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Analysis Of The Australian Meat Industry

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Question:

Discuss about the political, economic, social, environmental and technical analysis of the Australian Meat industry.
 
 

Answer:

Introduction

Australia produces meat on a relatively small scale compared to other major economies. However, Australia export a significant amount of its meat annually due to its comparatively small population and low consumption (Spencer & Kneebone, 2012). The country’s meat industry is majorly divided into two different production systems that include the Northern (bos indicus cattle breed) and Southern (Bos Taurus cattle breed) meat producers. The meat production and supply chain in Australia is significantly affected by different factors that also influences the competitive advantage of the industry locally and internationally.

As such, this report conducts a pest analysis that includes political, economic, social, environmental and technical analysis of the Australian meat industry. The report further highlights the industry’s porter's five forces that include the bargaining power of consumers, the bargaining power of suppliers, the threat of new entrants and the threat of substitute products.  

Pestle Analysis

Political factors

There is an increased international demand for protein particularly in regions experiencing various political unrests and wars such as the Middle East and Northern parts of Africa (Kotler et al., 2009). Similarly, multinationals and developed economies in Europe and the U.S are acquiring and developing large tracts of agricultural lands in most developing economies. The result of such acquisitions is a significant effect on the agricultural production and reduced food security.            

Economic factors

The 2008 global economic crisis affected most economies and resulted into acute food shortage among other important necessities in most countries. However, Australia is steadily recovering from the global financial crisis that affected its interest rates, commodity prices, international and local trade and consumption among other economic issues. For instance, the interest rates have significantly reduced making their commodities more competitive both globally and locally. Australia has also dismantled most of its trade barriers especially in its food industry in accordance with WTO policies increasing its exports.       

Social factors

The increase in different lifestyle diseases in Australia and in different parts of the world means that future consumption of red meat among other related products is likely to reduce (Spencer & Kneebone, 2012). The increased need to maintain a healthy eating pattern explains why most households are likely to reduce their purchase and consumption of red meat which is largely attributed to chronic diseases such as cancer.             

Environmental factors

The fluctuating climatic conditions in Australia implies that cattle producers have to use different breeds to meet market demands and specifications (Adams et al., 2008). Also, the diversity in environmental conditions occasionally forces producers to move their respective stocks closer to the market and to greener pastures. This has increased operational costs among meat producers in the country due to the increase in freight costs.    

Technical factors

Various technological applications introduced into the Australian meat industry have significantly increased production. For example, the introduction of vitro development of embryo and cryopreservation of embryo technologies. Moreover, the introduction of HMC and vitrification technologies have plummeted the reproduction of beef cattle in Australia (Spencer & Kneebone, 2012).     

Porter's five forces

Bargaining power of consumers

The bargaining power of consumers in the Australian meat industry high. This can be attributed to the increased range of available meat products offered by many competitors in the market. Most consumers in Australia are very keen on the best quality meat and reasonable pricing. The Southern Australia meet producers are known to produce the best quality beef but are relatively expensive to Northern meet products.

 


The result is an increase in the bargaining power of the consumers due to the low switching costs and expanded options. The high bargaining power of consumers is forcing the Northern and Southern meet producers in Australia to revaluate their pricing and quality production strategies to remain competitive in the industry.      

Bargaining power of suppliers

The bargaining power of suppliers in the Australian meat industry relatively low. This low bargaining power can be accredited to the many producers from Northern and Southern parts of Australia. Also, the perceived differences in taste between forequarters and hindquarters have further affected retail of meat products in Australia. The Northern and Southern meat consumers, therefore, have the enhanced advantage of directly negotiating with these many meat suppliers to reduce prices and i9ncrease quality.

Threat of new entrants

The threat of new entrants into the Australian meat industry is high. The high threat of possible entrants can be ascribed to the high growing rate of Australian economy and other sectors of the economy. Many investors are gaining interest in the Australia meat industry. This is also attributed to the minimal regulations by the Australian government on companies seeking to gain entry into this lucrative industry. This high threat of potential market players has led to prices wars with both Northern and Southern producers aiming at sustaining their respective market dominance.      

Threat of substitute products 

The threat of substitute products in the Australian meat industry is also high. The high threat of substitutes can be ascribed to increased entrance of new market players into the industry. Also, alternative sources of protein such as fish and chicken threatens the long-term survival of the industry. Other crucial sources of protein include walnuts and soya beans among others. Indeed, most consumers are increasingly becoming more conscious about their health and spending behaviours.

Most of these substitute products are considered to be healthier and relatively cheap. Thus, the competitiveness and profitability of various producers in the Australian meat industry have significantly reduced as a result of the increased presence of substitute products.

Threat of ccompetitive rivalry

The threat of competitive rivalry in the Australian meat industry high. Some of the companies with large operations in the industry include the Consolidated Pastoral Company (CPC) in Northern Australia, the North Australian Pastoral Company (NAPCo), Paraway Pastoral Company, and S. Kidman Company among others. The industry also faces competition from commercial meat processing from the UK, Mexico and U.S (Spencer & Kneebone, 2012). As a result of the high competitive rivalry, sales of meat products and the market share of respective companies operating in the industry have reduced significantly.    

Conclusion

Based on the comprehensive analysis of the Pestle, the report ascertain that a relatively stable political environment, stable economy, climatic diversity, technological applications and lifestyle changes affects the operations in the industry.  Conversely, based on the analysis of Porter’s 5 forces, the report point at increased competition and high market entrants as some of the feasible market threats. 

 

References:

Adams, R. M., Hurd, B. H., Lenhart, S., & Leary, N. (2008). Effects of global climate change on agriculture: an interpretative review. Climate Research, 11(1), 19-30.

Asseng, S., Ewert, F., Martre, P., Rötter, R. P., Lobell, D. B., Cammarano, D., ... & Reynolds, M. P. (2015). Rising temperatures reduce global meat production. Nature Climate Change, 5(2), 143-147.

Cline, W. R. (2007). Global warming and agriculture: Impact estimates by country. Peterson Institute.

Ho, J.K.K. (2014) ‘Formulation of a Systemic PEST Analysis for Strategic Analysis,’ European academic research, 2(5), pp.6478-492.

Kotler, P, Keller, K, Burton, S (2009) Marketing management, 1st adapted edition, Frenchs Forest, Pearson Education Australia pp. 74-89.

Kotler, P., Keller, K., & Burton, S (2009), from Chapter 3: Gathering information and scanning the environment, Marketing Management, 1st adapted edition, pp. 74-89, French’s Forest, Pearson Education Australia.

Kunc, M. (2010) ‘Revisiting Porter’s generic strategies for competitive environments using system dynamics,’ Computational Analysis of Firms’ Organization and Strategic Behaviour, 1(2), pp.152.

Spencer, S & Kneebone, M (2012) 'FOODmap: An analysis of the Australian food supply chain', Department of Agriculture, Fisheries and Forestry (DAFF), Commonwealth of Australia, Canberra.

Statistics.mla.com.au. 2017. MIDAS - Run Report. [online] Available at: https://statistics.mla.com.au/Report/RunReport/e4469a3e-e951-4f85-8243-4d3b0f432624 [Accessed 24 Aug. 2017].

The Conversation. 2017. Three charts on: Australia's declining taste for beef and growing appetite for chicken. [online] Available at: https://theconversation.com/three-charts-on-australias-declining-taste-for-beef-and-growing-appetite-for-chicken-78100 [Accessed 24 Aug. 2017]

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