Strategic Management in Australian Agriculture Company

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.

STRATEGIC MANAGEMENT
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Executive summary
This study focuses on strategic management in Australian Agriculture Company which can help
it to expand further and improved its operations. The main purpose of this study is to understand
strategic management which can help the company to expand its operations in international
market. Discussion regarding Australian Food oriented Agribusiness sector and identification of
internal opportunities for Australian Agricultural Company have been done. Issues like
decreased revenue and inadequate investments in scientific research have been highlighted in this
study. Moreover, discussion of internal strategies for Australian Agricultural Company and
inappropriate and appropriate mode of entry have been given. Recommendations for future
strategic directions for Australian Agricultural Company like increased investment in R&D
activities and hiring of skilled, manpower have been given.
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Table of Contents
Introduction......................................................................................................................................3
Findings and Analysis......................................................................................................................3
Discussion regarding Australian Food oriented Agribusiness sector..........................................3
Identification of internal opportunities for Australian Agricultural Company............................4
Discussion of international strategies for Australian Agricultural Company..............................5
Inappropriate and appropriate mode of entry...............................................................................5
Recommendations for future strategic directions for Australian Agricultural Company................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8
Appendices....................................................................................................................................10
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Introduction
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.
Findings and Analysis
Discussion regarding Australian Food oriented Agribusiness sector
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
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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)
Identification of internal opportunities for Australian Agricultural Company
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.
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Discussion of international strategies for Australian Agricultural Company
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.
Inappropriate and appropriate mode of entry
Appropriate mode of entry
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
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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.
Inappropriate entry mode
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.
Recommendations for future strategic directions for Australian Agricultural Company
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
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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.
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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:
http://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.
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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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Appendices
Appendix 1
Figure 1: Australian agrarian sector
(Source: http://www.farminstitute.org.au/ag-forum/australian-consumers-facing-increasing-food-
prices)
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Appendix 2
Figure 1: Revenue of Australian Agriculture company
(Source: http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_AAC_2017.pdf)
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