Macro and Micro Environment Affecting Beef Industry Company Samex - Case Study Example

Table of Contents Introduction 2 PESTEL Analysis 2 Porter Five Force Model 8 Market Structure and demand and supply analysis 10 Conclusion 12 References 14 Introduction Samex is an Australian company which exports meat all around the globe. The company was established in 1978 where it started exporting meat and has become a leader in exporting red meat. The business started with the intention of exporting small stock which included sheep, lamb and goat. Over the period of time the business grew and Samex has started to export beef and poultry along with other products. The business has grown over the period of time and the organization has become one of the major red meat exporter in the world. This paper looks at analyzing the macro and micro environment affecting Samex. Samex which is looking to operate in China and Korea needs to understand the manner in which the macro and micro environment would impact them. This would help to develop appropriate strategies through which the overall risk can be reduced. In addition to it the paper also looks as determining the market structure of the products and the demand and supply in China and Korea so that the future potential can be identified. Carrying out the analysis will help to understand whether the overall framework will be beneficial or not. The process would also help Samex to be better prepared for the different contingencies and would be better placed to deal with any situation which the business environment would present. PESTEL Analysis The analysis will look at the manner in which the macro environmental factors impacts Samex and the strategy they need to procure so that they are able to improve their chances of being successful. Political & Legal Factors Legal and political factors determine the legal boundary within which organizations should operate and it is imperative for all players to work within it. The operational aspect of business is governed through legal ways. This increases the need and importance of having a proper legal process for carrying out operations so that the business can be carried without any hassle (McDonald, 2001). Political factors provide opportunities for business players but also presecribes different rules which need to be followed and achieved. Samex has a proper constitution in place which prescribes the rules and guidelines which people working and associated with the company has to follow. It has a code of conduct, dealing policies, shareholders policies and other policies which lay the guidelines which need to be followed. This policies and rules ensures that people associated with the organization work within those and Samex as a result has been able to comply with the legal requirements. Samex while looking to work in China and Korea needs to ensure that they follow the legal requirements. Since, Samex will be operating in an international destination it is important that export related rules are followed for Australia and similarly import related rules are followed for Korea and China. Apart from it Samex needs to procure the important licence and authority from the concerned departments to carry out business. The organization also has to adhere to the different corporate governance norms, rules and legal matters so that the business can be carried out without any difficulties. Technological Factors Success of a business is largely dependent on the ability of the business to use technology as it helps to achieve a greater degree of efficiency. Technology helps to transfer information quickly among the different stakeholders present in the value chain thereby increasing business effectiveness. This has been taken care by Samex as they have used technology in their working application thereby garnering positive results. Samex uses self check out machines which provides customers with an opportunity to look at different products and carry out the entire function themselves. Along with it different software are applied which has helped to deal with the bottlenecks and improve overall effectiveness of the working system. In addition to using different online payment option and ensuring home to home delivery has helped Samex to reduce the waiting time and improve the mechanism through which work was carried out. Samex has understood that the future belongs to mobile and has thereby developed applications which are compatible on mobiles enabling customers to carry out their orders. This has eased the process through which business is carried out and has maximized the overall growth opportunity. The use of technology by Samex is seen in the field of online transactions, brick mortar and mobile applications. Samex while looking to work in China and Korea needs to integrate technology further so that business can be carried out at ease. Using technology to sell goods and developing proper software will help to ensure that the goods will be delivered on time. Apart from it using technology like just in time will enable timely delivery of goods and would help to keep track of the goods supplied. Working in different directives and looking towards improving the overall effectiveness will play a key role in shaping the performance and would help Samex to work in an effective manner. Environmental Factors The last decade has highlighted the need and importance of being environmental friendly. Environmental considerations are given importance from the perspective of production, packaging and suppliers practices. Along with it the timing when the goods reaches customers are also considered an important aspect of environmental concern. The role of environment increases in case of Samex as they produce meat products which are to be eaten fresh and rotten meat needs to be disposed appropriately so that environmental harm is reduced. This has thereby raised the need and importance of considering environment properly. Samex with this regard has taken the responsibility of influencing the retail supply chain so that the entire process becomes more sustainable and the business is able to reduce carbon footprints. The strategy of Samex is towards doing the right thing at the right time has helped them to look after the environment. Samex has set small goals where they look at using ethical and sustainable sources, reduce wastages and reduce water wastage thereby contributing towards the society and the environment (Smith & Chaffey, 2001). Samex