Strategic Analysis of GrainCorp: Business Level Strategies

This report provides a comprehensive strategic analysis of GrainCorp, an Australian agribusiness company. It begins with an executive summary, followed by an introduction outlining the importance of strategic management in a globalized market and the report's focus on GrainCorp. The report delves into GrainCorp's company background, detailing its core business of grain storage, logistics, and marketing, as well as its expansions through acquisitions. It identifies GrainCorp's various business revenue units, such as malt production, rail freight, storage and logistics, and grain trading, emphasizing the significance of each. The analysis then identifies and examines GrainCorp's business-level strategies, including cost leadership, and its approach to acquisitions. The report further analyzes GrainCorp's agribusiness strategy, focusing on its export strategies and competitive advantages. It explores the competitive reality, including Porter's five forces, and concludes with recommendations for future strategic directions, along with an implementation plan and evaluation strategy.

Strategic Management
Student Name
Institute and Affiliation
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Executive Summary:
The research is based on the agribusiness of Australia. The researcher has chosen GrianCorp
Limited. Services of Graincorp are in food, beverage and tobacco. The organisation is the
leading business provider in Australia and internationally also. The researcher has analysed the
business and revenue level strategies. Apart from that the researcher has presented the
recommendation also.
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Table of Contents
Introduction:....................................................................................................................................3
Company background:.....................................................................................................................3
Identification of different business level strategies:........................................................................3
Competitive reality:.........................................................................................................................3
Recommendation:............................................................................................................................5
Conclusion:......................................................................................................................................7
References:......................................................................................................................................8
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Introduction:
Strategic management helps the organisation through identification of innovative strategies. In
globalised world it is really necessary to identify the organisational potentiality to compete in the
global market. Strategy management helps to strategies business decisions according to the need
of the market. Present research is focused on the strategic management of GrainCorp an
Australian fibre focused agribusiness. The researcher will do the strategic analysis of this
organisation through competitive reality and different business level strategies.
Company background:
GrainCorp Limited is one of the public companies that is on the list of the Australian Securities
Exchange (ASE). The core business of the company revolves around storing and receiving grains
along with other related commodities. Their business also includes logistics along with
marketing the products. With the expansion of the company and acquisitions of multiple Malting
company, like the Canada Malting Company, Braids Malting Company, Great Western Malting
Company and the Barett burston malting Company, GrainCorp has now literally turned their
grain trading company to the one doing some international agribusiness (Graincorp.com.au.
2018). Their product business includes a wide array of packaged one with specialist’s fats and
oils that has been specially made in order to meet the needs of multiple food manufacturers,
caterers as well as bakers. Their business areas include oilseed, auscol, liquid terminals,
management of commodities along with liquid feeds (Lee 2015). GrainCorp is the leading
provider of grain storage and warehouse facilities along with marketing of grains, with multiple
benefits to the grower so that they can produce the highest quality of grain without thinking
about storage facilities or risk management or transportation of the grain. They are one of the
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road freight providers who not only help in managing the inventory of the grain but also help in
moving those grains in and out of Australia through their grain transporting trucks. They are also
one of the leading traders in grain who exports wheat, barley etc all in bulk (Baker 2018). They
also provide all round services for wheat flour processing along with being the largest producer
for wheat flour in Australia who producers premixes of bakery along with all the needs of flour
for different food sectors in Australia. And with their acquisitions on multiple Malting
companies they are now one of the major suppliers of malts to some major Australian as well as
Asian Breweries. GrainCorp is also one of the leading companies who help in sourcing,
supplying and refining oils that are edible and can be used not only for food but also for animal
feed. These oils also help in producing non-food industrial products such as biofuel.
Identification of its business revenue Units: GrainCorp is one of the leading producers of malt
for many big breweries in Australia and Asia. And this growing business has showed some
tremendous international growth. With the production of above of 1.5 million metric tons of malt
each year they are expecting to increasing it more in the coming few years. With the global
increase in the consumption of beer and the estimation that it would continue increasing in the
coming years shows promising revenue for the GrainCorp malt business (Zhong et al. 2017).
