Strategic Management Assignment On International Expansion Strategies

Executive Summary: 
Regarding the field of management, the term strategic management includes implementation and formulation for major initiatives and goals that is generally taken by the companies. The present study has been focused upon the Australian organization that is ITOCHU for grain based agri-business sector. This strategic management assignment has highlighted the facts regarding the expansion of grain production in various countries along with certain international strategies that can help the company to maintain a good business relation within Australia and similar other countries.

Introduction: 

According to Frynas and Mellahi, (2015), Strategic management is considered to be the continuous monitoring, planning, assessment as well as analysis of the things that are necessary for an organization to achieve its objectives along with the goals. With the focus to improve the level of customer satisfaction, the strategic managers of projects are known to provide assurance for a long-term success as well as profitability. However, these managers are seen to ensure their goals of the project whether they align with the strategic objectives and mission of the organization for analysing the data of the market and beating the competition as well. Hence, the present strategic management assignment focuses upon the management based on the Australian organization that is, ITOCHU and is related with grain based agri-business sector. This is a food company of Australia and Japan, in the recent days is known to be the leading country for global trading of this particular organization along with seven divisions of companies (ITOCHU Australia Ltd. 2019).

Discussion of Australian Grain focused Agribusiness sector: Agribusiness is the term for defining business in the agricultural production. This term has been coined in the year of 1957 through Davis and Goldberg. This involves breeding, agrichemicals, distribution, crop production, farm machinery along with retail sales and marketing. Australia is considered as a major producer of agriculture and is an exporter as well along with 325,300 employed within the agricultural forestry as well as fishing (Newburry et al., 2019). The agricultural business along with other closely associated sectors is found to earn $155 billion per annum with 12% share in GDP (World Bank. 2019). In recent days, it has been found that Australian agriculture is diversified in an increased manner. Considerable expenses based on arable land seem to help Australia for becoming the leading exporter of the world for grains, wool and meat as well. Both wool and grains production markets across the world and is dominated by the exports of Australia.

Figure 1: Department of Agriculture in Australia (Source: Clune, 2019 )

The grain industry is known to make a significant contribution towards the Australian economy. Within the years of 2016-17, production based on grain accounted for 27% for the farm production gross value along with the export income of the Australian farm. Most of the Australian farms are known to produce grain as wheat is considered as an important crop through tonnage as well as the value. In the year of 2016-17, GVP regarding wheat has been 7.4 billion along with 44% for the total GVP of the grains industry of Australia. Hence, the particular organization that is, ITOCHU also makes the production of grains. Through the manufacturing, distribution and trading of raw materials, ITOCHU Corporation has been found to work with the infrastructure and capital for the entire chain of food supply across the whole world (Clune, 2019). The Strategic Integrated System, in a global scale provides assurance that the vertical integration seems to remain the key factor for the success of the concerned organization as Australia is considered as a key player within the global market.
Identification of international opportunities for ITOCHU: ITOCHU Corporation is spread across the world in many countries such as Europe, China, North America, and Asia and similar others. Australia is the main country to produce grain for this company and Japan is considered to hold 100% subsidiary of ITOCHU in Australia. Itochu Australia is closely related with the major accumulators and growers of Barley, Wheat, Rice and Canola along with similar other seeds and grain production that are generally exported to Asian countries and Japan as well regarding further stage processing (Höglund et al., 2018). Being the part of SIS, for instance, ITOCHU is known to team up with the leading company of beef processing within Australia along with PRIMA HAM that is the largest meat packers within Japan for creation of a new venture within the feedlot beef cattle in Queensland. The present working and professional relationship is considered to provide higher levels based on communication along with the visibility of supply chain through “paddock to plate”. 

Moreover, ITOCHU Australia is also involved in the exports of various dairy products like cheese, products of milk powder and butter as well. The concerned organization in the recent days, is looking for involvement in dairy industry. Furthermore, the global supply is known to be limited with the increasing demand within the developing countries regarding various dairy products (Goedde et al., 2015). On the other hand, Belgium does not produce as much grains as per demand and hence, for ITOCHU, the Belgian market would prove to be most feasible for expansion. It may export grains or other dairy products within the country that can help the company to make a profit along with developing a trade relationship with Belgium. However, the places or rather the countries in which the company has already expanded, it may make the company larger so that the production can become more for grains in other countries.

Discussion on different international strategies suitable for ITOCHU: The sector of ITOCHU dealing in agriculture plays a significant role in earning large revenue as well as establishing the organization successfully in the international market. Thus, the agribusiness sector of ITCOHU can make use of the following international strategies:

Growth strategies: This involves the ways for expansion of the agribusiness such as capacity expansion that can be designed for taking advantages within the economies of the size. This a horizontal form of expansion as compared with the vertical expansion that is generally moved with up and down of the supply chain (Wambalaba et al., 2019). This strategy can help ITOCHU to expand its business in Belgium and similar other countries where it has not expanded. 

Stability strategies: This includes different ways for maintaining the size of the company regarding the current level (Hofstrand, 2019). For instance, the operation of ITOCHU can be expanded till it can generate an adequate income for the organization, in the selected Belgian Market. 

Global strategy: The organisation that makes use of global strategy, sacrifices the responsiveness for local requirements for each of the markets for emphasizing efficiency. This global strategy is required for gaining economies of scale through offering significant products and services in each of the markets (Clay and Feeney, 2019). For instance, in case of expansion of the respective company into the Belgian market, this strategy can help the organization to meet the demand of the people.

