Strategic Analysis of Namoi Cotton's Business and Revenue Strategies

This report provides a strategic analysis of Namoi Cotton, an Australian agribusiness focused on fiber. It begins by outlining the company's key business units, including cotton ginning and cottonseed operations, and discusses their revenue contributions. The report then delves into the business-level strategies employed by Namoi Cotton, specifically highlighting its differentiation strategy. A model of competitive reality is presented, incorporating PESTLE and Porter's Five Forces analyses to assess the external and competitive environments. Furthermore, the report identifies an implementation plan and an evaluation strategy for the company's strategic actions. Finally, it offers recommendations for Namoi Cotton's future strategic direction, emphasizing the importance of focusing on core business activities to maintain a competitive advantage in both domestic and international markets.

Running head: STRATEGIC MANAGEMENT
Namoi Cotton
Strategic Management
4/19/2019

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Table of Contents
Introduction................................................................................................................................2
Overview of Namoi Cotton....................................................................................................2
Revenue Units and importance..............................................................................................2
Business Level Strategies.......................................................................................................3
Business Level Strategy of Namoi Cotton.............................................................................4
Model of Competitive Reality................................................................................................4
PESTLE Analysis...............................................................................................................4
Porter Five Force Analysis.................................................................................................5
Identify an implementation plan and an evaluation strategy.................................................6
Recommendations......................................................................................................................7
Conclusion..................................................................................................................................7
References..................................................................................................................................9

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Introduction
The aim of this report is to highlight the strategy formulation and strategic actions undertaken
by the corporation operating in the Fibre focused Australian Agribusinesses sector. The
company that has been selected on which the description is based is Namoi Cotton. The
report will provide different information related to the company such as its key business and
revenue units and their importance for the business. Their different business level strategy
that has supported the company in sustaining in the market is being discussed. In addition,
different models are drawn related to the competitive reality of the business.
Overview of Namoi Cotton
Namoi Cotton Limited is involved in the marketing and ginning of cotton. The company
owns total 12 cotton gins in Queensland and New South Wales, and provide services of
ginning to the farmers, comprising parting of lint cotton in the unit form to bundle form. The
company is comprised in the buying of lint cotton from different farmers with the help of a
number of forwarding contracts such as supplying, packaging and trading of cotton seeds in
Japan, China, and Australia; and delivery of product services of packing to the consumers
considered as the third party (Reuters, 2019). Besides this, the organization obtains a number
of pulse and grain crops from the farmers, and vends in a number of markets in Australia as
well as international market; and offering cotton grouping services to the cotton industry of
Australia (Bloomberg, 2019). In addition, the company is comprised of the activities of
trading of logistics and sales of plastic waste from the activities of ginning. The key business
units of Namoi Cotton are Cotton ginning and Cottonseed business.

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Revenue Units and importance
The major revenue unit of Namoi Cotton is ginning of cotton from which in the year 2018,
the company earned the total revenue from continuing operations is $483,938. The revenue
from continuing operations of the company in 2017 and 2016 is $355,344 and $279,731
respectively (Namoi Cotton Limited, 2018). The increasing revenue of the company
highlights that the company is regularly working towards increasing its investment in the
cotton ginning activities of the business and earning from the same source. In addition,
Namoi Cotton represented net profit after tax from continuing operates of around $6.8 million
in 2018, in comparison to the net profit of 2017 of $0.3 million (Namoi Cotton Co-operative
Limited, 2017).
Australian cotton production
The total cotton crop production in Australia 2017 was around 3.75 million bales highlighting
a 38% increase from 2016 data of 2.71 million bales (Namoi Cotton Limited, 2018).
In 2017, the company ginned around 1,015,000 bales, comprising 100% of the joint venture
bales. It was around 47% upsurge in the volume of ginning (Namoi Cotton Limited, 2018).
Cotton Seed Business
The cottonseed operations of the company traded 266,000Mt in comparison to the previous
year record of 172,000Mt, which reflects an increase in the size of the Australian crop
(Namoi Cotton Limited, 2018).
Business Level Strategies
Michael Porter is generally known as the Father of Corporate Strategy, has introduced the
business level strategies such as cost leadership, differentiation, and focus (Moores, 2018).

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Cost leadership – Businesses that follow the cost leadership strategy successfully attain a
competitive advantage in the market by decreasing the operating cost to below the average of
the industry. Then, businesses pass this saving by offering customers products at low prices
(Scheele, 2014).
Differentiation – Business that comply with the differentiation strategy successfully win the
share in the market and charge higher prices by providing unique products to the customers.
Focus – Focus strategy is based on attaining cost leadership or differentiation in the niche
market by adopting different methods that are not adopted by broadly-focused businesses.
Integrated cost leadership – This strategy is adopted by the businesses who offer
differentiated goods in the market at low prices (Hitt, Ireland and Hoskisson, 2014).
Business Level Strategy of Namoi Cotton
Namoi Cotton has adopted the differentiation strategy, which is one of the essential strategies
of marketing in the business environment. The best possible way for the company to
implement differentiation strategy is to invent or innovate (Doubet and Hockett, 2015). In
order to innovate in the produce of cotton ginning and cotton seed operations, company has
incorporated itself into different acquisitions such as 50% of the contributing interest of
Twynam Agricultural Group Pty Ltd in the Classing services of Australia with the joint
venture of around $0.7 million and PJ & 25% of the participating interest of JM Harris Pty
Ltd in the Moomin Gaining Company, which is the joint venture of around $2.0 million.
These acquisitions are accepted by the company to offer augmented earnings before interest,
depreciation, and taxation of $0.4 million in 2019 (Namoi Cotton Limited, 2018). Through
acquisitions, the company is capable to make differentiation in its products and successfully
offering to innovate and quality products to its customers.

