Australian Food-focused Agribusiness sector

A market entry strategy is needed by every company for the purpose of delivering its goods and services to a new target market. In present conditions, the Government of Australia have started focusing on the Agribusiness sector because the sector is providing benefits to the economy of the country through employment generation and business opportunities. To understand the positive impact of the agribusiness in this report Unilever is been selected. Unilever is a British based company that deals in Food, Personal Care, Home Care and Refreshment products.  The business of the company is spread across the globe. Now for expansion, the company wants to introduce their new product in the Indian market. This report describes the international opportunities and international strategies that are available for Unilever. In addition, the report contains the most suitable and unsuitable entry modes for the company. At the end of this report, some recommendations have also been made.     

The Agribusiness sector of Australia is the country’s industry pillars. In the present time the media, business dialogues and governments have again put their focus on the agribusiness sector by trusting that it will be continued staple the prosperity of Australia (Agribusiness Australia, 2018).  The growth prospects of the agribusiness are creating a community optimism to develop new technologies, create jobs and open the new market. Australia’s present fragmented approach toward agribusiness opportunities will lead to massive emotional, cultural and financial loss due to which they have started preventing this sector.

The Australian Food and Agribusiness sector involves food-related items such as food processing, agricultural production and major inputs related to these activities. The Australian Food and Agribusiness sector is divided into two sub-parts:

•    Agribusiness: It includes all agricultural activities that are directly related to the food production
•    Food Products: It includes all beverage manufacturing and food processing activities (Department of Industry, Innovation and Science, 2018).  

The Australian Food and Agribusiness sector is contributing to the economy of Australia through employment, business and service opportunities. Australian Food and Agribusiness sector provided employment to around 522000 persons in 2015. Approx. 178500 businesses are trading in the agribusiness sector of Australia.  Australian Food and Agribusiness sector contributed around 3.35 to the total GDP (Department of Industry, Innovation and Science, 2018).   The labour productivity has increased at an annual rate of 2.4% and industry value added has increased at an annual rate of 1% over the past five years. Australia is the largest exporter of the food and agribusiness products and half of its agricultural products are exported by the country (Department of Industry, Innovation and Science, 2018).  

Company overview

Unilever is the Britain based company having its headquarters situated in London, U.K. and Netherlands. William Lever, Samuel Van Den Bergh, James Darcy Lever and Leverhulme founded the company in 1929. The company mainly deals in consumer goods and has divided its products into four main divisions such as Food, Personal Care, Home Care and Refreshments (Unilever, 2018a).  It is the world’s oldest multinational company and therefore has been able to ensure the availability of its products in almost every part of the world. The company produces over 400 products and its leading products are Surf, Sunsilk, Rexona, Magnum, Lux, Lipton, Knorr, Hellmann’s, Heart brand ice cream, Omo, Dove and Axe. The company is having its research and development centres at United States, India, China and Netherlands. In 2017, Unilever has earned net income of US $ 7.561 billion with net revenue of US $ 62.622 billion (Unilever, 2017d). The company had a total turnover of US$ 49.797 billion out of which 18% was earned from home care, 19% from Refreshment, 27% from Foods and 36% from Personal care (Unilever, 2018b)    

The operations of the company are spread over 190 countries of the world. For business expansion or for international opportunities, the company can introduce those products which are not available in the existing market. The company can introduce Weis frozen fruit dessert in the Indian market because the product has not been introduced by the company in the Indian market. With the help of the introduction of new product in the Indian market, they will get the opportunities for bringing their product in the international market. For expansion of the established brand like Unilever, this strategy is best for the business expansion.

Weis is an Australian brand that is owned by the Unilever. Weis is known for their bar-shaped fruit ice creams popularly known as Weis bars. Les Weis developed Weis Fruito bar in 1957. In 2017, the owner of Weis sold the company to Unilever (Unilever, 2018c).  Now the company is planning to expand its operations in the Indian market through the introduction of Weis as a new product.

