External Environment Analysis
The aim of the report is to provide an insight into strategic management concerning an agri food business in Australia known as The Australian Agricultural Company (AACo) (aaco.com.au 2018). It represents an Australian company that owns as well as operates farms and feedlots that covers close to 7 million hectares of the land in the Northern Territory and the Queensland and only 1 percent of the land mass in Australia. As per the records of 2008, the company had close to five hundred staffs members, operated two feedlots and twenty-four cattle station that comprised of 565,000 beef cattle (aaco.com.au 2018). The company commenced in the year 1824 through the Act of British Parliament and possessed the right of selecting close to 1,000,000 acres in the New South Wales with the purpose of the agricultural development. It is one of the oldest operating companies of Australia and headquartered in Brisbane with a listing in the Australian Stock Exchange. The report commences with a discussion of the agribusiness sector. The report focuses on identifying the international opportunities for the chosen agribusiness along with suitable international strategies. The report also puts forward a discussion on the most inappropriate and appropriate and mode of entry of the agribusiness into the international market. There are also recommendations on the futuristic strategic direction in chosen international market.
The Australian Agricultural Company (AACo) represents a public company holding a rank of 741 amongst the topmost 2000 companies across Australia. The major revenue of the company is generated through meat processing within the Australian industry. As per the reports of 2018, the company generated revenue of $ 545, 616,000 that included sales and the other revenue (ibisworld.com.au 2018). The Australian Agricultural Company (AACo) not only produces but also sells beef. The company also operates cattle stations, feedlots and beef processing facilities and farms across Western Australia, Queensland, Northern Territory and South Wales.
The external environment analysis is determined by political, economic, social, technological, environmental and legal factors.
Political: Australia is a not only a liberal but also a politically stable democracy. This makes the country ideal for investing in the agricultural sector (Zajda 2013). In fact, the growing and sophisticated market provides a suitable market for the agribusiness sector.
Economic: Australia’s economic stability renders higher growth rate. Thus, the economy of Australia has stable interest rate, lower risk, strong growth of GDP, higher levels of employment, lower rate of inflation and rising exchange rate (Rodrik 2014). These factors help in determining a suitable environment for agribusiness to thrive.
Internal Analysis
Social: In Australia, the government contributes a substantial amount of GDP on education (Koenig 2017) which has led to increasing figures in higher education thereby resulting in increased employment opportunities. Such a positive social structure acted as a boost for the agribusiness company like The Australian Agricultural Company (AACo)
Technological: The introduction of new technologies have led to not only the creation of new products and processes but also led to the reduction in cost, innovation and quality improvement (Hunt et al., 2014). This proved beneficial for promoting the growth of agribusiness.
Environmental: Australia not only went through a scarcity of water resources but also faced problems related to its constant availability (Jie, Parton and Cox 2013). Besides, rising salinity in water and difficulty faced in clearance of land for farming posed challenges to growth of Australian agribusiness.
Legal: The implementation of various new laws with its new procedures and systems has an impact on the organizational functions. This might sometimes pose challenges to the agribusiness and might increase their cost.
Internal Analysis
Resources: The Australian Agricultural Company has resources in the form of a grant of million acres along with charter from England for cultivating and improving the vast areas of Australia (aaco.com.au 2018). AACo is known for the family of its beef brand, its resources of seven million hectares of the Australian pastures and the commitment and passion it has towards the production of beef.
Capabilities: AACo operates and owns one of the biggest cattle herds of Australia with close to 500,000 heads extended across the properties of Northern Territory and Queensland (aaco.com.au 2018). The company specializes in Wagnu beef and grain fed beef production. The innovative team of AACo works closely with the units of bull breeding for running excellent breeding facilities. The company uses number of tools for ensuring the evaluation with highest accuracy under the widespread production systems.
Core Competencies: AACo captures the performance of the feedlot, paddock and the carcass and link them directly to the decisions of the breeding programs (aaco.com.au 2018). Technologies employed includes performance evaluation and recording, feed testing efficiency, Total Genetic Resource Management (TGRM), genomics and the walk over weighing technologies.
Competitive Advantage: AACo runs one of the largest herds of the Wagyu Cattle thereby producing highest grade of the Wagyu beef exported across the world.
The top five destinations for export of Australian agrifood include China (AUS$ 1730m), Indonesia (AU$1070), Japan (AUS $ 671), Vietnam (AU$ 300 m) and South Korea (AUS$497m). During the period between 1980 and 2014, the overall value of the international agricultural trade raised by close to 700 percent, triple the figures of 2002. This is driven by the megatrends transforming the world that results in the structural change to the societies, economies and business. Therefore, the international growth opportunities of the Agribusiness are as follows (agric.wa.gov.au 2016):
- Ensures Opportunity of Capitalizing and Earning Huge Returns: The rising global demand for the agrifood products puts forward a major market driven opportunity of growth for Australia through the exports that would also help in doubling the real value of the sector by the year 2025. Stakeholders belonging to every sphere of the agrifood value chain along with the international and the domestic investors puts forward a key opportunity for capitalizing on the demand and thereby earning improved returns.
- Leverages the Competitive Strengths of the State: Australia has a well positioning in terms of the modern, trusted and higher quality food. The country produces its food in well managed environment. The demand for food has offered the agrifood sector and companies like AACo in finding opportunities in inbound and domestic environment. This helps in generating long term return and growth thereby leveraging the competitive strength of the state.
