Australian Food Processing Industry - Case Study Example

Australian Food Processing industry Student Name Institution Supervisors Name Date Table of Contents 1.0 Introduction The Australian country has been lauded as being one of the democratic countries in the business world. It has a stable economy and a sound political system with a low risk for business environment. It has a government policy and regulation that is very transparent and accommodates the financial practices of any industry. The legal system of the country is also very transparent and provides for both the statute and common law that allows for both the domestic and foreign businesses to operate. This means that foreign organisations are able to stand the same stand when it comes to legal issues. This is good for the businesses in Australia (Schulz, 2013). This paper analyses the Australian Food Processing Industry and its possible expansion to the United States of America. The analysis wills assess the possibility of the industry expansion by looking and the porters fiver forces in a business environment and the swot analysis of the Australian Food Processing Industry in the current situation. The Australian Food Processing Industry is characterised by several products. The country in its own way boasting of having an assortment of climates and soils sorts. When though at times the Australian weather is mostly dry. The country also experiences high rainfall in the coast areas, northern tropical districts, dry semi-dry climates, most of these climates have been utilised for producing food for harvest. The country also utilizes technology in order to increase food processing in the country. The country is also a steadfast provider of food in the global markets (Shiva, 2001). The food processing industry in Australia can be said to be one of the most profitable industries in the country. The businesses has been fairly stable in the recent years even during the macroeconomic conditions of 2008-09 during the fall of the global economy. The food Processing industry has been seen to survive this wave to date. This means that the Australian Food Processing Industry has enough possibilities to expand to new markets like the United States and also increase profits of its established ventures. By entering in to the profit of the Australian food processing will mean that support will be needed to ensure that the industry is able to govern itself throughout (Harrington & Harrington, 2005). Over the years, the Australian Food Processing Industry has been expanding. To add on this, businesses that deal with food have seen a remarkable growth over the last decades making residents enjoy dining as part of living. In the last 5 years for example, the country is reported to having served more than 2 billion takeaways and means which have been served by the fast food chains and other autonomous outlets. This represents more than 44% of all meals that are served in the business service division (Fabozzi & Markowitz, 2011). Currently the country has over 17,000 fast food outlets throughout Australia, these accounts for 28% of the commercial food service outlets (Hofstede & Hofstede, 2004). The amplified recognition of the food processing industry in Australia proves that it is an industry with the ability to grow and expand to new markets in the United States. The following sections are going to analyse the food industry using porters’ five forces and a swot analysis of the food industry as it stands (Varma & Budhwar, 2013). 2.0 Institutional Framework, Industry Situation Analysis 2.1 Porter’s Five forces Porters five forces is a business strategy model that is used in analysis the business competition of an industry whenever the industry seeks to expand to new markets. The porter’s five forces of the Australian Food Processing Industry can thus be analysed as follows. a) Threats of new entrants Threats of new entrants in a business are usually considered in relations to the growth of the food industry. This lies in the fact that the strategy of the competitor could easily duplicate the strategies that the food industry in Australia might be using in its effort to expand to the United States. This is usually a threat since the industry that might duplicate the Australian Food Processing Industry might easily duplicate and even do better than the Australian industry itself. For example there could be an industry in a place like United Kingdom which has seen potential growth in the United States (Armstrong & Kotler, 2001). This could pose as a threat. And even if there are concerns with regard to legal requirements as the industry expands to the United States for business the industry should expect challenges and still competition from other major competitors who have already set ground in the United States. For example Wal-Mart, Lidl and Tesco (Schulz, 2013). All of them have interest in the United States and there Australian Food Processing Industry will have to know how to counter the competition which will rise due to new entrants in the market (Advice, 2010). b) Threat of Substitution Threat of substitution is also high in the United States as compared to if the industry would have expanded to a country like India or Mexico. This is because there are a number of competitors with big reputation in the food industry that give the same type of service and products to the customers in the United States. The cost of switching from one industry to the other could also be very difficult for the customers in the United States who may be loyal to the products in the United States (AustralianGov, 2014). The customers may not be satisfied with the services that the food industry in Australia may be willing to introduce, this means that they will easily go back to the normal product or switch to another better one again. Other customers and distributors may also be price sensitive, it will be important that in this situation, the industry ensures that it does not charge its products so high as to scare away the customers or so low that people doubt the credibility in the product (Fabozzi & Markowitz, 2011). The Australian Food Processing Industry should in the first place introduce friendly prices for their products so that they maintain that cutting edge with the customers as this will make people set their mind in Australian food. c) Bargaining Power of Suppliers The bargaining power of suppliers in the food industry is considered low in comparison to the one in Australia. However there are a number of suppliers in the United States who offer the same type of services and to a global chain like the one found in Australia known as Aldi. There will however be a number of options that the