Some international Strategies that can be used by the company while introducing new product in the international market are:

In Multi-domestic Strategy, the company tries to understand the preference and wants of the particular country and accordingly make changes in the product before introducing it in the market (Holmes, et.al. 2018). For the introduction of Weis in the Indian market, the company needs to understand the taste and preferences of the Indian targeted customers and accordingly have to make changes in the ice cream taste and texture.  

International opportunity for Unilever

The company can use the global strategy which will not require any changes to be made in the product. The company can introduce the same domestic product in the international market. If a company adopt a global strategy then it does not need to make any changes in the product (Holmes, et.al. 2018).  However, if a company wants then it can make some minor changes in the products.  Global strategy emphasises on the need to gain economies of scale by way of specifically offering the same product in every market.  

The transnational strategy is a mixture of multi-domestic strategy and global strategy or in other words, it is a middle ground between multi-domestic strategy and global strategy (Holmes, et.al. 2018).  In this, the company tries to make a balance between the desire of the local and international customers. This strategy is adopted by various big multinationals for the successful launch of their product in other country.

Indian Government and Foreign Direct Investment Policies

In 2011, the Circular 1 of the Department of Industrial Policy and Promotion was released. The Circular states that from now onwards, 100% FDI has been allowed on the production and development of horticulture, floriculture, planting material, seeds, and cultivation of vegetables and mushrooms. Pisciculture, aquaculture and services related to agro and allied sectors have also been covered under the norm of 100% FDI. Tea sector has also been brought to 100% norm (Ghosh and Roy, 2018).

The Ministry of Food Processing Industries of India made out all their efforts to encourage investment across the value chain. The industry has engaged around 1.77 million people with a fixed capital of $ 29.7 billion and aggregate output of around $ 144.6 billion in Food Processing units (Ghosh and Roy, 2018). Major Food divisions such as fresh produce, dairy products, food grocery, spices and perishables have a share of 6%, 8%, 15.6%, 16% and 34.7% in FDI (Ghosh and Roy, 2018).

Unilever is the big name in the customer goods and has full ability to set up their business or products in the international market. The most appropriate method which can be adopted by Unilever for entering into a new international market is Green Field Investment.

Greenfield investment is a kind of foreign direct investment method with the help of which the parent company can establish its operations in a foreign country. This method of the foreign direct investment is usually used in developing countries. In this mode of entry, the multinational companies construct new facilities as well as create new jobs in that particular country. The companies who adopt the green Field investment mode of entry will get the benefits like tax breaks to form the government of particular company (Ashraf and Herzer, 2014). Greenfield investment is a complex task and it includes potential cost but it provides a full control to the company over the operation, management, supply chain and other functions related to the product. In addition, the returns in form of revenue need not be shared by the company with the third party. The Greenfield investment includes high risk as it involves huge cost but Unilever will not face such problem because it is already having an established name in Indian Market.

International Strategies

Acquisition is a mode of entry that is beneficial for those companies that are already having their business in the country.  Acquisition has become an important most popular way of an entry in the international market these days (Hennart and Slangen, 2015. The trend of acquisition has increased because it is a way to get market power. The market power the market shares get affected. The acquisition involves low risk in comparison to Greenfield investment as its outcomes can be measured easily. In case of Acquisition, the ownership of business organizations or companies are consolidated or transferred to other entities. It can be used by Unilever for the purpose of increasing its market power.  

For Unilever the most inappropriate modes of entry into Indian market are:

Joint venture is the business arrangement between two or more parties who agree to pool their share risk and revenues to accomplish a specific task. In a joint venture, each party is responsible for cost association, losses and profits (Speckbacher, Neumann and Hoffmann, 2015).  Joint Venture is an inappropriate mode of entry because it divides the ownership of the business between the venture parties and the profits are also split between them. Unilever is a well-known brand that is why they did not require support from other parties.

Strategic alliance is also a business arrangement between two parties who are ready to share the risks and profits related to the specific task but the strategic alliance is less binding than a joint venture. In a Strategic alliance, the parties pool their resources to create a separate business entity. The strategic alliance is also not an appropriate mode of entry for Unilever and the reason is same that is for a joint venture (Speckbacher, Neumann and Hoffmann, 2015). Strategic alliance may include less involvement of parties, they work as a separate business entity but they share risks and profits. Due to its brand image, Unilever did not require support for the third party.

