Role of Internal and External Environment in Strategic Management for Australian Agricultural Company
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This research discusses the role of internal and external environment in strategic management for Australian Agricultural Company. It analyzes the resources, capabilities, and core competencies of the company and provides recommendations for maximizing business framework.
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Running Head: STRATEGIC MANAGEMENT STRATEGIC MANAGEMENT Name of the Student: Name of University: Author Note:
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1STRATEGIC MANAGEMENT Executive summary This research is going to discuss the role of the internal and external environment to maximise the business framework for Australian Agricultural Company. For the external environment, PESTLE analysis has been taken whereas the internal analysis is going to focus on the resources, capability and core competency. As the purpose of this research is to understand the business environment for Australian Agricultural Company in Australia, therefore some issues are found outthatperturbsthesmoothbusinessorientationforthecompany.Thereforesome recommendations are also incorporated into the report.
4STRATEGIC MANAGEMENT Introduction Australian Agricultural Company (AACo) is considered to be one of the leading and oldest agribusiness companies in Australia that was founded in 1824. The company owns around 7 million hectares of land in Queensland. CurrentlyAACohas more than 500 staff operating 24 cattle stations. The company is primarily associated with beef and agricultural business and has been listed in the Australian Stock Exchange in 2001. It can be argued thatAACois Australia’s largest integrated cattle and beef producer and the oldest operating company in Australia. Besides producing beef and cattle,AACoalso puts great deal of emphasis on the sustainability measures as the company believes that it will provideAACoa strategic advantage in the competitive agribusiness market in Australia. Based on this understanding, the purpose of this report is to analyse and compare the internal and external environment forAACoand propose a set of recommendations that will boost the profitability of the company. In this regard, the external environment will be analysed with the help of the PESTLE analysis whereas the internal environment puts emphasis on the Resource capability and competency matrix to evaluate the strengths and threats that the organisation is facing in Australian market. Business description AACoputsgreatemphasison itscustomersandthemarketdemands.Therefore, manufacturing is always tended to be a concern for the organisation. In this regard,AACois generally specialises in grain fed beef and Wagyu beef production. However, due to the market volatility production and manufacturing of beef products had been decreased robustly from 70.5
5STRATEGIC MANAGEMENT million kg LW in 2017 to 64.7Mil kg LW in the financial year of 2018 (aaco.com.au 2019). This decreasing rate in the production also cost huge loss for the company. The financial report of the company stated that in the fiscal year of 2018 the company faced loss with $102,559 in compare to the previous year. However, most of the revenue was collected from manufacturing and selling meats. Besides this, live cattle sales is also included in the selling practice of the organisation. In addition to this, the total current asset of is amounted $326,601 in the fiscal year of 2018 which was declined from the previous rate of $356,527 (aaco.com.au 2019). External environment Political As far as the Political stability of Australia is concerned, it can be stated that average value of the country is 1.01. It connotes effective moderate political stability within Australia. However, the year 2016 witnessed a sharp increase in the political stability index with 1.5 which is highest but declined in 2017 (Figure 8). It means there is political instability prevalent in the country. Besides this, the effectiveness of the government is also an important aspect for understanding the environment for business Australia (Prajogo 2016). As per the World Bank report, the average value of the government effectiveness index is 1.72 which stated that role o the government is quite effective in doing business in the country (Figure 5). The average value of the corruption Index is calculated 85 that identifies effective environment for the business organisations to do business in less corrupted Australia (Figure 2). Economic As a developed country, it is obvious for Australia to have a steady economic growth and flourishing opportunities for the business organisations. According to the Australian Bureau of
6STRATEGIC MANAGEMENT Statistics, an average 3.4% yearly growth in the economy provides further advantages to the Australian economy (Figure 3). In addition to this, a sharp and steady growth in the Australian market with an average value of AU$138.35 billion is also identified as an important facet. As a matter of fact, the average value in the Australian economy is 4.83% which is descending in a systematic manner (Dobeleet al.2014). Furthermore, the Consumer Price Index mentioned that average value with 51.49 index that connotes the impact of the buyers’ power (Figure 1). Social Australia is one of the most diverse countries in terms of multicultural and multiracial practices. The indigenous people of Australia are the most important heritage of the country with a number of other people who migrated from Asia (Mistilis, Buhalis and Gretzel 2014). Alongside this, there are the white people who were migrated to Australia in 1788. Based on this understanding, it can be stated that for business Australia has wide range of demographic customers with different religious and cultural practices. Most of the people are following Christianity. Besides this other religions like Hinduism, Buddhism, Islam and indigenous religious are also significantly existed into the country (Rubin, Aas and Stead 2015). Technological As far as the innovation index is concerned, it can be stated that the people are generally tech savvy with a good number of innovative ideas. Technology purchase growth is accounted 4% with an increase of $2 billion more in 2019 (Figure 7). Local and multinational companies are responsible to facilitate enough exposure and development in the process in order to set better business environment within the country (Head 2014). The Innovation Index in Australia is valued 52.75 that connotes Australia enjoys advanced technology oriented growth. In this regard, the research and development expenditure of the Australian government is increased at