industry should consider. For example suppliers may be willing to go for cheaper prices as this will help them to lower their prices and products (Shiva, 2001). Backward integration of the Australian Food Processing Industry when looked at closely can be said to have lower bargaining power of suppliers. This needs to be reversed in order to make the industry compete favourably with other industries in the United States (Fujii, 2014). d) Bargaining power of buyers The bargaining power of buyers in the Australian Food Processing Industry is currently moderate. There are however a number of buyers nationally and internationally in relation to the number of product options which are available to the customers making it difficult to switch cost. For this reason, most buyers will end up switching from one product to the other. This could also reflect in the industry as they move their markets to the United States. However it is a basic fact that most people are usually price oriented (Griffin & Moorhead, 2013). This means that the Australian Food Processing Industry should ensure that it maintains its tradition of being price friendly even as they move to the new markets in the United States as this will ensure that the tradition of buyers is maintained even in the new markets (Varma & Budhwar, 2013). e) Competitive rivalry There is a high competitive rivalry in the United States than in most states that the Australian Food Processing Industry has expanded before. This is because the United States has a number of big markets players in the food industry which could be a major threat to the Australian Food Processing Industry. The major players also provide for services which are the same as those that the Australian Food Processing Industry plans to introduce (Griffin & Moorhead, 2013). In addition, there could be an increase in competition from other global giants in the new future. This will also make business competition stiff for the Australian Food Processing Industry. This is because the strategy that the industry may use for its products might be similar to that of the businesses in the United States. In addition, the competitors might also be producing better products and packages and services than those of Australia. The quality of the products from the rival industry could be even higher (Harrington & Harrington, 2005). 2.2 SWOT Analysis Strengths The industry can be said to have a strong base in Australia and other countries in Europe for a number of years, this means that it contains a strong image. There is always reputable quality in the Australian Food Processing Industry as compared to other countries. The industries practices a simple organisational culture and unique organisational system which enables it to operate smoothly There is a high control over the quality of products. The price of the products is also low. This works well for the industry. Due to strong image of the Australian Food Processing Industry, there is little money spent in advertising. The industry records good working relationship with customers. The is a department for research and development which is vital for the expansion of the industry. The industry ensures strong quality standard which they have continued to set over the years,. There is high buying power and control of costs of the Australian food products all over the world. There customers find value in the food industry due to low costs and cost cutting. There is regular testing of products before they are released to the markets. Weaknesses There industry as a limited range of products that could be transported to the United States, this is caused by poor or no product differentiation. There is low brand or name loyalty in the United States because some manufacture might be reluctant to associate them with the Australian Food Processing Industry. The usage of the manual system in processing products also reduces the level of efficiency. This could be a weakness as the expand to more advanced United States systems. There is a limited usage of technology in the food industry; this could be very different from its competitors in the United States. The industry depends so much on manual labour and the fact that it could lack well trained staff could pose as a weakness. There is little advertising that is focussed on the customer needs. This could not go well with the new customers in United States. The ability to borrow is also low from the market as most of industries in the United States have product in their names. Opportunities The industry can capitalize on the lowest cost positioning. It has the chance to expand to the new market and make a name out of it. It needs to spend more on advertising so as to attract customers in the United States. It should diversify its services so as to accommodate the United States culture. The value of the United States dollar is high. Meaning that it could do business, and increase its profits as compared to if the industry opened business in another country of less dollar value. Threats The effects of globalisation will attract new competitors in the United States which will not be good for the Australian Food Processing Industry. The competitive advantage with regard to prices could be very short lived as new entrants may introduce service with the same strategy or better strategy than theirs. . 3.0 Conclusion Looking at the above five forces it can be concluded that the threat of new entrants is very high in the United States. Also the threat of substitutes due to the fact that the United States is already an industrialised country. The bargaining power on the other had appears to be low and also moderate. The competitive rivalry also stands high in the United States as compared to other countries. This means that profitability in the United States will be considered to be low in the Australian Food Processing Industry unless some of the factors discussed above are put in to consideration. 4.0 Recommendation It is recommended that the industry needs to invest high in advertising and creating a culture that will embrace the United States lifestyle. It should also work to create loyalty from customers during the time that their prices are the one thing that makes them gain advantage over other American industries. Lastly they should consider the five forces and find ways to counter any threat derived from this and also build on the strengths and opportunities. References Advice, 4., 2010. Understanding Modern Portfolio Theory And Investor Options. 401k Investment 401k Plan. Armstrong, G. & Kotler, P., 2001. Marketing: An Introduction (11th Edition). pengiun. AustralianGov, 2014. Corporations Act 2001. 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