Thomas Borthwicks and Sons Australian Pty Strategic Implementation

Thomas Borthwicks and Sons Australian Pty Strategic Implementation

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Thomas Borthwicks and Sons Australian Pty Strategic Implementation

Introduction

This paper will focus on Australia’s agribusiness food related sector while understanding and appreciating its strategic implementation. The company of focus will be Thomas Borthwicks and Sons Australian Pty which is a household name in the meat processing industry in Australia for over a century (Thomas Borthwick & Sons (Borthwicks), 2021). They manufacture products that are renowned for their consistency and quality. Besides, the brand Borthwicks has established it name in the export meat industry of Australia for decades. The main topics that will be included in this report include a general summary of the meat processing industry in Australia, the international opportunities for Thomas Borthwicks and Sons Australian Pty, the suitable international strategies for the company, and the both the appropriate and inappropriate approaches to enter the global market for Thomas Borthwicks and Sons Australian Pty. Finally, the paper will provide the future recommendations for the company’s strategic direction in the global context.

Discussion of Australian Food focused Agribusiness Sector

The agribusiness industry of Australia is a diverse sector that offers agricultural products and services across the country and even beyond its borders. The agribusiness sector of the country includes producers, manufacturers, processors, among others but the constant climatic changes is significantly affecting the agri-food patterns (Moshin, 2015). The products’ performance and scope within the agribusiness sector relies on the performance of the producers and manufacturers and their reactions to the external factors’ changes. The Australian government’s publication provides that plant’s size, financial capability, and the workers’ skills that work in the farms and processing plants significantly impacts the productivity in the sector of Agribusiness (Moshin, 2015). Furthermore, external factors such as technical progresses, climatic changes, market conditions, and government policies impacts the productivity in agribusiness.

Since technological advancements is one of the core drivers to the agribusiness’ success in Australia, it is revealed that investment in research and development significantly contributes to Australia’s agricultural productivity. According to Keogh and Heath (2018), agriculture is one of the largest contributors to the GDP of Australia and it is also the fastest economic growth industry. As of 2017, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) reported that general agricultural exports were estimated to have exceeded $50 million (Keogh and Heath, 2018). The company of focus, Thomas Borthwicks and Sons Australian Pty is one of the largest meat processing companies that supplies beef and meat products to various destination across the globe. The company exports to the United States, Europe, Asia, among others regions.

International Opportunities for Thomas Borthwicks and Sons Australian Pty

Based on the selected company, Thomas Borthwicks and Sons Australian Pty specializes in meat processing and is an abattoir which processes Brahman Cross and Short-Hair Brahman cattle, both grain and pasture fed. The domestic and foreign markets for processed beef is constantly growing and the average level of consumption has increased as well (Carey et al. 2016). There exist three core drivers of the popularity of processed beef in Australia, they include, the taste, increased consumption of processed beef, and positive health factors. There is a rapid growth in the market of processed meat (Whitton, Baker, and Mounter, 2016). That, combined with an increased production of beef, makes more exportation for Australia. The case is the same for consumer demand internationally because now people are looking into consuming processed foods more which has led to an increased demand for processed meat.

Spread across a broad geography, the grass-fed beef industry of Australia includes a broad range of cattle breeds, farm sizes, and the system of production. The production diversity allows the sector, which exported 75% of its output in 2019-2020 to service consumers is more than one hundred countries which made Australia the third largest exporter of beef in the world (Bajan and Mrówczyńska-Kamińska, 2020). Besides, Australia is already renowned as one of the leading exporters of live cattle particularly throughout South East Asia and the Middle East. This shoes that the country has already created a rapport with other countries when it comes to the exportation of beef. This can be an opportunity for Thomas Borthwicks and Sons Australian Pty to expand its markets in those regions and export processed beef. In the year 2015, Australia and China signed a cattle export agreement which would see over a million cattle exported to China annually (Bajan and Mrówczyńska-Kamińska, 2020). This shows that the market for beef is huge in China. Since Thomas Borthwicks and Sons Australian Pty is in the same business which is the selling of beef, they could take advantage and expand into China following the rapport that the two countries have already created. Australia’s beef exports continue to break volume records (Carey et al. 2016). This increase is partially driven by Northern Australia’s dry conditions and strong demand for beef from international markets.

