Implementation Of Strategic Management In Australian Food Focused Agribusiness Sector
Introduction
This report focuses on the understanding and appreciation of strategic implementation in an agribusiness food related sector in Australia. The selected company for this discussion is Select Harvests Limited, the second largest almond manufacturer in Australia. Throughout this report the discussion carrying under four main topics. The first part of the report provides an overall summary for the Australian almond industry discussing about the key driving factors. Also, in this sector, it provides a brief introduction to the company as well. In the next section of the report provide a discussion about the international opportunities for Select Harvests and discussed about the suitable international strategies. The discussion is then carrying on towards the mode of entry to the international market. This section will provide information regarding the most appropriate and inappropriate mode of entry to the international market for Select Harvests. In the latter part of this report provide future recommendations for the future strategic direction of Select Harvests in the international context.
Discussion of Australian Food focused Agribusiness Sector
The Australian Agribusiness sector id a highly diverse and a volatile sector which provides agricultural services and products across the country. There are manufacturers, processors and wholesalers in the Agribusiness sector while the changes in the weather is highly affecting to the growing pattern of Agrifood products. Industry income is required to develop at an annualized 3.0% over the five years through 2017-18, to $289.0 billion (IBIS World 1999). The scope of the performance of the products in the industry will depend on how the farmers perform and how they will react to the changes of the external factors. According to the government publications, it identifies that size of the farm, financial capability and the skills of the laborers who worked in the farms have an impact towards the productivity in Agribusiness sector. Also, the external factors like climate changes in the country, technical progresses, government policies and other market conditions such as infrastructure will also have an impact towards the productivity in Agribusiness.
As technological advancement is a key driver to the success in agribusiness, it has revealed that public investment in R&D has considerably contributed to the agricultural productivity in Australia. Based on the statistics it exposed that in 2016 – 2017 Agriculture is the largest contributor to the Australian GDP growth as the fastest economic growth sector. According to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), overall farm exports are estimated to be exceeded $48 billion for 2016 – 2017. The agribusiness focused in this report is Select Harvests Limited. Select Harvest is Australia’s largest vertically integrated nuts and healthy food manufacturing company. They are one of the largest almond growers, manufacturers and marketer for nut products, healthy snacks and muesli for the Australian market. Select Harvests provide capability to provide products to both domestic and international markets. In domestic they are retailing under the brands Lucky, Sunsol, Nuvitality and Soland and also under the brands Renshaw and Allinga Farms, Select Harvests expand their products to the wholesale and industrial markets. Further, as Select Harvests is one of the Australia’s largest almond exporter, they export to Asia, Europe and Middle East while making strong relationships with the countries like India and China.
International opportunities and different international strategies
Based on the company selected for this report, Select Harvests is specialized in manufacturing, marketing and exporting Almonds to the domestic and international markets. The domestic market for almond is continuously growing while the average consumption per level of person is also increased accordingly. There are three key drivers of almond popularity in Australia as, the taste, increased usage of almond in cuisines around the world and positive health factors. The rapid growth in the almond market and the rapid increase in the almond production makes more exports within Australia. The consumer demand for almond is also increasing worldwide because people are now more looking into the benefits of having healthy food rather than fast food. That has made an increase in the world demand for almond in 2017 up to 1.2million.
Based on the statistics during the year 2017 – 18, the total export of almond has been delivered to four major markets; America, Europe, Africa and Middle East and Asia Pacific Oceania. Considering the export markets of Select Harvests, their key export markets are India, China, Middle East, Europe and Australia. Looking forward to the Australian market, as it is the domestic market for Select harvests, they have look beyond that region for the opportunities. For Select Harvests, one best opportunity in the international market is the U.S market. Based on the article ‘Blue Diamond posts record sales’ 2017, the author has discussed that almond prices of U.S has climbed up to $5 per pound in 2015 but it has declined to $2.60 at the beginning of year 2017. The market analysts of the country have identified that product diversification and international marketing can be the best way to gain the revenue. Also, now U.S market has identified that almond as a nutritious food that plays an important role in a healthy diet. Further, ‘Blue Diamond posts record sales’ 2017, has revealed that almond is the number one crop in California which exceeds an incredible revenue. So, as Select Harvest is the second largest producer of almond in Australia, they can now enter to the U.S market. Select Harvests can enter into U.S market especially North American market with product differentiation. They can more concern on producing snack packs from almonds, natural milk products such as almond milk because the consumers in American market like to consume innovative products. Also, they can introduce almond oil to the market which again has a healthier value towards the people. Based on an article published on Californian almonds, it discusses that there are some special forms and functions of almond that is preferred by the global consumers. According to that, North America is leading towards on consuming almond as a snack. Further, it identifies that many consumers like to use almond as a confectionery, where they think that almond with chocolate gives them more nutrition, more taste and crunchier than chocolate without almond. It also discusses that almond is the second significant product used in bakery and also ass a cereal. A nutritious breakfast with mixed cereals (including almond), is more preferred by the consumers.