has also looked at developing green stores where eco friendly ways to light and refrigeration has been followed so that overall carbon footprints get reduced. Apart from it Samex has tied up with different organization to ensure that the wastage is used and minimum environmental harm is done. In addition to it Samex looks at having eco friendly packing by entering into collaboration with the different partners so that overall concern towards the environment rises. Samex has to carry out similar strategies in Korea and China. The organization has to ensure that they remain ethical and carry out different process keeping in mind the concern for the environment. Samex has to ensure that packaging is consistent and concerns for the environment are given prevalence. Apart from it ways to reduce carbon footprint needs to be identified so that appropriate ways to control carbon emission is achieved. Since, the government of different countries are very stringent with this area and Samex already has a mechanism which aims towards preserving the environment so the overall process will help Samex in their endeavour in Korea and China. Economic Factors The economic factors play a great role in determining the success of the organization. Samex operates in a sound economy of Australia which has enabled the business to be carried out without any difficulties. The different capital budgeting decisions taken by Samex are based on interest rates, exchange rate and other factors which determine the success of the Australian economy. Economic factors determine the purchasing power of people based on which business decisions are taken as goods are produced keeping in mind the purchasing power (Brassington and Pettitt, 2000). Australian economy is growing and the purchasing power of people is increasing which has helped Samex in its operations and enabled the business to be carried out successfully. Samex as a result has been able to use the economic conditions to its advantage which has helped the business to prosper. While working in China and Korea Samex will find similar economic conditions as both the economy is growing at a rapid pace. This will provide an opportunity to attract people as people purchasing power has increased and people are willing to spend. Apart from it a stable economy like China and Korea will help Samex to carry out business operations effectively. Since, the present situation interest rates and inflation is under control it will help the overall business to be developed on correct perspective which would thereby improve the business opportunities. This thereby presents before Samex a good economic opportunity where the different resources will be used in the most effective manner. Socio- Cultural Factors The social cultural factors keep on evolving which thereby forces companies to make changes in their beliefs and actions. Samex has been able to deal with the different social cultural factors by integrating proper use of technology and environmental initiatives. Samex with the regard has ensured faster and fresh delivery of products by speeding the mechanism of delivery so that the products which are supplied to customers are fresh. The distribution centre which has been developed by Samex has helped them with this aspect. Samex has also been able to understand the wants of customers as their red meat goes well with customers. They have understood what the customer wants and have made timely changes so that customer satisfaction can be enhanced. Producing red meat has helped them to deal with customer needs as they have been able to identify the required framework through which supplies can be improved. This will help samex in China and Korea as people there prefer red meat. Since, the business specializes in the production of red meat it will meet the social cultural requirements of people in China and Korea. People will also like the taste as the product has been made keeping in mind customer wants. In addition to it a long product line will ensure that the company will have offering for all section of the society which would thereby enable them to meet the expectations of customers in a better way. Samex has to be careful slightly as the culture of China and Korea is different from Australia. They need to optimize their strategy and develop new strategy so that the understanding improves and the business is able to make changes based on the changing social cultural needs. Demographic Factors Demographic factors which include size, density, location, age, sex and other factors have a key role in shaping marketing decisions. Samex strategy with this regard has been directed towards people. The organization tries to provide fresh products from the farm and produces locally so that demographic changes can be accepted. The business has also resorted towards a mechanism of generational marketing which has helped to develop strategy for all kind of people. Samex needs to procure similar strategies in Korea & China. Samex has an advantage with regard to population as it will provide an opportunity to cater to a large chunk of population. This would help the business as a wide market will be available. Apart from it understanding the demographic and developing strategy will help to improve the overall business perspective and would thereby provide better results. Porter Five Force Model The model will provide a micro analysis where the different factors which are inherent to the organization impact the working style. This will help to foster a process and mechanism through which the business can look towards improving their chances of being successful in China and Korea. Threat of new entrants The threat of new entrant is low as there are barriers to entry. Since new players entering the business needs huge investment it limits the number of people entering the business. In addition to it people entering the business needs to get necessary permission from the government and other bodies which is a difficult task. This has thereby limited the number of people entering the trade. The threat of new entrant has increased slightly after 2011 particularly due to fall in price of competing prices like cropping and diary has thereby resulted in rebuilding of cattle herds in different part of the globe. However, the rapid decrease in cattle beef prices in 2015 and 2016 has reduced the probability of long term profits. In addition to it continuous climate volatility, changes in environmental constraints highlights