Question

Aarong Dairy’s use of different organizational structural forms to pursue its strategic goals is described in this case. Emphasis is placed on Aarong’s business model and how its structural forms play a key role in the business model.

Although Aarong Dairy neither owns cows nor an actual farm, it has successfully organized thousands of micro-scale dairy farmers to serve as a reliable supplier base for its milk needs. The key lesson of this case is about the significance of boundary-less structures to pursue certain firm strategies.

Read the case below and answer the questions that follow.

Founded in 1998, Bangladesh’s Aarong Dairy is a social enterprise that has employed boundary-less structural forms to implement its strategies of meeting consumer dairy needs and providing a selling platform for micro-scale milk producers.

In Bangladesh, the micro-scale dairy farmers had historically struggled to receive fair prices for the milk they produced. These farmers had cows that produced low quantities of milk. No systematic approach to administering and managing cow-feed existed. Notwithstanding the involvement of plenty of locals in the milk trade, there had been no permanent market. Rahman (2015) narrates that “at times … there was hardly any demand or the demand was too erratic to be profitable for them. Low quantities of milk produced by their cows also meant that milk production was an expensive process. Poor breeding, limited veterinary services and shortages in cow feed were some of the other challenges faced by dairy farmers.”

Aarong Dairy was founded in 1998 with an aim to provide a permanent market place for the thousands of micro-scale dairy farmers. As a result, Aarong Dairy is a dairy farm that neither owns cows, nor engages in actual milk production. For a dairy farm that does not own any cows and does not directly engage in milk production, “Aarong Dairy collects 102,559 liters milk daily and serves 50,000 farmers, 64 percent being women” (Rahman, 2015).

From Aarong Dairy the micro-scale dairy farmers receives training in para-veterinary services, cattle feed administration, and artificial insemination for improved breeds of cows that produce more milk. To provide access to a permanent and reliable market, Aarong Dairy bought the milk that the farmers produced. This arrangement allowed the micro-scale dairy farmers to have guaranteed payments based on their individual level and quality of milk production. The advantage for Aarong Dairy is that thousands of micro-scale dairy farmers serve as its dedicated milk production units, yet Aarong Dairy does not have to be responsible for the operations and overhead of these micro-scale dairy farmers. The permeable structure allows Aarong Dairy to operate as if it were fully vertically integrated.

At times, Aarong Dairy has extended loans to micro-scale dairy farmers to expand their milk production scale. Those are akin to contractually agreed upon partnerships between two businesses. Here, Aarong’s financial support helps the micro-scale farmer to expand the production scale and become a more reliable milk supplier for Aarong Dairy. Each of these partnerships are governed by a different kind of permeable structure where formal contracts help the parties involved to bridge some of the typical barriers to help each other for the greater collective good.

Aarong Dairy adds value to the milk production process precisely in areas where micro-scale dairy farmers are unable to do so. Aarong Dairy plays essential roles in milk preservation, pasteurization, quality control, logistics, and marketing. The micro-scale dairy farmers are not capable of fulfilling this requirement, and thus Aarong Dairy serves as the permanent market place for these thousands of micro-scale dairy farmers. According to Rahman (2015), “Aarong Dairy thus removed the major headaches for the farmers such as where to store to the milk and how to transport the milk. Aarong Dairy has gone on to set up 101 chilling plants….”

1. According to the story, for a dairy farm that neither owns any cows nor directly engages in milk production, how much milk does Aarong Dairy collect every day?

Multiple Choice

• Between 100,000 and 105,000 liters

• Between 95,000 and 100,000 liters

• Between 105,000 and 110,000 liters

• Between 110,000 and 115,000 liters

2. To ensure smooth functioning of its supply chain, Aarong has most likely utilized which form of boundaryless structure to organize the 50,000 dairy farmers?

Multiple Choice

• Vertical Integration

• Virtual

• Modular

• Barrier-free

3. Aarong Dairy extends loans to micro-scale dairy farmers to expand their milk production scale. Aarong’s financial support helps the micro-scale farmer to expand the production scale and become a more reliable milk supplier for Aarong Dairy. What kind of permeable structure is most likely used to manage these partnerships?

Multiple Choice

• Vertical Integration

• Barrier-free

• Modular

• Virtual

4. Which of the following is NOT one of the ways that Aarong Dairy adds value?

Multiple Choice

• Logistics and marketing

• Milk preservation

• Milk production

• Milk pasteurization

Answer 1

Answer of the Question 1 - (C) Between 100,000 and 105,000 liters

Explanation - As already given in the case, Aarong Dairy was founded in 1998 with an aim to provide a permanent market place for the thousands of dairy farmers. Aarong Dairy is a dairy farm that neither have it's owns cows, nor directly engages in actual milk production. For a dairy farm that does not have any own cows and does not directly produce the milk by its own, “Aarong Dairy daily collects 102,559 liters milk and serves 50,000 farmers.On which 64 percent is women”.

Answer of the Question 2 - (C) Modular

Explanation - As given in the case,   Aarong’s financial support help farmers to expand there production and become a more reliable milk supplier for Aarong Dairy. Each of these partnerships is governed by the different kind of permeable structures. where formal contracts help the parties/farmers involved to bridge some of the typical barriers to help each other for the greater collective good.which is very helpful for the 50,000 farmers to done there function smoothly.

Answer of the Question 3 - (C) Barrier-free

Explanation - As given in the case, the permeable structure allows Aarong Dairy to operate as it were a fully vertically integrated.Aarong Dairy has extended loans to micro-scale dairy farmers to expand their milk production scale. Those are the contractually agreed upon partnerships between two businesses. Here, Aarong’s financial support helps the micro-scale farmer to expand there production scale and become a more reliable milk supplier for Aarong Dairy company.

Answer of the Question 4 - (C) Milk production

Explanation - As given in the case, Aarong Dairy adds value to the milk production process precisely in areas where micro-scale dairy farmers are unable to do so. Aarong Dairy plays a important role in milk preservation, logistics and marketing, quality control of the milk and pasteurization.