According to the article ‘Richard Cotta: a life devoted to dairy and co-ops’ 2012, it identifies that the domestic market of them (which is U.S market) is now a mature market. So that product differentiation and repositioning of the products will be the best strategy that any manufacture can do to enter the market. Therefore, it is better that Select Harvests can more look into these varieties of almond products and that will help them to capture the American market.
Based on the article written on an interview with Richard Cotta, owner of Terra Bella farms and Cotta farms where both of them are into almond farming operations; Richard has discussed about the new export opportunities for the industry. It reveals that China and Southeast Asia is the best market opportunity and Middle East and North Africa are growing markets. Further, he identified that India will also be a better market opportunity for the future.
Bath at al. states that recently in UK market, there is an increase of consumption of alternative drinks on milk. The article identifies that within two years’ time the alternative consumption of cow milk has increased rapidly while almond milk has the highest popularity among them. Further, the statistics shown that 10% UK consumers who used consume Soya milk has now shifted to almond milk and the percentage is shown as 7%. Therefore, under the dairy production of almond, UK market will be another opportunity for Select Harvests. Discussing the different international strategies that Select Harvest can implement in entering the international market, they can have following strategies as to enter the market. Based on an article published on almond market, it reveals that based on the profitability and the increase of demand in the market, it is better to continue on developing new innovations on the products. As American market is towards that, it is better that Select Harvests can have product differentiation as the strategy to the U.S market. Further, according to Blue Diamond’s strategy, they will enter into the market with having a new product portfolio which is having a high-margin almond products that explains the customers value.
That is also another strategy that Select Harvests can used in internationalization. Basically, they can reduce the inventory levels and can increase the growth level of the products. According to the research done by Rao-Nicholson & Khan, they discussed that considering the global marketing strategies of emerging market firms it is better to transfer of capabilities from more highly developed host markets to the home markets. Then it will make the stakeholders to rely on higher level of integration of the acquired subsidiary. If we consider about the theoretical aspect of international strategy, in Porter’s Diamond of national advantage, it is also discussed about the factor conditions. Under that, it highly concerns on the skilled resources, technological innovations and developing new methods to gain the national competitive advantage. Therefore, it is better if the host country is having more capabilities such as skilled labour or new technologies or if they are having more scarce resources which they need in their production process, then company can adopt them with the establishment of the company. Based on the research done by Stal et al. the firms who decided to export products can use acquisition of a company, setting up plants as greenfield investments or joint ventures with local firms will be the best suitable internationalization strategies that they can take. So, Select Harvests can also use the same strategies to enter the international market.
The most appropriate and inappropriate mode of entry to the international market
International entry mode strategies of a company help a firm to expand their business processes in a foreign country. When a firm access to the international market, it helps the company to upgrade their knowledge, skills and development with expanding new effective marketing strategies to launch their brand in the new entrant county. Even though there are more entry modes to the international market, the most appropriate mode of entry to the international market for Select Harvests is business incubation. A business incubator is a company that helps a new startup on growing their business by providing their services and management training. When selecting business incubation as a foreign market entry method, the experience of the firm who helps Select Harvests will press the company towards a right direction of the market. This entry method will be quick start to adopt to the new market and also this will cost less to Select Harvests compared to the other entry modes. Considering the risk factors of this method, it is also less because Select Harvest need to have limited internal resources. Also, in this model the culture and the language, market knowledge, competition in the foreign market, brand awareness and all the other factors are limited as the company who is supporting has the knowledge of these areas will provide to take the advantage towards the success of Select harvest in a foreign country. The control over the business operations are also high in this method compared to the other market entry methods. In this method the control will be holding by the owners not by any agent or distributor so that Select Harvests can ensure that the company objectives are achieving along with reliable information, market conditions and with the required quality.