International strategies suitable for Thomas Borthwicks and Sons Australian Pty

There are a number of strategies that Thomas Borthwicks and Sons Australian Pty can implement to enter international markets. According to a study conducted by Van Caenegem, Drahos, and Cleary, (2015), there is an increased demand for both live cattle and processed beef in Asia, Europe, the Middle East, the United States, among other regions. Therefore, the profitability is beef products in the foreign markets is guaranteed but to better tap into those markets, newer innovations are needed for this product. Many markets across the globe are leaning towards innovative products so this means that Thomas Borthwicks and Sons Australian Pty should implement product differentiation as one of its strategies when entering the foreign markets. Furthermore according to Bajan and Mrówczyńska-Kamińska (2020), companies should include a product portfolio that is diverse and inclusive. For, Thomas Borthwicks and Sons Australian Pty, they should have a product portfolio with a variety of beef products. This would offer value to different groups of consumers in the foreign markets.

Another strategy that can be implemented is acquiring a subsidiary in the host nation in order to increase their products’ level of growth. In their research, Mehlhorn et al. (2015) argued that considering the strategies of international markets, it is viable to transfer skilled workforce from the developed host markets to Australia. This will enable the stakeholders to depend on an increased integration level of the subsidiary acquired. If theoretical aspects of global strategy is considered, technological innovations, skilled resources, and development of newer methods are very important factors that Thomas Borthwicks and Sons Australian Pty should take into account to gain a competitive edge. Thus, if the host country has capabilities such as newer technologies or skilled labor or if the resources needed in the production process is scarce, then Thomas Borthwicks and Sons Australian Pty can establish a plant in foreign markets. The findings of the research that Mehlhorn et al. (2015)conducted companies that export their products can use company acquisition, establish a plant as Greenfield investment, or can even establish a joint venture with local companies. So to enter foreign markets, Thomas Borthwicks and Sons Australian Pty can used the same strategies.

The most appropriate and inappropriate mode of entry to the international market for Thomas Borthwicks and Sons Australian Pty

Exporting

Exportation is the easiest and most appropriate mode that Thomas Borthwicks and Sons Australian Pty use to enter foreign markets. Because of its ease many companies start their expansion to foreign markets using exportation (Schellenberg, Harker, and Jafari, 2018). Exportation is generally the sale of locally sourced services or products in other countries. The number one advantage of export is that Thomas Borthwicks and Sons Australian Pty will continue to avoid the expenses required to establish operations in other countries. However, the company must establish appropriate ways to market and distribute the processed beef in the new markets. This would be done via contractual agreements with local distributors or companies (Schellenberg, Harker, and Jafari, 2018). While exporting, Thomas Borthwicks and Sons Australian Pty must take into account the packaging, labeling, and pricing of its offerings and make sure that they are appropriate to the international markets. When it comes to the promotion and marketing of the company’s products, Thomas Borthwicks and Sons Australian Pty must inform the buyers of the company’s offerings via trade shows, advertising, local sales forces, among others.

Partnerships and Strategic Alliances

Another appropriate mode of entry is through partnerships and strategic alliances with local partners. Strategic alliances involve contractual agreements between enterprises which stipulates that the parties involved will cooperate for a specified period of time in order to achieve a particular purpose (Ďaďo, Wiktor, and Żbikowska, 2015). In order to determine if the approach of strategic alliance is suitable for Thomas Borthwicks and Sons Australian Pty, the company will be required to decide the value that is brought in by the partner to the venture in terms of both intangible and tangible aspects. One advantage of this mode of entry is that the local company would have an adequate understanding of the local market, culture, and ways to do business better than Thomas Borthwicks and Sons Australian Pty (Ďaďo, Wiktor, and Żbikowska, 2015). Partners are particularly valuable if their brand is well known and has a good reputation in the host country. Also they could have value to the company if they have an established relationship with the consumers that Thomas Borthwicks and Sons Australian Pty might want to target.

New, Wholly Owned Subsidiary

The most inappropriate mode of entry that Thomas Borthwicks and Sons Australian Pty should not implement is the establishment of a new, wholly owned subsidiary which is also known as a Greenfield venture. This mode is not only complex but also very expensive (Schellenberg, Harker, and Jafari, 2018). The proponents of this mode would argue that it would afford the company maximum control and its returns are above average. However, the risks and costs involved are very high given the costs involved in the establishment of new business operations in foreign countries. Besides, Thomas Borthwicks and Sons Australian Pty would have to acquire the expertise and knowledge of new markets by hiring costly consultants.

Recommendations for the future strategic direction

Thomas Borthwicks and Sons Australian Pty should implement a strategic production management in order to improve efficiency in the future. The increase of the weight of carcass, age reduction at slaughter, maintenance of optimum heterosis, and the use of multi-trait selection indices for fertile replacement heifers and feeder cattle are practices of management which would mean a significant impact on beef production sustainability (Terry et al. 2020). Reduction of weight at slaughter and increase of carcass weight are simple approaches to the reduction of beef production’s environmental footprints and improving the efficiency of production. Cattle with large carcass weight and frame tend to more efficiently divert energy towards production compared to smaller framed animals in which more energy is diverted towards their maintenance.

