge a reasonable price towards the supply of its dairy product. Therefore, Woolworths as a consumer would automatically look for a supplier with a better price. Hence, a demand of the milk product from the new supplier increases and is halted in the MG company.

Many factors that can alter the demand for a commodity such as the price levels of related goods and income (Cavusoglu, 2013). For the GM and Woolworths’ case, the most suitable factor would be the price standards of the relevant commodities by other suppliers. The price reduction will ensure a rise in quantity demanded by the other firm by Woolworths.

Other issues

Investment issues

The investors would no longer invest in the MG co-operative after the contract lost and farmers and workers may lose their source of livelihood.

Political issues

The farmers would have a difficult time after the MG supply contract denial by Woolworths. Therefore, the government through the prime minister came and provided the farmers with a $555 million loan to those mainly affected by the situation.

References

Cavusoglu, N. (2013). Macroeconomic Theory and Macroeconomic Pedagogy, by Guiseppe Fontana and Mark Setterfield. Eastern Economic Journal, 39(2), pp.258-260.

Heffernan, M. (2016). Cheesed off: Murray Goulburn takes $100m-a-year hit on Woolworths contract loss. [online] The Sydney Morning Herald. Available at: http://www.smh.com.au/business/retail/cheesed-off-murray-goulburn-takes-100mayear-hit-on-woolworths-contract-loss-20160729-gqgbn3.html [Accessed 7 Aug. 2016].

Hooy, C. and Goh, K. (2014). Market, Country and World Effects on Regional Equity Market Integration. Indonesian Capital Market Rev., 2(1).

Mc Taggart, D, Findlay, C,Parkin, M, 2013, Economics, 7th edn, Pearson Australia, Frenchs

Forest, NSW.

Neales, S. and Neales, S. (2016). MG’s $108m cheese deal sliced. [online] Theaustralian.com.au. Available at: http://www.theaustralian.com.au/business/companies/murray-goulburn-loses-108m-woolworths-cheese-deal-to-bega/news-story/7f756976598db8b37e32834c21b8ea93 [Accessed 7 Aug. 2016].