Strategic Management in Australian Agribusiness Sector: A Case Study of Nestle Australia Limited

This report provides an overview of strategic management in the Australian agribusiness sector with a focus on Nestle Australia Limited. It includes external environment analysis, Porter’s five forces, international opportunities, suitable international strategies, appropriate and inappropriate modes of entry, and recommendations for future strategic direction.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student:
Name of the University:
Author Note:

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Executive Summary:
The aim of the report is to provide an overview of strategic management in the purview of
Australian agribusiness sector. The chosen company is Nestle Australia Limited. The report
provides a description of the company and mentions the external environment analysis and
Porter’s five forces. There is also discussion of the international opportunities of the chosen
business along with a discussion of the strategies international strategies. The report also puts
forward a discussion on the appropriate and the inappropriate modes of market entry. There is
also a recommendation on the future strategic direction of the agribusiness in the international
market.

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Table of Contents
Introduction:....................................................................................................................................4
Discussion about Australian Food Focused Agribusiness Sector....................................................4
Identify International Opportunities for Food focused Agribusiness..............................................7
Discussion of Different International Strategies suitable for Chosen Agribusiness........................8
Appropriate and Inappropriate Mode of Entry to the International Market....................................9
Recommendations of Future Strategic Direction of Agribusiness in Chosen International Market
.......................................................................................................................................................10
Conclusion:....................................................................................................................................11
References......................................................................................................................................13

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Introduction:
The report provides an insight into strategic management in context of Australian
agribusiness sector. The company chosen here is Nestle Australia Limited. It was found in the
year 1908 with its headquarters located in Rhodes, Australia (nestle.com.au 2018). The
company markets and manufactures range of beverage and food products in Australia. The
products of the company includes coffees, drinks, culinary product, confectionary and chocolate
products, sauces and recipe bases, muesli bars and snacks, baking ingredients, breakfast cereals,
noodles, cooking milks, toddler and baby nutrition products and pet accessories and
foods(nestle.com.au 2018). The company also undertakes export of its products. Nestle Australia
Ltd operates as the subsidiary of the Nestle S.A. The report starts with an introduction of the
food focused agribusiness sector of Australia with a special focus on the external, internal and
the porter’s five forces analysis. The report then discusses about the international opportunities
of the Nestle Australia Limited. The international strategies suitable for the agribusiness sector
also find a mention in this report. There are various foreign entry modes for entering into the
international market. The report puts for ward a discussion about the most appropriate and the
non-appropriate entry modes of the agribusiness sector. The report further draws in
recommendations for determining the future strategic direction of the agribusiness in the arena of
chosen international market.
Discussion about Australian Food Focused Agribusiness Sector
Nestle Australia Ltd represents a public company ranked at a position of 198 amongst the
topmost 2000 companies across Australia. In the year 2017, the company had a total revenue

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generation of about $ 2,220,849,000 including the sales and the other revenues
(ibisworld.com.au 2018). As per the records of 2017, the company had close to 4432 employees
that included all the employees of the subsidiary (nestle.com.au 2018). The CEO of the company
is Mr Trevor Clayton. The brands of the company includes Nescafe, Nespresso, Nesquik, Uncle
Tobys, Maggi, Milo, Carnation, Kitkat, Quick Eze, Allen, Butter Menthol, Optifast, Sustagen,
Nestle professional, Bakers’ Choice, Plaistowe, Purina Felix Supercoat, Nan and Nan Toddler,
Cerelac and Nestle Health Science.
External Environment Analysis:
The external environment analysis of Nestle Australia Limited is determined with the
help of PESTEL that a tool used by the marketers for monitoring and analyzing the factors
influencing the organization (Pan, Chen and Zhan 2018). These factors include political,
economic, social, technological, environmental and legal.
Political: Australia is a liberal democracy that is politically stable. This ensures
the suitability of the country for making investments in the agribusiness
sector (Wright 2017). A growing economy with a multilingual and
skilled workforce will provide a boost to the agribusiness sector to
flourish.
Economic: The economic stability of Australia ensures higher growth rate. In fact, a
stable interest rate, lower degree of risk, stronger GDP growth and
higher levels of employment, lower inflation and higher exchange rate
provides an ideal ambience for the agribusiness to prosper (Bajada
2017).
Social: A multicultural and educated country like Australia gives rise to a