Further, Select Harvests can maintain a good network within the industry from the initial stage of the entry because with the platform of the supportive company will help to build new networks within the region. This method is recommending as the best method for Select Harvests because the new target market of Select Harvests is different continents so that they need to follow different strategies to enter to the market. But if they are doing business incubation then even though they are doing business in different continents they can still manage everything accordingly. Considering the inappropriate mode of entry to the international market for Select Harvests, there is no any inappropriate method. Instead, some mode of entries will have more disadvantages to Select Harvests compared with the others when enter into a new market. Using international agents and distributors as mode of entry will give Select Harvests more disadvantages than the other entry modes. Agent is an individual contracted with the business on behalf in a particular country. If Select Harvests take international agents, then sometimes company must not work with other agents in the same region for the same product which will be a disadvantage to the company. Further, they will always negotiate with the prices where select Harvests could not sometimes cover the target profit as they cannot maintain their profit-margin per product. Same as that profits will be reduced as the payment methods for the agents are on commission based payments. When Select Harvest selects international distributor as the entry mode, then also they will have to face on lots of disadvantages. There will be loss of control over pricing and promotion as distributors are always try to make more savings from them. In terms on taking the risks as distributors will expect more discounts form the company it will be a disadvantage to Select Harvests.
Further, as same as agents, there should be a commission structure to motivate the distributors. That will be the best way that Select Harvests can make the distributors happy. But when considering the commission payments, it will be a disadvantage to the company because every distributor tries to make more sales and promotions in order to make more money which will ultimately make a disadvantage in the profits to Select Harvests. As distributors need more time to make the product available in the market Select Harvest need to look for more experienced distributor in the region. Sometimes even though the distributor has the best experience in the region, still they will fail because according to the product that the company is providing to the market it will depend. Therefore, this will be an inappropriate method for Select Harvests to enter the market.
Recommendations for the future strategic direction
When considering the future direction of almond industry in the international market, the best way will be to establish the almond industry with more economically, environmentally and sustainability. The sustainability platform will be more appropriate when considering the almond market for Select Harvests. It can be a combination of social responsible crop as well. Further, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABAREC) outlook 2018 the agricultural commodity report is also revealed that almonds need a sustain growth based on the rapid growth in the international industry. As Select Harvests is having orchards, they can use more sustainable methods in expanding the orchards according to the demand of almonds in local and global industries. Specially they should consider on the water management because company need more supply of water to the orchards. According to the research done by Tan, George & Comino (2015, p.696), they identified that an adaptive management system will be suitable for the agricultural business in Australia. It further discussed that according to the context which is in Australia or outside of Australia, if the company know how to adopt to the different eco systems, ground water sustainability and food security in the different regions that will help the company for making their processers in a more sustainable manner.
Select Harvests need to look into the weather condition because it is one of the major thing that the company has to look into when they are entering into new international markets. Climate changes can happen in anywhere at any time. Therefore, Select Harvests need to look into those while it could be varied in different contexts. As the company is look into U.S market, U.K market and some African regions they will have different climate changes at a same time. If Select Harvests need to resolve them, then the best strategy that they can look into is adaptation strategy. The impact on climate change will be based on how farmers adopt and adjust activities like planting dates, labour resource and fertilization.
For the future of almond industry in international context, Select Harvests can further look into nutrition farming. Nutrition farming is a system developed by Nutri – Tech solutions to ensure the future of agriculture. This method will help Select Harvests to regenerate their soils and to reduce the chemical usage. As they foreign markets are now more focusing on health and nutrition in the almond products, if Select Harvests can provide their products under the organic category, that will help the company to grab the market and to establish their products in the identified regions in the world. This system is more cost saving to both producers and consumers and also it will provide Select Harvests a market opportunity in the international context. Further, the knowledge and tools using in this farming will provide Select Harvests towards the direction of sustainability.
Conclusion
This discussion is basically considering the strategic implementation of Select Harvests in the international context. As the key product of Select Harvests is almond, it is identified that U.S. market with product differentiation, U.K market with almond milk as the consumers are shifting from cow milk to almond milk, North Africa, Middle-East and South Asia as the international opportunity markets for Select Harvests. Considering the appropriate mode of entry to the international market this report identifies business incubation as the best method and there is no any inappropriate method of entry instead, the mode that having more disadvantages is identified as the inappropriate mode of entry; international agents and distributors. It is recommended that having crops in more economically, environmentally and sustainability will be the most suitable for the future. Also, as they are into farming, they need to look into water management and climate changes. Also, it is recommended that having nutrition farming will help Select Harvests more towards the sustainability.