Business Diversification: Unilever is the leading brand that deals in the consumer goods. The company expanded its product in every part of the world. The company have adopted a product diversification strategy for the expansion of their business. It is recommended to the company that they should adopt a business diversification strategy for expansion (Alessandri and Seth, 2014).  Business diversification will provide better chances to the company to expand their business through new product.

Appropriate modes of entry in the international market

Price differentiation: It is recommended to Unilever that they can use a price differentiation strategy when they enter into the new market.  With the help of price differentiation, the company can charge different prices from the different buyer for the same quantity and quality of a product (Vogel and Paul, 2015). The value of money is different in every country and by considering this fact it is recommended that the company should use price differentiation strategy.  

Consider exchange rate and economic crisis: It is recommended that the company should consider the exchange rates and economic crises of the country in which they have introduced their product because the fluctuation in the economy of the country and in the exchange rate will provide a negative impact on the operation of the company.

Improve customer experience: The ultimate target of the company is the satisfaction of the customers. It is recommended to the company that they should provide an excellent experience to the customers when they purchase the product of the company. The experience will help attract the customers more towards the products and they will buy the product frequently.

Conclusion 

To conclude, Unilever is the well-known and well-established brand across the world, customers are aware of the brand name. For the success of every business, expansion strategy is very much suitable for expansion in this report the company is introducing their new product in the Indian market that is not available in the market before. For the purpose of entering into the Indian market, the suitable entry modes will be Greenfield investment and Acquisition. These modes will assist the company in easy establishment of their product in the Indian market and will further provide complete control over the business activities.

References  

Agribusiness Australia. (2018) About us [Online] Available from: https://www.agribusiness.asn.au/about-us/overview [Accessed on: 28-09-2018].

Alessandri, T.M. and Seth, A., (2014) The effects of managerial ownership on international and business diversification: Balancing incentives and risks. Strategic Management Journal, 35(13), pp.2064-2075.

Ashraf, A. and Herzer, D., (2014) The effects of greenfield investment and M&As on domestic investment in developing countries. Applied Economics Letters, 21(14), pp.997-1000.

Department of Industry, Innovation and Science. (2018) Food and Agribusiness Industry [Online] Available from: https://archive.industry.gov.au/industry/IndustrySectors/FoodManufacturingIndustry/Pages/default.aspx  [Accessed on: 28-09-2018].

Ghosh, M. and Roy, R.P., (2018) FDI, Technology Imports and R&D in Indian Manufacturing: Revisited. In Globalisation of Technology pp. 127-149. Springer, Singapore.

Hennart, J.F. and Slangen, A.H., (2015) Yes, we really do need more entry mode studies! A commentary on Shaver. Journal of International Business Studies, 46(1), pp.114-122.

Holmes Jr, R.M., Hoskisson, R.E., Kim, H., Wan, W.P. and Holcomb, T.R., (2018) International strategy and business groups: A review and future research agenda. Journal of world business, 53(2), pp.134-150.

Speckbacher, G., Neumann, K. and Hoffmann, W.H., (2015) Resource relatedness and the mode of entry into new businesses: internal resource accumulation vs. access by collaborative arrangement. Strategic Management Journal, 36(11), pp.1675-1687.

Unilever. (2017d) Annual Report and Accounts 2017 Highlights [Online] Available from: https://www.unilever.com/investor-relations/annual-report-and-accounts/ [Accessed on: 28-09-2018].

Unilever. (2018a) About [Online] Available from: https://www.unilever.com/about/who-we-are/about-Unilever/ [Accessed on: 28-09-2018].

Unilever. (2018b) Our strategy [Online] Available from: https://www.unilever.com/about/who-we-are/our-strategy/ [Accessed on: 28-09-2018].

Unilever. (2018c) History [Online] Available from: https://www.unilever.com/about/who-we-are/our-history/unilever-archives.html [Accessed on: 28-09-2018].

Vogel, J. and Paul, M., (2015) One firm, one product, two prices: Channel-based price differentiation and customer retention. Journal of Retailing and Consumer Services, 27, pp.126-139.