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positive social culture thereby prompting the growth of Nestle Australia
Limited(Forrest, Lean and Dunn 2017)
Technological: Australia undertakes huge investments in research and development.
The implementation of newer technologies not only leads to lower cost
of production but also improvement and innovation (Prajogo 2016).
Such developments act beneficial for the agribusiness sector.
Environmental: The constant scarcity of the water resources, water quality and constant
availability might act as a challenge in determining the growth of
agribusiness (Winchester et al. 2018)
Legal: New laws related to regulation or taxes might influence the operation of
a business. Implementation of new systems and change in legal
framework can not only have an influence on the cost of the
agribusiness but also bring about a change in customer demand.
Porter’s Five Forces
This an important tool used for analyzing the competitive nature of a business. It depends
on the five forces that determine competitive intensity and attractiveness of the business in terms
of profitability. The forces include (Song and Tsai 2017):
Threat of New Entrant: The customer satisfaction and product quality enabled Nestle
Australia in gaining a considerable market share. Since the food processing industry is viable and
huge, so there are lot of companies who entered Nestle market and captured a place although it
could not match the market share of Nestle Australia.

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Threat of Substitute: Nestle Australia faces fierce competition and remains surrounded
by similar products. Therefore, the company needs to innovate constantly for staying in the
market and working efficiently for removing substitutes.
Bargaining Power of Suppliers: Nestle Australia believes in maintaining a sturdy and
strong business relations so it provides guidance to the suppliers in working effectively in
reducing the redundant expense. The care for the suppliers pays them in return with quality
products.
Bargaining Power of Customers: To understand the power of the customers it is very
necessary to understand their needs and adopt ways in better satisfying them. Nestle have
become successful amongst the users through introduction of health and awareness program.
Competitive Rivalry within Industry: Competition is aggressive within food
processing industry and the companies competing with one another tries to improve product
quality thereby proving to be beneficial for the consumers.
Identify International Opportunities for Food focused Agribusiness
The international opportunities for the food focused Agribusiness includes:
1. Market Driven Opportunity for Real Growth: The rising global demand for the
Agrifood products represent remarkable growth in the exports thereby boosting the actual value
of the sector by two fold by the end of 2025 (Paschen et al. 2017). Stakeholders belonging to
agrifood value chain and the international and the domestic investors are faced with major
opportunity of capitalizing on the demand and thereby earning improved returns.

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2. Leverages the Competitive Strength of State through Enhanced Growth: Australia
holds a good position as a modern, trusted and quality producer of food products. Here the
beverages and food are grown within a proper supervised environment (Ho e al. 2017). Besides,
the agribusiness sector puts forward immense opportunities for both the inbound and the
domestic investment. These investment leverages long term returns and growth thereby
leveraging the competitive strength of the state.
3. Identification of Growth Market with Higher Potential: Research and analysis
conducted by Government on behalf of Australia, found that close to twenty four states across
the South Asia, South East Asia and the Middle East, showed higher potential as target markets
for the investors and business looking for growth via exports.
Besides the agribusiness sector have recently experienced certain major advancement
through liberalization related to the target market exports which includes the Free Trade
Agreements (FTA) (McKenzie 2018). These are major international trade reforms that possess
the potential of increasing the competitiveness of the state in the key market thereby spurring
investment and growth opportunities across sectors once there has been a negotiation for the
particular product.
Discussion of Different International Strategies suitable for Chosen Agribusiness
In the ever changing and overtly complex trade setting, international activities are
conducted for not only supporting the Australian industries, farmers and government but also
building a resilient, strong and competitive agribusiness sector. There are various international
strategies that also prove ideal for the chosen agribusiness sector. These international strategies
act as a framework for the engagement of the sector into the various international activities

