International Expansion Opportunities For Australian Agricultural Company In Brazilian Market
International Business Opportunities in Brazilian Market
Business expansion is very important for the growth of every organization that wants to stay competitive in developing market. Without this, an organization cannot increase its brand presence in global business market. In this process, the organizations need to make most appropriate decisions on the selection of perspective market and market entry modes (Robson, 2015). The major objective of this report is to discuss about international expansion opportunities for the chosen organization i.e. Australian Agricultural Company.
Australian Agricultural Company (AAC) is an Australia based company which owns and runs the feedlots and farms covering around 7 million hectares of land in Queensland and Northern, approximately 1% of Australia’s land mass (Bloomberg, 2017). The company is operating its business in Australia successfully so now it is planning to expand its business in another international market i.e. Brazil. This report focuses on the international business opportunities which the chosen organization can have in Brazilian market. It outlines the international strategies which can be adopted by this company when expanding its business in foreign market. Moreover, there is the discussion about both most suitable and inappropriate market entry modes to the foreign market. At the end, recommendations are provided for the future strategic directions of the Australian Agricultural Company.
Australia is one of the largest agriculture products producers and exporters across the world. Agri-business sector in Australia covers a large market share in this country. It can be stated that this nation produces more than $155 bn per year from the food agri-business and related sectors and it covers 12 percent of Australian GDP. In this country, farmers have 136,000 farms which include 60% of country’s land. There is a mixture of dry land and irrigation agriculture (Australian Trade and Investment Commission, 2018). Among all segments in agriculture sector, beef segment is one of the chief sectors which Australian Agricultural Company belongs to. Australia is among top three largest beef exporters all over the universe. Australian food-focused agribusiness sector has a significant place in Australian economy. This sector has a sound financial record in attracting global investment all over the supply chain of agricultural products. It is a $256 bn dollar sector and it is growing very fast. As a basis of Australian industry, agribusiness and food sector are the major parts of identity of Australia (Ardeshiri and Rose, 2018). There are various leading players in Australian sector like NAPCO, Kidman and Co., Australian Agricultural Company Ltd and Consolidated Pastoral Company etc.
International Strategies for Australian Agricultural Company
Australian Agricultural Company is one of the major players in this sector that owns and manages many properties, feedlots and farms in Queensland and Northern Territory. Additionally, it is engaged in finishing, breeding and processing of cattle and this company also grows food crops. It also grains to the assist the livestock production. It maintains a cattle herd that includes around 500,000 cows (AACO, 2018). Now, the company is planning to expand its business in Brazilian market.
While any company plans to expand its business in any new and international market, it explores different opportunities which can provide it different opportunities. It can be stated that Australian Agricultural Company can have various opportunities while spreading business in Brazilian market. Some of these international opportunities are discussed below:
Brazil is among the top 10 countries in terms of consumption of beef products by its population. By conducting the analysis, it is identified that consumption of beef in this market is estimated 7.585 million metric tons in the year 2016. As mentioned above, Australian Agricultural Company is world leading producer of agricultural beef products and it is the largest producer of beef in Australia. So, it will be favorable for AAC Company’s business to explore business opportunities in this country. The government of this country is supporting the production and exporting of agricultural and beef products. This is the major reason that country is able to become the 2nd largest commercial beef producer all over the world, behind United States (Greenwood, Gardner and Ferguson, 2018). By expanding its business in Brazil, Australian Agricultural Company will be able to get significant opportunities in international market. Currently, this company owns more than 500,000 beef cattle which will help it to fulfill the needs of Brazilian population toward beef consumption (Cook, 2018). It will assist Australian Agricultural Company to enhance its brand presence and overall revenues along with sustainable competitive advantage.
Technology is one of the major reasons behind the growth of food and agriculture sector in Brazil. The country is involved in enhancing the soil to standard needed by agricultural utilization, producing pasture varieties and new crops and enhancing the productivity of field animals, specifically dairy and beef cattle. Australian Agricultural Company can have various international opportunities in this market by upgrading its beef processing and other farming operations with the assistance of advanced technology and modern farming techniques. Brazil is a technologically advanced market so AAC will have various opportunities to update its operations. It will assist the organization to decrease the costs of agriculture and enhance the quality of beef (Cavallo, et al, 2014). The major reason behind the selection of Brazilian market for AAC is its agricultural potential and role of new technologies in enhancing the productivity of farming operations in this country.
Market Entry Modes for Australian Agricultural Company
Food and agribusiness sector is one of the most profitable and significant sectors in Brazil because this nation has massive agricultural resources available to it. The most significant products in this country are such as beef, cocoa, coffee, corn, wheat, soybeans, sugarcane, rice and citrus. This sector covers one third of the total employment rate of Brazil. Among all the segments, the fastest growing segment is meat and beverages that is around 40% of total food agribusiness sector in the nation (Mueller and Mueller, 2014). As sixth largest economy in the world, Brazil is on the third rank among major agriculture exporters in the world. It indicates that the country has experienced a significant growth which will support the growth and profitability of Australian Agricultural Company. This company will be able to increase its customer base by operating the business as per Brazil market trends and changes in the needs and demands of Australian customers. It can launch its food and agribusiness products in Brazilian market to deal with the competing brands both in Australian and Brazil. This is the nation with a variety of targeted customers and farming lands which will provide outstanding achievement in agro-food business (Galanakis, 2018).
