Strategic management is important fo0r designing and planning strategies which can help in counter risks and adequate implementation of resources for incurring profits. This study focuses on the strategy of the Australian Agricultural Company, which is Australia’s largest beef and cattle producer, to expand further and earn maximum profits. It gives discussions on the food-oriented agribusiness sector along with identification of internal opportunities of Australian Agricultural Company. In addition, inappropriate and appropriate entry of the aforementioned agribusiness has been evaluated. Recommendations have been given regarding future strategies of agribusiness so that it can be able to recover from market fluctuations.
Australia in recent times has a very highly technical and sophisticated industry and is one of the most efficient and innovative industries. According to Richards, Kjærnes, and Vik (2016), its farmers have remained competitive in the market through the country has the low level of subsidies as compared to its major competitors. For Australia, food security is linked to political stability, which has the potentiality of affecting national security. Strong reputation in agribusiness and closer to growing Asian markets can help agribusiness companies to expand its markets. The government encourages the agricultural companies to invest in science and technology so that they can expand in international markets. Globally food-focused industry, it has been assumed that Australian food sector will be able to deliver food as per market needs. Though the country accounts for 3% of global food trade, its exports are more than A$30 billion annually. However, the country has been able to produce only 2 of the Asian population. Moreover, arable land is limited and severity and frequency of climate shocks are major threats to the agribusiness sector.
(Refer to appendix 1)
Diseases like that of viral, fungal and bacterial results a loss up to 20% to 40% of horticultural crops, 50% aquaculture, 10-15% grains along with more than 20% livestock. Carey et al. (2016) argued that the agro-food industry faces high risks related to delivering of quality and production of quantity which is unlike from other industries that operate in controlled and closed environments. The ineffective supply chain management system can increase losses as perishable food products will not be delivered in adequate time and target customers. It has been found that the agriculture sector comprises of 3% of GDP which is $29 billion approximately (atse.org.au, 2017). In this case, the Australian Agricultural Company operates and owns farms and feedlots of around 7 million hectares of land in Northern Territory and Queensland, which comprises of roughly 1% landmass (aaco.com.au, 2017). Sales revenue of the company has been around $4 billion which shows that the company is n an important exporter of beef and cattle products. However, the company has cut down its costs by 25% as its revenue from sales of beef and meat has fallen to $46 million (annualreports.com, 2017). It has declared a net profit of $47.9 million which is $1.9 million down from the previous year. The underlying earnings of the company have improved by $2.4 million through its revenue is down by $214 million (Curtain, 2016). This shows that the company has been able to provide adequate food products to Australian consumers, though the company has cut off its expenditure. (Refer to appendix 2)
The company has the opportunities of increasing its operations in other countries through the help of advanced technology and scientific advancement. It has the opportunity of diversifying trading of cattle and meat processing which can reduce its expenses and adds up to its profits. It has the strength of conducting quality assurance programs and sensitive use of land so the company can evolve new technology for making profits in meat processing industries. Adoption of value-adding processes like cattle and through Branded Beef Division of the company can help it to improve its standards. Its main competitors are S Kidman & Co, The Consolidated Pastoral Company and NAPCO. The company distributes branded beef to a wide range of customers in the world, which can help it to tailor its route model for capitalizing on regional opportunities. Carey et al. (2016) stated that the Australian Government’s Industry Innovation and Competitiveness Agenda have identified that agribusiness and food is an area of competitive strength which can help in growth and innovation. The National Food Plan can give an opportunity for the company to enhance its food processing industries through better production and supply. In addition, skilled people can be hired for making its supply chain system robust and reducing food wastage.
In the recent times, the company has been suffering from loss of revenue due to the decline of sales in cattle and beef. The main focus of the company is to manage costs and revenue, particularly its selling price. Fang et al. (2017) are of the view that global food prices are increasing so the agricultural companies in Australia have the opportunity of increasing its profits through advanced technology. The Australian Agricultural Company can invest in advanced types of equipment and technology which can help it to expand its business in the international market. However, Opitz et al. (2016) argued that Australian agricultural companies are experiencing a window of improved opportunities with high prices in commodities; they are also exposed to rising input costs. Therefore, the company is facing the problems of rising input costs and a decline in sales of meat and beef products which has resulted in cutting down of its expenditure. Garnett (2014) commented that demand for meat has remained strong but wealthy countries are taking steps for reducing per capita consumption with the rising of alternatives to meat. In this case, the company needs to bring in alternatives to meat so that it can be able to make profits in international markets. It needs to assure that its products are able to deliver adequate nutritional content for the consumers which can give it a competitive advantage over others.
The choice of market entry depends on factors like characteristics of products, the target for foreign investment, resources of the company, distribution pattern, number of customers and target for foreign investment. In this case, the company needs to identify those markets which can help it to sell its beef and cattle products (Larder et al. 2018). It has the opportunity of investing it in a sales company which can help it to sell its products to the international market. It can hire distributors and marketers who can help it to give appropriate information regarding the market condition of international markets. As for example, the company can supply fish products in Asian markets as they are popular among Asian people. In addition, it can hire a representative in foreign markets for enabling trading and selling of foreign goods. Asioli et al. (2017) argued that a company entering in the international market need to be aware of political condition as deteriorating political condition will lead to market instability. In this case, the company should invest in those markets where there is political stability and the purchasing power of individuals are high.
