International Strategy Operation - AGRANA - Coursework Example

International Strategy Operation - AGRANA - ID Number & Total Number of Words 199 Introduction This study will closely examine and analyze the case of AGRANA. After discussing the characteristics of market competition based on an industry-based view, this study will discuss the significance of resource-based view particularly with regards to AGRANA’s impressive growth rate. Eventually, this study will discuss the institution-based view in identifying the opportunities and challenges that has triggered by the company’s decision to integrate the EU markets in both the Western Europe and the Central and Eastern Europe (CEE). Market Competition Analysis based on Industry-Based View The market competition in the case of AGRANA is characterized by the presence of regional and global integration. As a small-scale company in Austria, AGRANA had to compete with other larger and similar companies. Prior to 1989, AGRANA encountered a lot of business challenges before it was able to successfully compete in the global markets. Regional integration is referring to the process in which companies located in different regional states are actively interacting with one another in order to promote both economic and political security1, 2 whereas global integration is pertaining to the process in which the company is able to benefit from the act of combining the different business activities that are located in different countries around the world3. Through regional and global integration, AGRANA was not only able to gain benefits from economies-of-scale but also created more competitive advantage. Ever since the CEE decided to open its market to other regions and in the world market, the scope of AGRANA’s target market also increased significantly. Through foreign direct investment (FDI), AGRANA took the opportunity to expand its manufacturing plants in different regional and international sites4. Since AGRANA was selling homogenous products, its target buyers can easily purchase the same item from other companies. Back when the scale of AGRANA was small, the bargaining power of its buyers was high. Therefore, the company was determined in searching for ways on how they can effectively cut down its operational costs without sacrificing the quality of the products. To compete in the market, the company had no other choice but to improve its marketing and production strategies to create cost and differetiation advantages5. It means that through product differentiation, market segmentaion, the use of generic strategies, and continuous reduction in the actual fixed costs of the busienss6, AGRANA was able to keep up with the tight market competition. For example, instead of focusing on improving its sugar and starch manufacturing process alone, the company decided to implement the practice of sanitization throughout its manufacturing plants. The company also expanded its business operations in the processing of fruits, agricultural products like cereals and beet, beverages, and biofuel such as the actual production of ethanol7, 8. Due to global integration, multinational companies like Coca-Cola, Pepsi, and Nestle decided to enter into a partnership agreement with AGRANA. As a result, the brand equity of AGRANA increased in the process. This strategy made it easier for AGRANA to market its product in different places without the need to invest much on logistics. It also increases AGRANA’s ability to compete with large-scale competitors in different European countries. Under the AGRANA’s new management, the company was focused on producing a diverse products which are to be sold at highly competitive prices. As part of AGRANA’s business expansion plan, the company acquired several companies in different countries9. Eventually, the continuous business expansion of AGRANA was the key behind the effective reduction in the market competition. To keep its fixed operational costs low, the company maximizes its economies-of-scale and restructured some of its corporate divisions to enhance the flow of its daily operations. Other than improving its management strategies, the company also adopted the use of a tripod strategy (i.e. institutional, industrial, and resources)10. As a result of reducing its fixed operational expenses, AGRANA was able to continuously increase its sales and annual gross profit. Impressive Growth Rate based on Resource-Based View The VRIO technique can be used to help the company create a sustainable competitive advantage11. The impressive growth rate of AGRANA can be explained using the VRIO framework. Despite the tight competition within the regional and global markets, AGRANA managed to create and increase its corporate value not only by being able to exploit external market or any future business opportutnities but also effectively utilizes its intangible and physical resources to improve the quality of its product line. This strategy made the company able to win a lot of loyal customers. Likewise, the company was able to minimize the risks of external threat. By continuously acquiring similar companies in prime locations in different countries, AGRANA was able to gain benefit from the actual reduction in the levels of market competition. Aside from being able to win the loyalty of its 8,000 talented employees, AGRANA was able to increase its employment engagement. Therefore, the company was able to deliver a high quality service to its valued customers. Furthermore, AGRANA’s decision to expand its product diversification increases “rare” as one of the company’s competitive advantage12, 13. Up to the present time, very few companies are into the manufacturing of ethanol products. This gives AGRANA the competitive advantage as compared to its close competitors. To ensure that the company will have suffient supply of raw materials, AGRANA’s top management was firm enough not to depend only on local supply of goods. Instead, the company has been importing some of its raw materials from accredited foreign-based suppliers. Using this strategy, the company was able to reduce the risk of potential bottle-neck due to inavailability of raw materials. Thus, maintain a smooth flow in its production line. To avoid the risks of potential legal implications in relation to environmental pollution, AGRANA’s top management implemented a campaign for environmental sustainability. Through careful planning, the company was able to effectively implement some policies on how the company will be able to manage its waste products and reduce the rate of pollution. Institutional-Based View on the Opportunities and Challenges CEE’s decision to open its door for regional and international integration increases the business opportunties for AGRANA. By implementing its regional and international integration policies, AGRANA was able to enter into a partnership deal with other multinational companies that are already well-known and established within the global food industries. Furthermore, this strategy also widens AGRANA’s target market and existing customer-base. Despite the business advantages of regional and international integration, EU integration can triggered a lot of challenges on the part of AGRANA. Aside from regulating the market prices of basic agricultural products like corn and wheat, each member of the EU nation is also regulating their own tariff barriers14. In other words, the tariff rates in EU can be unpredictable at times. To protect the company from the potential business consequences of continuously fluctuating tariff rates, AGRANA should make it a habit to purchase excess raw materials in advance. However, this option can somehow make the company unable to use a portion of its excess funds on other equally important business expansion plans or other related projects. The only thing good about this strategy is that the company can effectively manage controllable down-time errors within in its manufacturing operations. References Agrana. ‘Agranas Strategy’. 2013, viewed on 3 January 2013, J. Barney, Gaining and Sustraining Competitive Advantage. 2nd Edition, Prentice Hall, 2002, p. European Commission. ‘Taxation and Customs Union’. 2013, viewed on 3 January 2013, J. 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