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thereby setting out focal points for the international engagement. These strategies include
(Felzensztein et al. 2014):
1. Maintaining, Gaining and Improving Access to Market through Strong
Biodiversity System: This strategy ensures trade in the agricultural goods and protects the status
of a stronger biodiversity through negotiation of technical arrangement for the exports and the
imports.
2. Influencing Global Agenda Related to Agribusiness for Sustainable Food and
Resource Management: This involves bilateral, plural and multilateral engagement for
prioritizing the international policy related to agribusiness set or while remaining vested to the
Australian interest.
3. Reduction and Removal of Production and International Trade Distortions: The
long term international strategy of Australia related to the agribusiness sector has remained in
removing and reducing the production and trade distortions for the creation of an equitable and
open trade environment for carrying out trade.
4. Strengthening AgriBusiness through Global Citizenship: The strategy involves
working with the trading partners for building the capability of the global agricultural sector and
the infrastructure for trade. This strategy also involves sharing skills and strategies thereby
helping in improving the protocols and the systems for achieving a mutually favorable outcome
for the production and trade of the agribusiness sector.
Appropriate and Inappropriate Mode of Entry to the International Market

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Modes of entry into the international market represent channels that Nestle Australia
might employ in gaining an entry into a chosen international market. Some of the common entry
modes include exporting, partnering, licensing, acquisition and turnkey projects. Exporting
seems to be the most appropriate mode for Nestle Australia for entering into international
market. Exporting represents a function in the international trade where the goods produced in a
country gets shipped to another country for the future of sales or trade (Huo 2014). It seems to
be the most appropriate modes of entry for Nestle Australia for the following reasons:
 It results in higher potential profits due to the elimination of the intermediaries
 Involves greater control on all the aspects of transaction.
 Customers are known
 From the customers end also there exists security in performing the business activities
 Business trips become more effective and efficient since the contact points are known.
 It helps in the development of a better understanding of marketplace
 There exists greater flexibility in redirecting or improving market efforts
On the other hand, licensing as a mode of entry might seem inappropriate for the
international market. Licensing refers to the agreement that allows the foreign firms in
manufacturing Nestle Australia’s products for a particular term and in defined market (Moeen
and Agarwal 2017). The reasons for being inappropriate are as follows:
 It might lead to partial or complete loss in control and intervention
 Effective commercialization of the parent company patent depends on the ability of the
licensee
 The risk of execution or poor strategy might lead to a damage of the product success

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 The risk of poor quality of management that might lead to the damage of the product or
brand reputation.
Recommendations of Future Strategic Direction of Agribusiness in Chosen International
Market
1. It involves supporting the people in driving the futuristic propensity of the
agribusiness sector and the regional communities by providing learning experiences and
opportunities: This implies that for building the prosperous and sustainable industries
intervention of skilled and knowledgeable rural leaders with are required for making informed
choices about future of the industries and the enterprise.
2. Identification and Nurturing of Innovation and Research Opportunities
Synergistic across the Agribusiness Sectors: The Australians agribusiness sector faces
challenges and opportunities common across the rural sector. Hence the agribusiness sector
requires leadership for responding and identifying issues and enhancing the shared benefits.
3. Targeting for enhancing the Sustainability and Profitability of the Sector: The
broader Australian economic has dependency on the profitable farms. There however exists a
link between the economic prosperity and the capacity for up taking newer technology and
innovation. Agribusiness like Nestle Australia that is well positioned should adopt newer ideas
and ensure usage of technology for the creation of productivity benefits thereby resulting in
sustainable growth and competitive advantage.
4. Supporting the Newer and Emerging Agribusiness: The emergence of the market
trends and the global environment not only impacts food consumption but also puts forward an

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opportunity to the agribusiness sector in identifying newer food types and in connecting with
and expanding and driving newer markets.
Conclusion:
On a concluding note, it can be said that the future of Australian agribusiness is followed
by an ambition that places people and the regional communities at the core of everything.
Agribusiness like Nestle Australia embraces a commercial approach for innovation and research
that leads to initiated changes across the sector and the regional communities. International
opportunities and commercial partnerships predefined the future of the agribusiness sectors. It
has however been found that the agribusiness sector operates in dynamic and complex ambience
and faces certain common opportunities and challenges as a result o the national, global and the
local change. The report also puts forwards certain future strategies for determining the future
directions of the agribusiness sector.

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