According to Sippel (2015), companies making strategies of entering into international markets can conduct direct exports through dealers. In Asian markets, the company may enter into direct exporting which can help it to handle its own exports. It can be conducted through a dealer who determines the final price for customers without getting instruction from exporter or seller. The license is regarded as the simple way for companies entering into the international market. However, Lewis et al. (2014) argued that dealer may establish a separate sales company in the market and the manufacturer has little opportunity of controlling the marketing aspect of dealers. In this case, the company can open sales or branch offices which will be the permanent establishment in the foreign market and help in expanding businesses. Its international strategies need to include understanding the needs of future customers, creating an effective supply chain management system, attracting capital and people along effective coordination with employees can help it to expand in international markets.
Too much trust on dealers and agents can become problematic for the companies who wish to enter into international market (De Mooij, 2018). The company should not be too much dependent on information of dealers or agent as they may give misleading information. Use of intermediaries for indirect entry to international markets can lead to huge costs which the company may find it difficult to give. In case of high commitment entry modes, the company can face risks which may hinder its productivity. Inadequate market information and inappropriate of understanding customers needs are considered to be inappropriate entry mode for companies in the international market. With the division of market structure, the company cannot adopt the value chain system which it implements in the Australian market.
It can be recommended that the Australian Agricultural Company in Asian markets needs to deliver unique products for capturing the attention of customers. It is required to have a strategy which can help in to mitigate disparity between performance and perception. In addition, it needs to invest in scientific development so that it can be able to increase its profits. As demand for meat and beef products have declined in the international market, it needs to put more focus on agrarian products to be able to exist in the international market. In order to enter the international market, it needs to have a fair pricing system for its products so that middle-income individuals can purchase their products. It needs to indulge in more commercialism and increase its expenditure on R&D activities for better productivity and increased growth. Moreover, the company needs to devise strategies like making nutritious food products, sustainable packaging and minimizing wastage. This can help the company to do business successfully in local and international markets without getting affected by market fluctuations.
Conclusion
It can be concluded that organizations need to make strategic management for overcoming market fluctuations and risks. In this case, the Australian Agricultural Company can devise strategies which can help it to expand in Asian markets through R&D activities. Skilled manpower and technological innovation play a crucial role in meeting market demands and provide satisfaction to customers. Agribusiness is prone to fluctuation to weather and economy so effective supply chain management system needs to be adopted by agribusiness companies. This can help in reducing wastage and adopting eco-friendly packaging substances. The company needs to have a good understanding of Asian markets in order to expand its business in these emerging markets. This can help it to become a global producer and manufacturer of food products catering to the needs of millions of people. Effective strategic management can help it to understand the emerging demands of consumers.
References
aaco.com.au. 2017. Australian Agriculture Company, Available at: https://aaco.com.au/ [Accessed on 12 Jan 2018]
annualreports.com, 2017. Australian Agriculture Company annual report, Available at: https://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_AAC_2017.pdf [Accessed on 12 Jan 2018]
Asioli, D., Aschemann-Witzel, J., Caputo, V., Vecchio, R., Annunziata, A., Næs, T. and Varela, P., 2017. Making sense of the “clean label” trends: A review of consumer food choice behavior and discussion of industry implications. Food Research International, 99, pp.58-71.
atse.org.au. 2017. Food and Agribusiness, Available at: https://www.atse.org.au/Documents/…/Agriculture/atse-food-and-fibre-full-report.pdf [Accessed on 12 Jan 2018]
Carey, R., Caraher, M., Lawrence, M. and Friel, S., 2016. Opportunities and challenges in developing a whole-of-government national food and nutrition policy: lessons from Australia’s National Food Plan. Public health nutrition, 19(1), pp.3-14.
Carey, R., Krumholz, F., Duignan, K., McConell, K., Browne, J.L., Burns, C. and Lawrence, M., 2016. Integrating agriculture and food policy to achieve sustainable peri-urban fruit and vegetable production in Victoria, Australia. Journal of Agriculture, Food Systems, and Community Development, 1(3), pp.181-195.
Curtain, C. 2016. Australian Agricultural Company cuts costs by 25 per cent, as revenue falls, Available at: www.abc.net.au/news/rural/2016-11-23/agricultural-company-aaco-revenue-down-half-year-results-2016/8049966 [Accessed on 12 Jan 2018]
De Mooij, M., 2018. Global marketing and advertising: Understanding cultural paradoxes. NY: SAGE Publications Limited.
Fang, Z., Zhao, Y., Warner, R.D. and Johnson, S.K., 2017. Active and intelligent packaging in meat industry. Trends in food science & technology, 61, pp.60-71.
Garnett, T., 2014. Three perspectives on sustainable food security: efficiency, demand restraint, food system transformation. What role for life cycle assessment?. Journal of Cleaner Production, 73, pp.10-18.
Larder, N., Sippel, S.R. and Argent, N., 2018. The redefined role of finance in Australian agriculture. Australian Geographer, 49(3), pp.397-418.
Lewis, G., Crispin, S., Bonney, L., Woods, M., Fei, J., Ayala, S. and Miles, M., 2014. Branding as innovation within agribusiness value chains. Journal of Research in Marketing and Entrepreneurship, 16(2), pp.146-162.
Opitz, I., Berges, R., Piorr, A. and Krikser, T., 2016. Contributing to food security in urban areas: Differences between urban agriculture and peri-urban agriculture in the Global North. Agriculture and Human Values, 33(2), pp.341-358. Available at: https://link.springer.com/article/10.1007/s10460-015-9610-2 [Accessed on 12 Jan 2018]
Richards, C., Kjærnes, U. and Vik, J., 2016. Food security in welfare capitalism: Comparing social entitlements to food in Australia and Norway. Journal of rural studies, 43, pp.61-70.
Sippel, S.R., 2015. Food security or commercial business? Gulf State investments in Australian agriculture. The Journal of Peasant Studies, 42(5), pp.981-1001.
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