Firm Specific and Location Bound Advantages for Multinational Operations
Discuss about the International Expansion Analysis of Graincorp.
The multinational organizations which operate in different locations of the world need to face some extra costs as compared to the local competitors. The additional costs which are related to the operations of an organization in different countries mainly include, cultural, institutional and the language based differences. The lack of knowledge of the multinational organizations based on the market is an important factor that affects the operations in an adverse manner. The success of a foreign firm in a different country is thereby based on some specific advantages which can be gained which can help in overcoming the costs based on operations in a foreign country (Bamiatzi et al., 2016).
The firms can earn higher revenues for similar costs or they can also have lower costs for same revenues. The advantages that are gained by the organizations are mainly firm specific in nature. These advantages of the organizations can also be termed as the ownership advantages. The organizations which have a monopoly in their home country are able to use these in the multinational operations in order to gain higher revenues. The advantages that are thereby created by the organizations can be termed as the location bound types which can help the organization to gain a profitable position in the foreign countries (Cano-Kollmann et al., 2016). The organizations are thereby able to carry these advantages to the foreign countries in which they wish to operate. The country specific advantages of the firms can be used by them in specific countries mainly include, technology economies of scale and scope of the organization. These advantages are totally location bound and non-transferrable in nature as they are used by the organizations in some specific areas (Ciravegna, Lopez and Kundu 2014).
The firm specific advantages are those which are based on the levels of productivity of the organizations and the assets that have been gained by them as well. The imitation of these advantages by the competitors proves to be tough for the competitors. This helps in protecting the firms from external competition for a certain amount of time. The firm specific advantages are therefore highly intangible in nature and are can be used by the firms in different countries as well. These advantages are mobile of transferrable in nature and can provide high levels of advantage to the firms in an effective manner (Contractor, Yang and Gaur 2016).
Introduction and Business Operations of Grain Corp Limited
Grain Corp Limited is an Australian organization which is listed in Stock Exchange of the country. The core business operations of the organization are mainly based on the revival and further storage of grain. The company also provides logistics based facilities and promotes the commodities. The CEO of the company currently is Mark Palmquist and Chairman is Don Taylor. The organization was mainly founded as the New South Wales public sector agency. Grain Corp was established in the year 1917 in order to transport grain from the local points of collection to the different grain-producing regions of New South Wales. The organization was later known with the name of Grain Handling Authority (Graincorp.com.au. 2018). The operations of Grain Corp have extended in a subsequent manner to the other Australian started with the merger and amalgamations with other grain handling based operations. Grain Corp operates a network of rail-linked storages which is spread across Brisbane, Port Kemble, Newcastle, Portland, Victoria and Geelong (Graincorp.com.au. 2018). The company further expanded its operations to North America in the year 2009 with the successful purchase of an organization named United Malt Holdings. The organization extended its reach to Europe with the purchase of GermanMalt GmbH and Co. The fleet of locomotive which are operated by Grain Corp is more than 18 which includes 48 vehicles each. The fortunes of the company are however based on the levels of harvest in different seasons. The production of malt is thereby based on the ways by which the value of infrastructure can be unlocked for the purpose of extending operations in different countries (Graincorp.com.au. 2018).
According to, Gugler (2017), Grain Corp has been able to gain many advantages during its successful operations in the home country Australia. The organization has been successful in creating its position in the industry with the help of its assets and effective infrastructure that has been developed. The company has extended its operations to many other countries of the world by purchasing the local organizations which operate in these areas. Grain Corp has further taken the decision to the merge its operations of marketing of grains with the freight and storage based business in an effective manner. This step has been taken by the company in order to simplify its operations and the structure of the management as well.
Hong, Wang and Kafouros (2015) suggested that, the feedback that has been provided to the organization by the farmers and the buyers have been a major reason behind updating its operations. The Managing Director of the organization also played an important role in the ways by which Grain Corp has been able to create a profitable position in the industry. The customer base of the organization has been an important advantage that has been gained by Grain Corp in an effective manner. Grain Corp has been able to create a monopoly in the market with the help of its products and logistics. The company has created many opportunities in the market and has further maximised the value of grain as well.
Grain Corp Limited’s Advantages and Monopoly in Australian Market
The grain storage based activities that have been performed by the organization is considered to be an important part of the successful operations of Grain Corp in the industry. The advantages that have been gained by the company in this case are transferrable in nature as the company can carry these advantages to the different area in which it wishes to operate. The strategies that have been formed by the organization are also important for the successful operations in the different foreign locations. The experience that has been provided to the customers by the organization is an important factor that has been able to affect the ways by which the organization operates in different areas. The storage based facilities that have been created by the company is important for creating opportunities in the industry (Hoskisson et al., 2018).
The organization has recently taken a decision to combine the operations of different departments with the aim of increasing the productivity and also further simplifying the operations of Grain Corp in an effective manner. The strategic approach of the company is an important part of the advantages that have been gained by Grain Corp in the industry. The changes that have been made in the operations of the organization are able to provide more firm specific advantages to Grain Corp so that it is capable to operate in the foreign countries. The process of streamlining the grain storage, trading the grains and further processing the logistics of the company can also provide greater advantages to the company for the purpose of operating in global locations (Kim, Hoskisson and Lee 2015).