There has also been an increase in the rail freight business of transporting the grains from and in
Australia not only for own company but also for other grain exporters which has also showed a
great expansion in terms of revenue. There has also been a huge increase in the earnings of the
company due to their storage and logistics business of grains. They have now managed to
remove various fixed costs that were engaged with the storage business and together with the rail
freight, it is expected that they would receive a good return in terms of revenue. According to
Graham et al. (2015), the trading business that GrainCorp is associated with is involved in
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buying and selling of more than 4 million tonnes of protein meals and grains which makes them
a leading traders in the business and has generated and is expected to generate a huge amount of
profit for them (King 2014). And with the hunter grain soymeal business of importation being
fully integrated with the trading business of GrainCorp, they have now been able to enter in the
feed for poultry which shows promising revenue as well.
Identification of different business level strategies:
Agribusiness is one industry that undergoes a rapid change with each passing time. This dynamic
industry is highly dependent on the climate as drought or flood can really affect the conditions of
the grains that are growing. In the recent times it was seen that that GrainCorp has decided to
laid off many employees because of the severe drought conditions that has affected the business.
But keeping that aside, if we talk about the general strategies of business that is followed by
GrainCorp, the first thing that they have always supported are the small growers. By providing
them with logistics and storage facilities, they have been able to encourage them not only to
produce more but also have lead to an expansion in their revenue on the storage business and by
providing freight rails for transportation of the grains, they are able to able to increase the
revenue to a much more extent. They are also the leading producers of malt for multiple big
breweries across Australia and Asia which takes them in a good position when it comes to the
cost leadership in the market. Very few countries in the world uses barley malt which limits the
scope of the other companies to enter to the market and hence putting them in an advantageous
position in terms of the market and cost leadership involved in it. One of the most important
strategies that are involved in the Agribusiness of GrainCorp at all level is rather than merging
with the top end firms who expertise in the business, they prefer acquisitions which makes the
business run under the old name of the leading producers but the end products and the revenue
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generated are mostly captured by GrainCorp. They have not only been able to capture the grain
market with their supporting strategies but also they have been able to become one of the leading
processed flour producers who deliver flour to all the food industry and the bakery in the
Australian region (King 2014). When it comes to cost leadership in all the sectors of production
that GrainCorp is involved in, then undoubtedly because of their market occupancy rates them
the price deciders and have a huge influence in the internal agribusiness trade.
All products that are produced by the organisation are of highest quality and their product
differentiation from other companies are hugely appreciated in terms of the competitive price
that they deliver all of their products in. Their increasing base for producing wheat is one of the
most important decisions that have been concluded to be highly profitable for the one when it
comes to the food industry of the country. Even their production management for oilseeds have
proven to be hugely beneficial as they not only produces highly demanded edible oils of the
highest quality but also produces non food oils that can be used for production of biofuels which
really has an increasing demand (Graham et al. 2015). Their export strategies have gained much
importance in the last few years and have made them the leading exporters of grains.
Analysis of Agribusiness’ business level strategy: GrainCorp is one of the leading exporters of
grains in Australia due to the fact that their domestic consumption is much low compared to
many other nation. They provide a gigantic portion of grains in the total exports of grain that
goes out of the country. There has been an increasing global demand of grains, and as they are
the leading producers of grains, their export quantity have also increased to a much higher level
in the recent time. And with the use of their innovative and highly technical farming
technologies, they are now also able to produce much more than they were able to do few years
back or compared to other organizations in the same industry (McCaskill et al. 2016). And it has
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been observed, that there has been a huge demand for the wheat all round the world, which have
encouraged GrainCorp to increase their wheat production and have made them the leading
producers of processed grains. They are not only able to cater the needs of the domestic market,
but are also now able to export to various regions like Africa and Asia. The wheat not only are
used as the raw food material but are also used by different industries across the world in making
of different food, beer, pasta etc. Another globally demanded crop that is produced abundantly in
Australia is canola, a major oilseed crop. The global demand has made this product to export at a
huge quantity from Australia and GrainCorp contributes a major share in that (AgM 2014). This
not only used by consumers as edible oil but is also used by livestock industries all over the
world and this dual usage has increased their popularity to a much greater extent. One of the
major problems that lie before trading these grains and crops is their storage and logistics and
Graincorp has a huge Capacity for that. They have also been able to successfully transport the
grains in and out of Australia which really gives them a major advantage over any other
organisation involved in agribusiness.
