When the management of an organisation plans expansion and growth they have to keep in mind a number of aspects that would impact this decision. The strategies that a company undertakes depend upon a number of aspects which has to be analyzed in order to understand the potential of the market and the mode of entry that would mean fruitful to the company. In this report the focus would be on a business that is operating in the agriculture industry for this case the company has chosen Woolworths as the area of focus. This assignment includes a discussion of the agriculture industry in Australia and an identification of the area of expansion for the business. Along with this it will also include the strategies that can be used by the company to undertake the opportunities of expansion.
Woolworth’s group is a conglomerate that operates in Australia and New Zealand. Over the years of operation the company has gained significant goodwill in the industry. Since 2009, the company has been associated with the agriculture industry. The goal of the company is to serve the customers with best possible option, in order to achieve this goal the company has a simple strategy which the management calls it as the Big W (Woolworthsgroup.com.au 2018). There are five aspects to this develop the team as a single group, keep refreshing the stores, update and develop the products and services, invest in the development of cohesive brands and reduction of cost in order as well improve the process (Woolworthsgroup.com.au 2018).
For any country food and agriculture industry holds a significant place not only based on the economic support that the country gets from this industry but also the need for food for the general public that is necessary. Agriculture occupies almost half the land mass of the Island country and contributes around 2 percent of the economic activity as well (Ausbanking.org.au 2016). In 2015 the output of the industry amounted to approximately $78 billion. As of June 2015, around 179,549 businesses operate in the agriculture industry specifically, broader agriculture, forestry and fishing. Woolworths play an important role in the Australian food industry (Ausbanking.org.au 2016). Focusing on the industry, Australia has been the key exporter of dairy, cattle, sheep and wheat (Oecd.org 2014). The government of Australia encourages research and consulting in order to contribute towards the challenges that the world is facing in this context (Austrade.gov.au 2013). The state and federal government of Australia is responsible for funding and carrying out the research and development functions, there are a number of institutions and private organisations, including numerous cooperative research centers (CRCs) , which are responsible for the research that take place in the sector. Some of the areas of focus are the sustainable agriculture, livestock, fisheries and crops, natural resource management (Austrade.gov.au 2013).
Woolworths operates in the agribusiness in the Australian as well as in the New Zealand market. The company runs the largest chain of supermarkets in Australia and ensures that there is ethical sourcing in the supply chain. The company boosts that the 96 percent of the fruits and vegetables are Australian grown and 100 percent meat are sourced from Australia (Ausbanking.org.au 2016).
Woolworths is a company that has the resource and capability to expand the business in the international market, the revenue of the organisation is $56,726M in the financial year 2017 (Woolworthsgroup.com.au 2018). And thus it can be said that the company can invest in the expansion strategy. The company has been focusing on the Canadian Market to expand the business. There are a number of reasons why the company has taken this decision of expansion in Canada (Woolworthsgroup.com.au 2018).
Political: The country has a stable political scenario and the current government is focused on improving the trade and commerce in the economy. The government is led by the Liberal Party and the prime minister of the country is Justin Trudeau who has taken the responsibility in 2015. He is focused on providing the people with a better standard of living and better opportunities in life. He has focused on the middle class population development as an agenda to improve the situation. Canada and Australia has a trade agreement which makes import and export of goods easy (Homeaffairs.gov.au 2018). These agreements have the regulations for the trade relations of the business. The countries also share a peaceful relation in terms of trade and thus it will be easier for Woolworths to invest in Canada.