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Model of Competitive Reality
PESTLE Analysis
Political Forces
Risk of military invasion
Trade regulations and tariffs
Economic Forces
Government development in
a free market
Stability and exchange rate
of the local nation
Social Forces
The skill level and
demographics of the
population
Culture (social conventions)
Technological Forces
Gas Efficient technology
Rate of Technology diffusion
Legal Forces
Anti-trust law in the industry
Employment law (Fern Fort
University, 2019b)
Environmental Forces
Waste management
Support for renewable energy
Porter Five Force Analysis
Forces Impact (High, Low or Moderate)
Threats of New Entrant High
The threat of Substitute Products Low
The competitive rivalry among the existing
player
Moderate
Power of Buyer High
Power of Supplier High (Fern Fort University, 2019a)

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Identify an implementation plan and an evaluation strategy.
Source [(Merger Integration, 2019)]
Executing the acquisition is certainly one of the key tough assignments that a business
experience in the business world. Any business that has been involved in the implementation
of the large acquisition understands the difficulty level associated with this. The challenges
available in the market for different businesses are related to the environment, different
approaches, and mergers.
In order to operate a successful acquisition in the business environment it is very important
for the manager to understand the life cycle of the acquisition.
Another factor that is considered in the implementation of the acquisition is the type of
acquisition Partners Company is selecting for its future operations.
Namoi Cotton is involved in one of the large and key business operations of cotton ginning
and cotton seed business that is used to manufacture a number of products in the market. In
order to increase its production, revenue, and production company is involved in a number of
acquisition with businesses like Twynam Agricultural Group Pty Ltd, JM Harris Pty Ltd, etc.
(Northern Star, 2013). The company has been involved in the intense market research in

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order to identify the appropriate partnering firm which can contribute to the increasing value
of the business.
Evaluation strategy
It is known that acquisition results in increasing funds and valuable assets for successfully
operating the business in the market. From the above analysis, it has been identified that
Namoi Cotton has been involved in the acquisition with different companies to offer
innovative products to the customers as well as to offer augmented earnings before interest,
depreciation, and taxation of $0.4 million in 2019
Recommendations
From the above analysis, it has been analyzed that company is regularly shifting its focus
towards differentiation strategy, by getting involved in a number of acquisitions with
businesses in order to increase the earnings before interest, depreciation, and taxation.
However, in order to successfully operate in the international market, it is very essential for
the business to focus on its key business activities such as cotton ginning and cotton seed
business. By focusing on the key operations of the business, the company will be capable to
gain a competitive advantage in the market in comparison to its competitors present in the
domestic as well as international market.
Conclusion
The above report is presenting a brief report of the current business operations and revenue
units of Namoi Cotton, which is one of the known business in the fiber focused Agribusiness
sector of Australia. From the above analysis, it has been identified that the key revenue units
of the company are cotton ginning and cotton seed business. However, the financial analysis

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of the company, it has been recognized that the company is successfully able to maintain its
strong financial position in the market despite the fact of a worldwide economic downturn.

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References
Bloomberg (2019) Company Overview of Namoi Cotton Limited [online]. Available from
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=883214
[accessed 19 April 2019]
Doubet, KM.J., and Hockett, J.A. (2015) Differentiation in Middle and High School:
Strategies to Engage All Learners 1st ed. U.S.: ASCD.
Fern Fort University (2019a) Namoi Cotton Co-Operative Limited Porter Five Forces
Analysis [online]. Available from http://fernfortuniversity.com/term-papers/porter5/asx/179-
namoi-cotton-co-operative-limited.php [accessed 19 April 2019]
Fern Fort University (2019b) Namoi Cotton Co-Operative Limited PESTEL & Environment
Analysis [online]. Available from
http://fernfortuniversity.com/term-papers/pestel/nyse4/4368-namoi-cotton-co-operative-
limited.php [accessed 19 April 2019]
Hitt, M.A., Ireland, R.D., and Hoskisson, R.E. (2014) Strategic Management: Concepts and
Cases: Competitiveness and Globalization 11th ed. U.S: Cengage Learning.
Merger Integration (2019) Execute Acquisition Integration Plans [online]. Available from
https://www.mergerintegration.com/acquisition-integration [accessed 19 April 2019]
Moores, S. (2018) Understanding The Different Types of Business-Level Strategies [online].
Available from https://www.fastcapital360.com/blog/business-level-strategy/ [accessed 19
April 2019]

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Namoi Cotton Co-operative Limited (2017) Annual Report [online]. Available from
https://www.namoicotton.com.au/fileadmin/user_upload/full-year-financial-report-
fy2017.pdf [accessed 19 April 2019]
Namoi Cotton Limited (2018) Annual Report [online]. Available from
https://www.namoicotton.com.au/fileadmin/html_templates/namoi/images/
2018_Namoi_Cotton_Limited_Annual_Report_HR.pdf [accessed 19 April 2019]
Northern Star (2013) Namoi Cotton confirms a strategic marketing alliance [online].
Available from https://www.northernstar.com.au/news/namoi-cotton-confirms-strategic-
marketing-alliance/1719922/ [accessed 19 April 2019]
Reuters (2019) Namoi Cotton Ltd (NAM.AX) [online]. Available from
https://www.reuters.com/finance/stocks/companyProfile/NAM.AX [accessed 19 April 2019]
Scheele, D. (2014) The trade-off between cost leadership and differentiation 1st ed. Germany:
GRIN Verlag.