The managerial decisions that are taken based on the advantages that have been gained by the organizations is related to the expansion of the operations. The managers need to take specific decisions related to the ways by which the company can use the advantages in order to operate in foreign countries in a profitable manner. The transferrable advantages are gained by the organizations which are specific to them and their operations. Grain Corp has also been successful in creating different advantages that are based on the ways by which the company can operate in the other countries. The managers need to take the decisions based on the usage levels of advantages that have been created by Grain Corp (Kirca, Fernandez and Kundu 2016).
For example, the collaborative operating processes of the company can be successfully used in its North American operations or any other country where it has plans of expanding. The company will be successful in creating a competitive advantage over the others in the market with the help of these firm specific advantages. The leading position which has been established by Grain Corp in Australia and help the organization to operate in the other countries with an advantage over the other companies. The international development of Grain Corp is thereby based on the ways by which the organization is able to expand its operations by using the advantages that are specific in nature. The international grain industry has also created many opportunities for the organizations which can be used by Grain Corp to operate in the foreign areas.
Decisions for International Expansion based on Firm Specific Advantages
As discussed by, Lebedev et al. (2015), the country specific advantages of Grain Corp are those which are based on the advantages that are provided to the company by the country in which it operates. The advantages that are provided to Grain Corp by the Australian government are quite high. The company is able to operate in a profitable manner with the help of the advantages that are provided by the government. The costs based on the supply chain related activities of the company also had an effect on the production based activities of Grain Corp. The company has acquired the position of the largest gran handler in Australia.
As argued by, Lee, Paik and Uygur (2016), the topmost position in the industry is also an advantage that is enjoyed by the company in Australia. The growing grain based sector of the country has been able to create an important advantage of Grain Corp in Australia. The grain industry of the country is emerging in nature and is able to provide important advantages to the organization in an effective manner. The competitive forces that are present in the country have affected the supply chain of the organization as well. Regulations that are developed by the government with respect to the Australian grain industry have been able to bring changes in the marketing activities of the organizations which operate in the country.
The grains sector of Australia has gained extensive importance in the recent times and is able to provide opportunities to the organizations. Rates of grain production in the country have increased highly and have affected the organizations in a positive manner. The position that has been developed by the industry is strong enough to increase the profitability of the organization. The future operations of Grain Corp in the country is also totally based on the ways by which the company is able to operate in the market (Magelssen and Feinberg 2014).
The decisions that are made by the managers based on the new locations of operations in different countries are affected by the advantages that are provided to the organization by the country of operations. The organization thereby needs to take the decisions of expansion based on the advantages that can be provided by the new country. The costs of operations of Grain Corp in the different countries can be affected by the expansion in new market areas. The organization can also increase the profitability and revenues with the help of specific advantages which are provided by the government. Grain Corp is dependent on the government for many investments that are made in different sectors (Tan 2017).
Country Specific Advantages of Grain Corp Limited in Australia
The company thereby needs to creat6e a different source investment in these specific areas in order to operate in a profitable manner. Grain Corp is able to operate in an effective manner if the managers take appropriate decisions based on gaining investments from the government based bodies. The importance of grains industry in the world has increased in the recent times and this advantage can be used by the managers to convince the government so that they provide investments in the business operations (Wan 2016). Grain Corp will then be able to establish its operations in different areas of the world in an effective manner with the help of the subsidies that are provided by governments of different countries. These advantages are non-transferrable in nature and the management has to take a decision based on the ways by which they can create the advantages in the other countries (Lee, Paik and Uygur 2016).
Conclusions and recommendations
The report can be concluded by stating that the multinational organizations have some transferrable and some non-transferrable advantages which can be used in the foreign areas of operations. The companies can use some of the advantages and some of the, need to be created by the managers and the organizational operations. The company which has been analysed in this report is Grain Corp and the ways by which the organization operates in the industry. The organization has been able to gain many advantages in the industry with the help of its position in the market and the successful operations. The firm specific advantages can thereby be used by the organization in the other countries of operations. The company can use the transferrable advantages in different areas in order to gain a competitive advantage in the market. The non-transferrable advantages on the other hand cannot be used by Grain Corp in other areas of its operations. The company can gain its position in the market with the help of support that can be provided by the government of different countries. The investments need to be gained by the managers in order to create a position of the organization in new market areas. The managers play an important in the ways by which the company can operate in a profitable manner in different areas of the world. Grain Corp will thereby be able to set up its business in an effective position in the industry with the help of appropriate usage of different advantages that have been gained by the organization.
- Analysing the external environment of the operations of the organization where it is planning to expand.
- Taking decisions based on the appropriate advantages that can be used in other areas of operations of Grain Corp.
- Thorough analysis of the advantages that have been created by the firm in the industry so that it can be used in an effective manner.
- Distinguishing properly between the firm specific advantages and the country specific advantages of Grain Corp in the industry.
- Making proper use of the advantages in different areas of operations of the company.
- Grain needs to try to increase the advantages that have already been gained in the market. This will be helpful for the organization to provide tough competition to others in the gran industry.
- The managers need to create competitive advantage of Grain Corp in the domestic market which can be used effectively in the other areas. The international operations will be highly affected by the ways by which the company operates in the home country. The analysis of the advantages is important before taking a decision based on international expansion.
References
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