Economic: The GDP of the country is around 1,640.39 (billions USD) for the year 2017, and has observed a growth of 3 percent (En.portal.santandertrade.com 2018) . The economy of Canada is based on the exports and in the recent years the hike in the oil prices and other raw materials has reduced the growth rate of the economy. However, the country regained stability in the last financial year (En.portal.santandertrade.com 2018). The debt to GDP ratio of Canada is among the lowest of the developed countries and in 2017 the year-on-year inflation rate reached 1.7%, slightly below the Bank of Canada’s 2% target (En.portal.santandertrade.com 2018). The food and agricultural industry in the country as well as the food processing industry has a significant contribution towards the economy in terms of revenue as well as employment generation. This industry is estimated to contribute to 8% of the national wealth and employee around 2 million people. Canada is one of the largest exporters of agricultural products in the world – particularly of wheat – and produces 10% of the world’s GMO harvests. Fishing is another important sector (En.portal.santandertrade.com 2018). Therefore it can be said that the economic condition of the country is favorable for the expansion. The company will be able to establish the stores in the country targeting the middle class population which will also correspond with the political agenda that is discussed before (En.portal.santandertrade.com 2018).
Social: As developed economies the standard of living among the people are high, there are a number of supermarkets that are relevant in the industry. The people are focused on improving their livelihood and opportunities in the market. The society is inclusive and the government supports the people by providing with infrastructural support the needs and requirements of the people. There is significant contribution of culture and heritage on the society of the country (Shabanova et al. 2015).
Technology: The people and the government have an acceptance towards advanced technology, social media and the digital platform is widely used in the daily works of life. The government has also digitalized most of the proceedings so that it is both easier for the people as well as the documentation of any government projects (Gupta 2013).
In order to analyze the competition in the market Porter’s five force model is used as follows:
Threat of new entry: The industry in which the company operates requires a large number of capital investments which is not also feasible for a new company to invest and thus it can be said that the threat of a new entry is low (Dobbs 2014).
Threat of substitute: Considering the advancement of technology and communication, there are a number of ways in which consumers can reach out to agricultural products apart from visiting a supermarket. E-commerce websites are the major threat of substitute for the Woolworths supermarkets (Teeratansirikool et al. 2013).
Intensity of competition: There is intense competition in the market in terms of direct and indirect companies. Some of the direct threats in the market are: H.Y. Louie Co, Jim Pattison Group, Overwaitea Food Group, Metro Inc. operates etc. therefore it can be said that there is high intensity of competition in the Canadian market.
Bargaining power of the suppliers: Woolworths an organisation that has gathered significant goodwill among the stakeholders over the years of operation. All the suppliers who are associated with the company share the goodwill and thus they would not like to disassociate with the brand name. Hence it can be concluded that the switching power of the suppliers are low and the bargaining power of the company is high (Teeratansirikool et al. 2013).
Bargaining power of the consumers: Since the intensity of competition in the market is considered to be high the company has to invest significantly on attracting the customers with the services. This intense competitive market makes the switching power of the customers low (Dobbs 2014).
The management has to decide upon the competitive approach that the company can undertake to combat the intense competition. The Ansoff Mtrix framework will help in the analysis of the same it will help the company establish corporate strategies for the business in Canada.
Source: Author’s creation
The company has taken the decision of market development in order to grow the business and thus, the expansion to a new country will be good opportunity for the company (Yin 2016). Though there is intense competition in the market, the host country and the country of origin share similar societal and other external environmental aspects of Canada and Australia are similar. Thus, the idea of expansion will be feasible for the company (Hussain et al. 2013).
In order to comply with the decision that has been taken in the corporate level, the management has to decide upon the competitive strategy on a business level, Porter’s Generic Strategies help in deciding the business strategy that the company can undertake in order to achieve competitive advantage in the new market. There are three ways in which this can be achieved in the framework: differentiation strategy, cost strategy and focus (Tanwar 2013).
Source: Author’s creation
The strategy that the company can undertaken while entering in the Canadian market is differentiation. The company will establish itself as the one which provides the customers with the best quality products. The process of differentiation will focus on the supply of fresh Canadian sourced products, which is the USP of the company in the Australian market as well (Teeratansirikool et al. 2013).