Discussion on the most appropriate and inappropriate mode of entry to the international market for ITOCHU

Expansion of business is the most important growth strategies for every business. It is the stage in the life-cycle of an organization which is characterized by a range of opportunities as well as threats. There are several ways that ITOCHU; Australia may follow for its expansion into international markets like Belgium. Belgium is considered one of the most important emerging markets and provides a range of opportunities for ITOCHU. Most of the Belgian population is reliant on grains imported from other countries for food, besides the staples produced in their own country. The comparatively high rate of consumption of grains, as observed from the fig.2 below, vouches for the attractibility of agribusiness in Belgium.

Fig 2: Daily consumption of Grains in Belgium(Source: Statista, 2019)

Though developing, the economy of Belgium has grown exponentially in recent years which attract a number of investors to various industries. There are a number of market entry strategies that ITOCHU may follow such as the Direct Exporting, Licensing and Franchising, Joint venture, Strategic Acquisitions, and Foreign Direct Investment. Among all these market entry strategies Strategic Acquisition seems to be the most appropriate market entry strategy for ITOCHU in Belgium. ITOCHU may buy 100% shares of any agribusiness organization based in Belgium, which would enable ITOCHU in making decisions regarding the newly acquired assets without collecting permission from the purchased organization. However, the process and regulations of Strategic Acquisition in Belgium must be followed by ITOCHU. Greater knowledge of the market expansion opportunity through strategic acquisition is needed, for ITOCHU, which can be accumulated through intense research of the target market. The advantages of Strategic Acquisition for ITOCHU would be that it would be able to benefit from the experience, knowledge and expertise of the target company and its employees. Strategic Acquisition is also important as it is the fastest mode of business expansion among all other market entry strategies (Xie, and Li, 2017). The establishment of ITOCHU in the Belgium market would be promoted with the utilization of manufacturing facilities, existing infrastructure, and distribution channels of the target organization. This strategy will reduce the risk of threats to the company in the new market (Trigeorgis and Reuer, 2017).

Apart from the Strategic Acquisition, another market entry strategy which can be followed by ITOCHU while expanding to the emerging market of Belgium is the Joint ventures. The joint venture is recommended after the strategic acquisition as in the toughest situation, all the partner organizations are impacted equally (Tulung, 2017). However, it is advantageous as the expertise and knowledge of the partner organizations can help ITOCHU to grow fast in the new market. 

The concept of direct exporting is inappropriate with the expansion of ITOCHU in Belgium, as it is a high-cost strategy. The direct export strategy is suitable for online products and not much preferred for offline products like grains. To apply this strategy ITOCHU has to spend a huge amount of money and time for market research and recruitment, without any guarantee of good returns, thus increasing the risk of investment.
Recommendations for the future strategic direction of the selected Grain focused Agribusiness in the chosen international market

The strategic direction of business organizations is the activities that the organization performs for achieving the goals and objectives. After successful expansion in the market of Belgium, the strategic direction of the company can be promoted for achieving the business goals and objectives in the new market within a target period of time. ITOCHU may follow certain models and theories for growing in the chosen international market.
A Goal-Based and Issue-based Strategic planning model is recommended for ITOCHU in Belgium. The company may generally follow Goal-based strategic planning, which focuses on the vision statement of the company and helps organizations to plan accordingly to the goals and objectives. In this type of planning, a number of goals are set that are aligned with the vision. In the next step, the company can define time frames to achieve those goals. The goal-based strategic management assignment planning would be very useful as the long term planning tool for ITOCHU. An issue-based strategic planning tool may be followed by the company to cope up with some issues that could hamper the profitability and growth of the company (Wolf and Floyd, 2017). ITOCHU can focus on identifying the issue which can be followed by suggesting activities that can mitigate the issue. Analysis of micro and macro business environment utilizing PESTLE, SWOT and Porter’s five forces can help in identifying the imminent issues as well as the solution to the same.

 Fig 3: VRIO Framework(Source: Knott, 2015)

A VRIO framework that relates more to the vision of any business organization can also be recommended for ITOCHU. For growing into the new international market, the company has to gain a competitive advantage over other agribusinesses that are present in Belgium. The VRIO framework would enable ITOCHU to find out the Value of its products in the market as compared to other rival organizations in the first step (Grover et al., 2018). The product that ITOCHU deals in that is Grains is valuable given its demand in the Belgian market and is Rare too. However, there are other organizations supplying grains in the market too, which increases competition and necessitate making the products inimitable. Since this is not possible usually, ITOCHU needs to improvise the technologies used in processing of the grains for selling, in order to ensure retention of quality and longer shelf-life, for gaining competitive advantage and ensuring inimitability. According to Baumgartner and Rauter, (2017), ITOCHU needs to organize all their available resources, be it financial or human resources for gaining sustained competitive advantage, for which change in management and leadership styles, along with change in operational technologies and modifications in supply chain would prove to be beneficial.
Conclusion: From the above strategic management assignment, it can be concluded that the Agribusiness sector is one of the versatile industry in the world and is important to reduce the hunger from the world. The organizations in the grain focused agribusiness sector have a greater opportunity to expand widely across the world. For expanding to the international market choosing appropriate international strategies and market entry strategy is very important. It is also necessary for making strategic planning accordingly to the market situations for attaining growth in the target market.

References: 

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