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7STRATEGIC MANAGEMENT an average rate of 1.98% which is quite impressive for the business development in Australia (Figure 9). Legal The legal or regulatory frameworks are also played significant role in order to establish an effective and healthy business environment (Higgins, Milne and Van Gramberg 2015). In this context, the power of the Rule of Law in Australia has an average value of 1.78%. It means the country highly respects the existence of law in every sphere of life (Figure 10). In association to this, the quality of the regularity is also an important aspect for the regulatory body to maintain. As per the World Bank report, the Regulatory Quality Index points 1.71. It refers to the pragmatic and effective legal practice that creates huge environment for better business practice in Australia. Environment For the quality of environment, the government and the business organisations as well put great deal of focus on the sustainability programs. The environment of the country has variety of flora and faunas and the natural beauty of the country is always highly rich so that it can attract a number of tourists across the world (Shenget al.2015). Therefore, opportunity for hospitality and tourism industry can also be possible for Australia. However, the recent climate change posed a serious threat for the country and pushed the government to set more draconian rule to deal with the emerging threat (Shenget al.2015). The government always creates high value to the sustainability of society and environment. Therefore, encouraging the organisations in this regard is also a part of the government job.
8STRATEGIC MANAGEMENT Internal organisation Resources TangibleIntangible Skilled employees High quality products Clear organisational hierarchy. Effective use of technology Corporate governance Supplier contracts Brand equity Technical expertise Effective business environment Market capitalisation. Capabilities TangibleIntangible Speed of service. Technological advancement Increasing the market Effective course of doing business. Reputation Word of mouth Prolonged experience Sustainability. Customer loyalty Core competencies The Capabilities are highly relevant in creating core competencies forAACo. For an example, it can be stated that asAACois a manufacturing and service company therefore it is effective to deal with the practice regarding high speed of service. It is associated with the intangible factors of capabilities as well. The customer loyalty can be increased a lot due to the incorporation of speed of service. Moreover, introducing new technologies in course of the
9STRATEGIC MANAGEMENT business activities will also referred as a strategic advantage forAACobecause currently the organisation is facing sever challenges in market capitalisation. Both the tangible and intangible factors are highly effective in this aspect to enhance sustainability and customer loyalty with the help of technology (Friel, Barosh and Lawrence 2014). Furthermore, word of mouth is also identified as one of the major factor to endorse the reputation of the company in a large scale. However, it is essential for the organisation to maximise its market with the help of word of mouth, reputation and the technological assistance. Competitive advantage As far as the resource s are concerned, it can be stated thatAACoputs a great deal of emphasis of emphasis on the practice of recruiting skilled employees and manufacturing high quality beefs. As a result of that, it helps the organisation to establish a brand image with enough number of equity and revenue earnings. The transparency in decision making with a clear hierarchy is also encouraged the employees to get accompanied with developing better business environment in Australia.According toDonget al.(2017) the employees are considered to be the most important part for doing successful business. Therefore,AACoalso puts great deal of emphasis on its human resources. In addition to this, capabilities ofAACoalso highlights the potential abilities to ensure healthy growth in the business orientation. In this context, it is highly important for the organisation to put great deal of importance on its technological incorporation and service delivery (Visser, Clapp and Isakson 2015). Relationship with the suppliers and effective means of sustainability framework are identified as the most important part forAACoto register rapid growth in its market orientation. Those are said to be the effective means of competitive advantage that push the organisation to deal with capitalise the market more intensely. As per the
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10STRATEGIC MANAGEMENT research ofCarayannis, Sindakis and Walter(2015) technological advancement can aid the organisation in terms of both service deliver an product manufacturing. Therefore, in case of AACotechnological implementation is considered to be highly valued prospect. In addition to this, the core competencies ofAACoare also played significant role in order to establish firm market capitalisation for the organisation. In this regard, it can be argued that the core competency factors ofAACoare responsible to make effective market capitalisation for the organisation. For an instance, the prolonged experience in the Australian market is considered to be a major advantage forAACoto know the ups and downs in the market. As a matter of fact, the change in the customer behaviour has also intense impact on the business activity ofAACoand the decrease in the market capitalisation in 2017 is also a threat for the organisation to expand its business further. Recommendation Based on this understanding, there are some recommendations that the organisation must opt for in order to expand its business extensively. The recommendations are as follows, Implementing advanced technology is considered to be an important measure for the organisation to take. With the advent of globalisation it becomes essential for the corporate organisations to introduce new and advance technology to maintain up-to-date framework. Product diversification is going to be a pragmatic aspect forAACoto sustain in the Australian market extensively. In this context, only producing beef and selling cattle are limited the business orientation forAACo.Therefore, putting more focus on alternative food products can help the organisation to maximise its market capitalisation effectively.