There are a number of ways in which a company can establish their business in a new market or in a new country (Brouthers 2013). A company like Woolworths that has the resource and capability of establishing the business by themselves in a new market will open a new venture and set up stores in Canadian market by themselves without the help of any kind of licensing or merger and acquisition (Brouthers 2013).
The company has the resource in terms of man power as well which will help the management in establishment of the venture in a new place successfully (Brouthers 2013).
Conclusion
It can be concluded from the above discussion that Woolworths has the resource and capability to expand the business on an international level. The country of expansion that is chosen is Canada as the host and the country of origin of Woolworths are similar on a number of aspects firstly both are a part of the commonwealth countries. The mode of entry that has been selected is direct investment as Woolworths have the required resource and capabilities.
Reference
Atse.org.au., 2013. A Report of A Study by the Australian Academy of Technological Sciences and Engineering (ATSE)|Atse. [online] Statista. Available at: https://www.atse.org.au/Documents/Publications/Reports/Agriculture/atse-food-and-fibre-full-report.pdf[Accessed 10 Oct. 2018].
Ausbanking.org.au., 2016. Agriculture in Australia: activity and financing | Ausbanking. [online]Available at:https://www.ausbanking.org.au/images/uploads/ArticleDocuments/134/Economic_Report__Agriculture_in_Australia_-_activity_and_financing%20Sep%202017.pdf [Accessed 10 Oct. 2018].
Austrade.gov.au., 2013. AGRIBUSINESS RESEARCH, CONSULTING, TECHNOLOGY AND EQUIPMENT | Oecd. [online] Austrade. Available at: https://www.austrade.gov.au/agribusiness/ [Accessed 10 Oct. 2018].
Brouthers, K.D., 2013. A retrospective on: Institutional, cultural and transaction cost influences on entry mode choice and performance. Journal of International Business Studies, 44(1), pp.14-22.
En.portal.santandertrade.com., 2016. Canada:Economic and political outline | En.portal.santandertrade.com. [online] Available at: https://en.portal.santandertrade.com/analyse-markets/canada/economic-political-outline[Accessed 10 Oct. 2018].
Gupta, A., 2013. Environment & PEST analysis: an approach to external business environment. International Journal of Modern Social Sciences, 2(1), pp.34-43.
Homeaffairs.gov.au., 2013. Trade Agreement | Oecd. [online] Homeaffairs. Available at: https://www.homeaffairs.gov.au/busi/cargo-support-trade-and-goods/free-trade-agreements/canada[Accessed 10 Oct. 2018].
Hussain, S., Khattak, J., Rizwan, A. and Latif, M.A., 2013. ANSOFF matrix, environment, and growth-an interactive triangle. Management and Administrative Sciences Review, 2(2), pp.196-206.
Oecd.org., 2014. Australian agricultural productivity growth | Oecd. [online] Oecd. Available at: https://www.oecd.org/tad/events/Mr.%20Merrilees_Agricultural%20productivity%20growth%20reforms%20opportunities.pdf[Accessed 10 Oct. 2018].
Shabanova, L.B., Ismagilova, G.N., Salimov, L.N. and Akhmadeev, M.G., 2015. PEST-Analysis and SWOT-Analysis as the most important tools to strengthen the competitive advantages of commercial enterprises. Mediterranean Journal of Social Sciences, 6(3), p.705.
Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and management, 15(1), pp.11-17.
Teeratansirikool, L., Siengthai, S., Badir, Y. and Charoenngam, C., 2013. Competitive strategies and firm performance: the mediating role of performance measurement. International Journal of Productivity and Performance Management, 62(2), pp.168-184.
Woolworthsgroup.com.au 2018. 2018 ANNUAL REPORT | Woolworthsgroup. [online] Statista. Available at: https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf [Accessed 10 Oct. 2018].
Yin, N., 2016. Application of AHP-Ansoff matrix analysis in business diversification: The case of Evergrande Group. In MATEC Web of Conferences (Vol. 44, p. 01006).
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