When any organization plans to spread its business in foreign market so it needs to formulate and implement effective international strategies so that it can stay competitive in new market. Same as, Australian Agricultural Company needs to adopt some international strategies to compete with the existing players and increase its profitability in global agricultural market. International strategies for Australian Agricultural Company are stated below:
One of the major international strategies which Australian Agricultural Company can use is multi-domestic strategy. This is a strategy by which organizations try to attain maximum local responsiveness by modifying their product offering and marketing strategies so that they can match the conditions of different countries. This is a suitable strategy for AAC as it can expand its business in Brazil by analyzing the needs and demands of Brazilian customers. Before entering into Brazil, this company should conduct market research so that it can understand the trends and demands of agricultural products in country. After that, it should customize its beef products and services accordingly so that it can attract more people (Engel and Siczek, 2018).
Transnational strategy is another international strategy that can be utilized by AAC while spreading its business in international market. This strategy will combine both global and multi-domestic strategy. Under this international strategy, AAC will use its management tactics for achieving increased efficiency and profitable economies of scale. By using this strategy, AAC will offer its agricultural and beef products in all the markets by using a single way (Swoboda, Elsner and Morschett, 2014). In Brazil, this strategy will support significantly as it is already agricultural potential market where it can use the same strategies as it is using in Australia and New Zealand. The company can use transnational strategy to enhance the effectiveness of its business.
Conclusion
In addition to above strategies, AAC can implement global strategy as its international strategy. It can use these services when developing the operations in Brazilian market. Under this, this firm will make more emphasis on Brazilian market than its local market. It will help the organization to excel its customer base and profitability in world food and agribusiness sector. It can decrease the costs and approach a larger population all over the world (Laurance, Sayer and Cassman, 2014).
Thus, this organization can use above international strategies while expanding operations in Brazilian market.
Before entering into new market, Australian Agricultural Company will determine some specific market entry modes which are given below:
Most appropriate modes for AAC in Brazil are stated below:
Exporting
Nowadays, Australian Agricultural Company is one of the largest producers of cattle and beef. Now, it is able to become the largest Wagyu beef exporter all over the world. Brazil is one of the largest economies all over the world so it will be the most appropriate market for the expansion of AAC’s operations. It can use exporting mode to enter in this market. Under this mode, the company can use two types of exporting modes i.e. direct exporting and indirect exporting. AAC can use both of the methods as it can export agricultural and beef products directly from Australia to Brazil by using direct exporting. Furthermore, it can use indirect exporting in which it can use intermediaries and third parties (Game and Apfelthaler, 2016). This will be the most suitable entry mode for AAC as it can help the company to establish its brand presence without setting up the premises.
Green Field Investment
Green Field investment is one of the suitable entry modes that assist the firm to establish business in international country. To start its business in Brazil, AAC can use this market entry mode. Under this, it can set up its facilities in Brazil and develop more opportunities in new international market. If AAC will adopt this type of market entry mode then it will be able to have various tax benefits Brazilian market (Richards and Arima, 2018).
The inappropriate modes of entry for AAC in Brazil are discussed below:
Joint Ventures
Joint venture can be defined as a business venture where two or more firms enter into an agreement to participate in the revenues and profits. This is not much appropriate entry mode for AAC as all the involved parties need to share the profits and revenues. It can affect the profit earnings of company. There may be issues and conflicts among the firms while operating business on global level.
Franchising mode
Franchising mode can be an inappropriate entry mode for AAC as franchisee can work as competing brand in the coming future. Moreover, a single firm can have adverse impact on the overall brand image and financial performance of company (Schierhorn, et al, 2016).
It is hereby recommended that AAC Company should focus on using effective strategies for future strategic directions. It should implement differentiation strategy to spread its operations in Brazilian market. It should make efforts to differentiate its agricultural and beef products from other players in the industry. Moreover, diversification can assist the firm for business development and expansion. It will provide AAC to get a good chance to compete with international competitors. In order to stay competitive, AAC should make changes in its pricing strategy. It should lower the prices of its beef products so people in Brazil prefer to purchase its products. To enhance its brand presence, Agribusiness Company should implement effective promotion strategies so that it can approach a larger population in Brazil. By conducting market research, the company should analyze the needs and demands of targeted customers and fulfill their needs. It will help the organization to enhance its revenues and profitability in global agribusiness sector.
Conclusion
From the above analysis, it can be concluded that Australian Agricultural Company is the largest agriculture and beef producer in Australia. The company has a great potential to expand its products in international market. In this report, it is planning to spread its business in Brazil that may offer various international opportunities to this company. The organization will use effective international strategies which will help in establishing its business in foreign country. AAC will use effective market entry modes which will assist it to set up its business and generate more revenues. It is found that these entry modes will help this company to approach a larger population in new market and increase its customer base. AAC will be able to set up its operations in Brazil by practicing joint venture and franchising mode. In the future, the organization should focus on formulating new and effective strategies so that it can stay competitive in Brazilian agricultural industry. These business strategies will support this firm to gain sustainable competitive advantage against Brazilian agriculture industry players. Moreover, it should go ahead with the given recommendations so that it can flourish its business in Brazilian market and other international markets. Thus, this firm should focus on developing its international and business strategies in the future.
References
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Australian Trade and Investment Commission 2018, Food and Agribusiness, Available from https://www.austrade.gov.au/local-sites/singapore/contact-us/food-and-agribusiness [Accessed on 3 October 2018].
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