Yak Milk: Niche or Nightmare?

YAK MILK: NICHE OR NIGHTMARE?

CASE STUDY ANALYSYS BY JOHN BERNING FOR MBA 565

Overview:

Dave Peters is the strategic sourcing director for ABCI, a subsidiary of Land O' Lakes, the dairy manufacturer from the United States. In the past 20 years, Mr. Peters has worked with other lesser developed countries around the world to help create international markets for locally grown agricultural products. ABCI had great success implementing agricultural programs in several Central European nations that helped improve the living standards among the impoverished farm communities in those nations. The government of Tibet was now reaching out to ABCI to see if a market could be created for yak milk and dairy products with the intention of raising the living standards of one of the poorest regions under the Chinese government, the Quinghai-Tibet Plateau.

Key issues:

1) The remoteness and harsh weather of the Quinghai-Tibet Plateau limit the amount of yak products that can be manufactured and transported out of the region.

2) The cultures of the Tibetan farmers and their use of the yak along with the wants of the Chinese consumers clash with the idea of creating a dairy-based business in Tibet.

Alternatives for Issue #1

1) Improve the infrastructures, facilities, and roadways in the Quinghai-Tibet Plateau region.

2) Attempt to increase the amount of yak products during the spring and summer months.

Analysis of alternatives for Issue #1

1) The Chinese government is taking the steps to improve infrastructure in this region. Electricity was introduced into the Hongyuan region in 2002 and many of the roads in the area were getting paved. A tunnel is currently under-construction to allow year-round transportation in addition to reducing the travel time via car or truck by two hours. An airport was also planned to eliminate the harrowing experience of driving a long distance into the region. This is all part of a program by the Chinese government to industrialize the yak to provide more food to China as a whole and help improve the economic standards of the Tibet region while keeping the region ecologically pure. However, two factors play a great part in the implementation of infrastructure in this region: weather and altitude. Winters are so harsh in this part of the world that virtually every outdoor function grinds to a halt for six months. There is a question if the cold weather would adverse affect the roadways. High altitude not only affects people, but the lack of oxygen affects the operation of machinery as well. One type of transportation that wasn't discussed in this case study was the extensive rail systems within China.

2) The Quinghai-Tibet plateau is home to 13 million yaks and is considered the major pastoral region in China. It was projected that the two million yak located in the Hongyuan region would produce 72,000 tons of yak milk per year.