11STRATEGIC MANAGEMENT On the other hand, thorough marketing and advertisement is also marked as a prerogative for the organisation to get a strong foothold in the Australian market. it can be argued that the role of the marketing and advertisement is also helps the organisation to build enhance its brand image and a possible driving factor to attract the customers more enthusiastically. Conclusion From the above discussion, it can be stated that the external environment highlights different aspects of market environment that will encourage to do agricultural business. High political stability and economic flexibility in the market makes a better business environment for AACoinAustralia.Moreover,itcanbestatedthatthemoresocialandtechnological endorsement are also helpful for the organisation to set a better business opportunities forAACo. In this regard, the resources and capabilities are the key factors that facilitate better business orientation forAACoto sustain in the high competitive market of Australia. However, the internal environment analysis finds out that there are some gaps into the internal business activities ofAACo. Lack of diversification in product and ineffective marketing strategies are considered to be the most important aspect for the organisation to deal with. Therefore, some recommendations has been mentioned in order to resolve the issues. Henceforth. It can be concluded that the report effectively evaluates the internal and external environment ofAACo and recommends some suggestions so that the organisation can get strategic advantage in future business orientation.
12STRATEGIC MANAGEMENT Reference aaco.com.au, 2019.About Us | AACo. [online] AACo. Available at: https://aaco.com.au/about-us [Accessed 30 Mar. 2019]. Carayannis, E.G., Sindakis, S. and Walter, C., 2015. Business model innovation as lever of organizational sustainability.The Journal of Technology Transfer,40(1), pp.85-104. Dobele, A.R., Westberg, K., Steel, M. and Flowers, K., 2014. An examination of corporate social responsibility implementation and stakeholder engagement: A case study in the Australian mining industry.Business Strategy and the Environment,23(3), pp.145-159. Dong, Y., Bartol, K.M., Zhang, Z.X. and Li, C., 2017. Enhancing employee creativity via individualskilldevelopmentandteamknowledgesharing:Influencesofdual‐focused transformational leadership.Journal of Organizational Behavior,38(3), pp.439-458. Friel,S.,Barosh,L.J.andLawrence,M.,2014.Towardshealthyandsustainablefood consumption: an Australian case study.Public health nutrition,17(5), pp.1156-1166. Head, B.W., 2014. Evidence, uncertainty, and wicked problems in climate change decision making in Australia.Environment and Planning C: Government and Policy,32(4), pp.663-679. Higgins, C., Milne, M.J. and Van Gramberg, B., 2015. The uptake of sustainability reporting in Australia.Journal of Business Ethics,129(2), pp.445-468. Mistilis, N., Buhalis, D. and Gretzel, U., 2014. Future eDestination marketing: perspective of an Australian tourism stakeholder network.Journal of Travel Research,53(6), pp.778-790.
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13STRATEGIC MANAGEMENT Prajogo, D.I., 2016. The strategic fit between innovation strategies and business environment in delivering business performance.International Journal of Production Economics,171, pp.241- 249. Rubin, T.H., Aas, T.H. and Stead,A., 2015. Knowledge flowintechnologicalbusiness incubators: evidence from Australia and Israel.Technovation,41, pp.11-24. Sheng, Y., Zhao, S., Nossal, K. and Zhang, D., 2015. Productivity and farm size in A ustralian agriculture: reinvestigating the returns to scale.Australian Journal of Agricultural and Resource Economics,59(1), pp.16-38. theglobaleconomy.com,2019.AustraliaPoliticalstability-data,chart| TheGlobalEconomy.com.[online]TheGlobalEconomy.com.Availableat: https://www.theglobaleconomy.com/Australia/wb_political_stability/ [Accessed 30 Mar. 2019]. Visser, O., Clapp, J. and Isakson, S.R., 2015. Introduction to a Symposium on Global Finance and the Agri‐food Sector: Risk and Regulation.Journal of Agrarian Change,15(4), pp.541-548.
14STRATEGIC MANAGEMENT Appendices Appendix 1 Figure 1: CPI in Australia (theglobaleconomy.com 2019)
19STRATEGIC MANAGEMENT Figure 6: Inflation rate in Australia (theglobaleconomy.com 2019) Appendix 7 Figure 7: Innovation index in Australia (theglobaleconomy.com 2019) Appendix 8
20STRATEGIC MANAGEMENT Figure 8: Political stability in Australia (theglobaleconomy.com 2019) Appendix 9 Figure 9: Research and development expenditure in Australia
21STRATEGIC MANAGEMENT (theglobaleconomy.com 2019) Appendix 10 Figure 10: Rule of law in Australia (theglobaleconomy.com 2019)