Beef processing plants such as Thomas Borthwicks and Sons Australian Pty should select large framed crossbreed cattle for slaughter because this reduced the number of cattle required for the production of the same quantity of beef (Terry et al. 2020). But costs of feed inputs for large framed cattle is much higher. As grazing and mixed system account for over 90% of beef production globally, improving on this sector would be vital to improving the beef production efficiency (Terry et al. 2020). In addition, the establishment of finishing targets for feeder cattle to reach the weight of slaughter of 658 kg for yearling feeders and 612 kg for calf-fed feeders would result in improved efficiency, reduced greenhouse gas emissions intensity and increased profits for Thomas Borthwicks and Sons Australian Pty both in the local markets and in foreign markets.

Conclusion

This paper considers Thomas Borthwicks and Sons Australian Pty’s strategic implementation in the global context. Since the key product sold by the company is processed beef, it has been identified that with differentiation of products and the rapid increase of processed food consumption in both local and foreign markets, there is a potential increase in demand for processed beef. This means that there is an expanded market for Thomas Borthwicks and Sons Australian Pty’s products both locally and internationally. Considering the appropriate and inappropriate mode of entries to the foreign markets, exportation and strategic alliances has been identified as the best options for Thomas Borthwicks and Sons Australian Pty and establishing and new, wholly owned subsidiary is the inappropriate mode of entry. Also, it is recommended that for future strategic direction, Thomas Borthwicks and Sons Australian Pty should implement a strategic production management in order to improve efficiency.

References

Bajan, B. and Mrówczyńska-Kamińska, A., 2020. Supply of Materials to the Agribusiness Sector of European Union Countries. Problems of World Agriculture/Problemy Rolnictwa Światowego, 20(1827-2020-1132), pp.15-24. DOI: 10.22630/PRS.2020.20.1.2

Carey, R., Caraher, M., Lawrence, M. and Friel, S., 2016. Opportunities and challenges in developing a whole-of-government national food and nutrition policy: lessons from Australia’s National Food Plan. Public health nutrition, 19(1), pp.3-14. https://doi.org/10.1017/S1368980015001834Ďaďo, J., Wiktor, J.W. and Żbikowska, A., 2015. Foreign markets entry motives and strategies of polish exportsers. DOI: 10.15240/tul/001/2015-2-010

Keogh, M. and Heath, R., 2018. Enhancing Private-Sector Investment in Agricultural Research Development and Extension (R, D&E) in Australia. The Australian Farm Institute.

Mehlhorn, J.E., Bonney, L., Fraser, N. and Miles, M.P., 2015. Benchmarking entrepreneurship education in US, Australian, and New Zealand university agriculture programs. Journal of developmental entrepreneurship, 20(03), p.1550017. DOI: 10.1142/S108494671550017X1550017-1

Moshin, M., 2015. Agribusiness financing in Australia: issues and research agenda. International Journal of Economics and Finance, 7(7), pp.1-18. doi:10.5539/ijef.v7n7p1

Schellenberg, M., Harker, M.J. and Jafari, A., 2018. International market entry mode–a systematic literature review. Journal of Strategic Marketing, 26(7), pp.601-627. http://dx.doi.org/10.1080/0965254X.2017.1339114Thomas Borthwick & Sons (Borthwicks), 2021. About Thomas Borthwick & Sons (Borthwicks). [Online] Available at: https://www.nh-foods.com.au/facilities/thomas-borthwick-sons/Terry, S.A., Basarab, J.A., Guan, L.L. and McAllister, T.A., 2020. Strategies to improve the efficiency of beef cattle production. Canadian Journal of Animal Science, 101(1), pp.1-19. https://doi.org/10.1139/cjas-2020-0022Van Caenegem, W., Drahos, P. and Cleary, J., 2015. Provenance of Australian food products: is there a place for Geographical Indications?. RIRDC, 15(060), pp.15-060. https://www.researchgate.net/profile/Peter-Drahos/publication/280722021_Provenance_of_Australian_food_products_is_there_a_place_for_geographical_indications/links/55c2d3e108aeb975673e4c77/Provenance-of-Australian-food-products-is-there-a-place-for-geographical-indications.pdf

Whitton, C., Baker, D. and Mounter, S., 2016. Foreign ownership in Australian agribusiness: results of a survey of firms (No. 427-2016-27359).