that new players entering the cattle production business is unlikely. Threat of substitute The threat of substitute product is limited as substitution for red meat is limited. People have an option of consuming other meat products but since every meat product needs to be processed similarly and would require dairy farming which thereby limits the options for people. People consuming meat products generally don’t prefer to substitute it with other products as the preference and taste for those products continuously increases. This thereby has limited the threat from other products. The increase in price of cattle products and meat products have certainly forced certain section of the society to reduce consumption but still people have little or no option to substitute it with other products. Bargaining power of customers The bargaining power for customers is low as the customer base consuming meat products is high. Since people all around the globe prefer meat products as it provide valuable vitamins and nutrients it has made more and more people consume meat products. In addition to it different climatic conditions has also forced people to consume meat products which has thereby limited their bargaining power (Kotler, Linden, Stewart, Suzan & Armstrong, 2009). Irrespective of the price people prefer meat products as it has become a part of their diet. This has thereby reduced the bargaining power as a certain section of the society is always willing to purchase the products. Bargaining power of suppliers The bargaining power of suppliers is high as there are few big players working in the market. The bigger players control majority of the market share and are limited due to different barriers of entry which exist. Apart from it the rising cost of cattle feed and other products have restricted many people from entering the market. In addition to it the volatility in the market and changing business environment has limited the number of suppliers. This thereby provides suppliers with an advantageous position as they can bargain with the customers and ensure that they are paid appropriately for the different products. Degree of competition The degree of competition among the big suppliers is limited as there are few players in the market and have a huge market share. When we consider the unorganized sector then the degree of competition increases substantially as there are many players in the unorganized sector. This has thereby increased competition in the local markets but on the whole the degree of competition is limited. With different barriers to entry and high cost of investment the degree of competition is bound to remain low as new players will refrain from entering the market. Market Structure and demand and supply analysis The market structure which Samex should look at using in their endeavour in China and Korea is the franchise model. This form of model will benefit the organization as it will provide a framework where control over the activities can be exercised. It will help Samex to keep control of the inventories and ensure that products which are supplied are fresh. Since, both the countries have demand for the product so the model will help to reach every nook and corner of the country. It is imperative that the model chosen fits the present business structure and adopting the franchise model will help the business to grow in all areas. The process would entail towards improving effectiveness which would thereby help to achieve better results. Australia already exports meat and other dairy products to both Korean and China but the percentage of business is very low compared to other countries. The data below of 2015 shows export of meat products taking place in Australia (ABARES, 2015) It is clearly seen that Australian beef product is already been sold in China and Korea highlighting the presence of demand in the market. Since, Samex is one of the leader in red meat it will provide an opportunity to cater to a huge market and would provide an opportunity for the business to grow further. The following data further shows the amount of beef export taking place from Australia (DAWR, 2016) It is seen from the above data that the overall demand for Australian meat market is increasing which creates an opportunity to provide products in the other markets. The overall present condition shows that there is a ready market both in China and Korea which Samex can look to work on. It will provide the business with an opportunity to spread their business as the Australian meat industry is growing. While looking at the demand it is seen that China and Korea culture have a preference towards meat. The preference towards red meat is increasing as the climate of the region is such that it will provide an opportunity to meet the health requirements. Since, the meat products are of the finest quality it will help to determine the mechanism through which demand can be met by supplying proper products. This thereby shows an opportunity for the business to provide dairy and meat products so that the overall business scenario improves in the future. Conclusion The paper has thereby brought forward the micro and macro environmental analysis for the beef industry looking to work in Korea and China. Samex which is one of the leaders in the meat industry is looking towards garnering a mechanism through which they can enter the new markets. The market scenario shows that there is demand for the product as Australia already supplies meat products to China and Korea. This thereby provides an opportunity for Samex through which they can look towards entering the market and increase the overall business opportunities. References ABARES, 2015. Australian Bureau of Agricultural and Resource Economics and Science, Agricultural commodity statistics, ABARES, Canberra, 2015 Brassington, F and Pettitt, S, 2000. Principles of Marketing, 2nd edition, Prentice Hall, Harlow DAWR, 2016. Department of Agriculture and Water Resources, Red meat export statistics, DAWR, Canberra, viewed May 2, 2017, www.agriculture.gov.au/export/from-australia/quota/red-meat/statistics Kotler, P., Linden, B., Stewart, A., Suzan, B., & Armstrong, G. 2009, Marketing, 8th edition, Pearson Prentice Hall, Frenchs Forest. McDonald, M. 2001. Marketing Plans: How to prepare them, how to use them, 4th edition, Butterworth Heinenamm Smith, P.R. & Chaffey, D. 2001. E-Marketing Excellence: at the heart of E-Business, Butterworth Heinemann, Oxford, UK. Read More