- Identification of Higher Potential Growth Markets: Research and analysis conducted by the Australian government have found that close to twenty four countries across Middle East, South East Asia and South Asia put forward higher potential markets for the investors and the business looking for growth through the exports. Besides, recently there have been major investments in the sector through the further liberalization of the target market for exports. However, the key international trade reforms have the potential of increasing the competitiveness of the state in the major markets thereby spurring investment and growth opportunities across agribusiness provided the negotiation of the product protocols.
- Other Opportunities
International Opportunities for the Agribusiness
The range of other opportunities for the agrifood related sector includes (Lamprinopoulou et al. 2014):
- Technical assistance to the participants of the export market or the customers in the export market leads to the enhancement of quality assurance and certification standards.
- Latest technology along with the sustainable business and industry models helps in driving productivity and profitability.
- Allows the adoption of the renewed energy and the changing technologies for supporting the regional storage and generation
- It leads to further investment in the critical infrastructure and the efficiencies of the supply chain.
- It results in facilities of venture capital funds that focus on the technology and are in search for the sector participants applying newer technology in the agrifood production and thereby meeting the preferences of the changing consumers.
- It involves adoption of the innovative practices including drones and automated farming equipment. This will help in driving greater optimization of value chain and the investment returns.
The international strategies for the Chosen Agribusiness include (dpi.nsw.gov.au 2018):
- By Prioritizing the International Sectors and Markets: This includes identification of the challenges and opportunities of the export market and recommend steps for supporting the growth of the relevant sectors. The strategy also involves development of the industry profiles for supporting the sector and the market analysis. It also secures funding for the development of the Australian agribusiness sector for building export readiness and capability. Besides, the strategy also motivates AACo in working with the industry for exporting the research and development capability in water treatment, biodiversity response and monitoring, grazing management, forestry, soil conservation, horticulture, education and aquaculture.
- Ensuring Growth the Agribusiness Exports: This facilitates access to the exporters in entering newer and the existing markets. It also involves identification of the barriers of trade and prioritising actions for reducing any barriers. The strategy also involves enhancing the food safety systems for supporting the efforts for export marketing. Further, it also leads to improvement in the airfreight for supporting the access of the fresh products to the key markets. Besides, the strategy also supports supply chain innovations and advocates access to Sydney airport for providing effective access to the export markets for the future growth.
- Attracting Investment in Agribusiness: This involves the facilitation of the foreign investment for providing valuable capital source for not only ensuring innovation and growth in the sector but also ensure successful integration into the global market. The strategy also involves working across the agencies for identification of the opportunities for the better support investment. It also involves participation in the investor events and support the outbound trade delegations for promoting the AACo in the priority markets. Besides, it also involves collaboration with the investment promotion agencies for supporting the foreign direct investment in Australia.
The common modes of entry includes exporting, partnering, licensing, turnkey projects are some of the common modes of entry (Fernández?Olmos and Díez?Vial 2014). However, the most appropriate mode of entry for the Australian agribusiness would be exporting. This is because export helps in increasing the sales potential of AACo by increasing the pie in the international market. Exports also contributes to enhanced profits since the standard order from the international customers are comparatively larger than the domestic counterparts. Exports also reduce the risk and ensure a balanced growth for the agrifood related business of Australia. This mode of entry also helps the agribusiness sector in lower the production cost as it helps in boosts idle production capacity back to work. It is also an excellent means through which businesses can enjoy economies of scale with the products that have an increased global scope and wider acceptance across the world. In other words, it implies that the products can be used across the world without undergoing much adaptation. This mode of entry into the international market also minimizes the impact of the seasonal fluctuations on the sales.
Licensing refers to an inappropriate mode of entry for the agribusiness sector of Australia as it allows the foreign firms to manufacture the product of the proprietor for a particular term in a specific market (Laufs and Schwens 2014). This mode of entry is not suitable for the agribusiness in Australia since it has results in lower income compared to other modes of entry. This mode of entry might also result in income loss due to the lack of control of licensee manufacturer over the marketing practices and operations thereby leading to a loss of the quality. In fact, in licensing there always remains a risk of ruining the reputation and trademark of the original company by unskilled partner. Besides, the parent company can face competition from for reign partner especially when they choose the same place for selling the product.
The recommendations are as follows:
- The future strategic direction of AACo would be building of accurate frameworks for the maintenance of the profitability, innovation and productivity that will help in determining the competitiveness of the agribusiness sector in instances of declining terms of trade.
- Future strategic direction involves reviewing the business operation and regulatory environment for enhancing the focus on business development. Besides, it is recommended for agribusiness in undertaking review of instances of any sort of red tape and duplication. For example, this included resources like water, labor, labelling, logistics, ingredients and the market access of the products.
- To determine a future strategic direction, the agribusiness should be able to create a support through the protection and enhancement of the social licence of the industry that aids it in connecting with the community. These tools also encourage the farmer’s participation.
Conclusion
On a concluding note, it can be said that AAco is an agrifood related business that mastered the art of the Australian Beef since the year 1824. The company represents an intersection of technique and passion thereby delivering cultivated products across the world. Through the report, one can find a detailed description of the company. The international opportunities and the different international strategies also find a mention in the report. For AACo, how export mode of entry proves appropriate while licensing poses inappropriate also finds a mention in the report. The report also discusses about the future strategic direction.
References:
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