GrainCorp is the largest grain Storage network in the Eastern coast of Australia with more than
290 storages and a strong grain marketing team that operates in about 25 countries around the
world. The majority of bulk storage of grain along with facilities related to handling in Australia
is controlled by GrainCorp. The main advantage of the company lies in the fact that it has its
own storage, logistics, transportation and wheat processing units which gives them a high control
over the forces of the market and they can manage their operation which depends on their own
performance in the allied activities. Being the critical supply chain of food grains round the
world with the best of quality product that are managed with high innovative and technical ways
along with offering them at a competitive price to the customers gives them a great position in
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the market. And with their increasing railway freights they have started transporting products for
other companies as well.
Competitive reality:
GrainCorp is a leading agribusiness of Australia which has huge international market base also
through its diversified operations. It serves food, tobacco and beverages over the years and it is
also listed in Australian Securities Exchange. Through the analysis of Porter’s five forces and
competitive reality models, the researcher will try to evaluate the competitive advantage of the
agribusiness in Australia and future potentiality of GrainCorp. Porter’s five forces is the
framework invented by Porter (Porter, 2008). It is holistic approach to help in taking the strategic
decision for the development of the organisation or industry in gaining competitive advantage.
Porter’s five forces have five elements. These are bargaining power of the buyers, bargaining
power of the suppliers, threats of new entrants, threats of substitutes, competitive rivalry.
Bargaining power of the buyers: Bargaining power of the buyers is huge in agribusiness and so
in GrainCorp also. This has put huge pressure in the Agribusiness of Australia. Thus there is
maximum customers’ base in agribusiness. Hence expectation of the customers is also high.
Bargaining power of the suppliers: Every company in the tobacco, food and beverage sector
buy their raw materials from the several suppliers. Hence, suppliers have the dominant position
and it can decrease the market of GrainCorp along with the Australian agribusiness. Thus who
are powerful suppliers can negotiate with the industry through their power to gain the higher
price. Hence higher supplier power can lower the industry power and business.
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Feedback
Threats of new entrants: New entrants are the big threat for the agribusiness in Australia. The
new entry may bring innovative strategy and can reduce cost to sale their products. This is the
big threat for the GrainCorp along with agribusiness of Australia.
Threats of Substitutes: Threats of substitutes are also very high as Australian market is highly
competitive. GrainCorp has several competitors and its industry also. Thus threats of substitutes
are high when its offers value proposition.
Competitive rivalry: Competitive rivalry is also very high for agribusiness in Australia. It is due
to their strategy of down the prices and its profitability.
Thus the five forces analysis helps to reveal that GrainCorp is in hugely competitive market and
its industry also is hugely competitive.
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Competitor Analysis:
Market commonality
Resource similarity
Drivers of competitive
rivalry:
Awareness
Motivation
Ability
Competitive Rivalry:
Likelihood of attack
First mover benefits
Organisational size
Quality
Likelihood of response
Type of competitive
action
Action's reputation
Market dependence
Outcomes:
Market position
Financial performance

Figure 1: Model of Competitive reality
(Source: Graincorp.com.au. 2018)
The competitive reality model shows the analysis of the GrainCorp’s competitors, the drivers of
competitive rivalry, competitive rivalry, and Outcomes. All of these are depend upon the service
and feedback of others.
Competitor’s analysis: Competitor’s analysis has two elements. These are resource similarity
and market commonality. GrainCorp’s competitors are Emerald Grain, Awb Grainflow and Abb
Grain. All the organisations have been operating their business in Australia (Byrne, 2014). These
are all Australian companies and in same industry. GrainCorps annual revenue $4.6 billion and
its employees are almost 1,682. It is the highest compared to its competitors.
Drivers of Competitive rivalry: Competitive rivalry drivers are awareness, ability and
motivation. Australian agribusiness market is very competitive and thus to compete in these
market, the organisation has to be aware about the business trends, customers expectation and
competitors strategy. GrainCorps has been doing the business successfully through their market
awareness and ability to reach the customers in right time (Garcia, 2016). Also their human
resource management team have been motivating its employees through the proper salary and
reward.
Competitive Rivalry: GrainCorp has huge market in Australia and it is the leading organisation
of Australia. It has been reaching to its customers through providing flexible, reliable and
competitive grain supply. They are specialised in customised grain service. They are supplying
more than 30 countries and they are top 5 global malt producer. Apart from that they have 7 bulk
grain ports.
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Outcome: GrainCorp’s gross profit $704.08 in the year 2017and its gross profit was $3,577.24.
Its total assets are $2,821 million and its market value $1,268.5 million. Hence, GrainCorp is at
the top position in the Australian agribusiness (Graincorp.com.au. 2018).
All of these competitive reality elements depend upon the feedback of the other. Customers’
choice and satisfaction has been maintained in GrainCorp.
Recommendation:
Analysis shows that GrainCorp faces huge competition in Australian market. GarinCorp can
increase its competitive advantage through innovative new services and products. It is true
innovative way help to bring new approach and new way of strategising the business (Ho et al.
2017). Hwoever, it also helps to bring new customers and old customers can get reason to buy
the products of GrainCorp.
Economic scale building is also necessary to lower the per unit fixed cost. This also helps to
enable huge profit to the business of GrainCorp. Economic scale building is necessary to
enhance the flow of sales along with the customer’s expectation to the buy the product.
It is necessary for the GrainCorp to invest money to research and development so it can create
barrier for the new entrants. Thus it also reduces the chances of new entrants to gain profit in
new market (Karunaratna and Crouch, 2016). Research and development are two main part of
business which helps to develop the organisations capacity and profit margin.
Efficient supply chain is also necessary for the stable business growth (Mehlhorn et al. 2017). It
can be done through the experimenting new product design and raw materials and it can help to
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choose other suppliers according to the price fluctuation. GrainCorp can learn from Nike and
Wal-Mart, how they developed third party manufacturers. Thus these third party manufacturers
have lowered the suppliers bargaining power.
It is also necessary for GrainCorp to build large customers base. It helps to decrease the buyers
bargaining power (Uddin, 2017). Thus it brings opportunity for the firm to streamline its
production and sales process. Through the rapid innovation of new products and services, the
expectation of the customer also rises for seeking offers and discounts. Hence, GrainCorp should
come up with new products and services to reduce the buyers bargaining power.
GrainCorps should be subject oriented not be product oriented. They have to understand the
exact needs of the customers rather than just customers buying intention. GrainCorp should use
different sales promotion strategies which can help them to attract more customers. Australian
agribusiness industry has huge competition as this business needs limited amount of investment
hence, its competitors are also huge. GrainCorp Limited can provide product discounts and
loyalty card to the loyal customers which can help to retain the customers. Customer’s retention
is the most necessary aspect for the steady growth of the business (Xia and Nelson, 2018). Happy
and satisfied customers help to bring more customers and thus the amount of customers can
increase more and more not nationally but internationally also. Product price and quality are the
two main features which are needed to be in high quality for GrainCorp. Good quality product
and affordable price helps to satisfy the customers.
Implementation: Through the analysis of competitive forces, it has been identified that
Graincorp needs to adopt some innovative approach and one of them is lower customers and
suppliers bargaining power. Graincorp should go for third party vendors or suppliers who can
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help them to get competitive advantages on suppliers bargaining power. Business sustainability
is the first and foremost of any business. It helps to meet the organisational objectives. Graincorp
needs to develop its market through the varieties range of products. These wide ranges of
products can help to create a good customer base and minimise its competitive rivalry. First of
all, Graincorp needs to develop it product range through innovative products which will help to
attract new customers. Secondly it should adopt innovative approach to serve the products
according to their needs. Globalisation has forced the global and domestic market to be
competitive and in this global world every organisation is much focused on the technology based
work practices. Thus it is necessary for the GrainCorp also to adopt innovative way to gain
competitive advantages.
Conclusion:
To conclude with GrainCorp is in a great position and is of great help for the small producers of
grain around Australia but in recent times, there has been an anxiety going on that GrainCorp
would be sold to ADM, who is also a global food commodity trader. It is been seen that as ADM
has large power on the market and with acquisition of GrainCorp, they would be able to gain
more power on the supply chain in the market. But Graincorp is already doing great in the supply
chain management and taking a great risk for trade and if the sale happens then there could be
much problem for global trading as well as the Australian growers.
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