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Business Management: Prominent And Profitable Industries

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Question:

Discuss about the Business Management for Prominent and Profitable Industries.

 

Answer:

Introduction:

The nut industry of California has been consistently remaining as one of the most prominent and profitable industries of the country with a continuous and extensive boom in the industry over the last few decades. In a time span of a few decades the production levels, the prices in the domestic as well as in the global markets, the bearing acreage and also the value of the production of almonds, walnuts, pistachios and other crops of this primary product industry have grown significantly. The acreage of bearing almond especially rose from 418,000 acres to as high as 900,000 acres from 1995 to the current times. Walnut acreage has also undergone a significant increase between the same time span, from 177,000 acres to a enormous magnitude of 315,000 acres in the recent times. The huge upward dynamics in the nut industry collectively, attributed to the continually growing global demand for nuts and economies of scale in the industry itself, is currently one of the primary contributors to the economic growth and GDP growth of the country. The nut industry of California also poses as one of the primary employment generators in the country with immense backward as well as forward linkages (Howitt et al 2014).

 

Theft Issues in the Nut Industry:

In spite of being one of the most highlighted and continually expanding and revenue generating industries in California, the nut industry of the country is severely plagued with a constant and bothering issue of large-scale thefts. These are occurring in high frequencies and are jeopardizing the growth of not only the industry and its members but also the country as a whole.

As has been speculated and reported in many instances the theft circle of the nut industry in the country includes various sophisticated international crime rings. The billion dollar industry, having a high demand and producing nearly 9.3 billion dollars worth of products annually, have been targeted by the crime mongers for the high profitability (Modernfarmer.com, 2017). The thefts, which are taking place in this industry, are of highly organized sorts. The thieves often hack into the company profile and in the profile of the trucking companies used for transporting the nuts, steal the identities of those companies and with false documents they drive off truckloads of nuts in broad day light. Each truckload valuing from 150,000 dollars to 500,000 dollars, these robberies are strengthening the hold of the theft organizations and are hurting the supply side as of the industry heavily.

The most bothering issue regarding the theft in the nut industry of California is that the magnitude of theft, in spite of continuous preventive efforts on part of the government and vigilance authorities and also on parts of the companies involved, is continually increasing. The magnitude of nut theft in the industry in the last year amounted to 4.6 million dollars, from the 31 reported cases, the amount being higher than the theft amount in the industry in the previous three years. The nature of the commodity is also becoming as issue as there is no way of arresting anyone carrying a truckload of nuts till it is proved that the nuts are stolen. Thus, it can be seen that the thefts in the nut industry of the country has been and is still continuing to be one of the major threats in the industry. This affects the supply side severely and also having implications on the demand side as well as the economic growth of the industry as well as the country itself (Theguardian.com 2017).

 

Industry Analysis:

To understand the occurrence of any phenomenon, positive or negative, in any industry of a country, it is of absolute necessity to have an overview about the macro as well as the micro conditions of the economy and the genre or domain under which the industry is functioning.

 

Macro-environmental Conditions:

The macro-environmental conditions and the factors in this aspect are an important determinant of the way in which a commercial organization can operate and these factors have significant positive as well as negative implications on the productivity, prospects and short term as well as long term profitability of the commercial organization. To analyze these factors in the context of the nut industry of California, a PESTEL Analysis can be undertaken which is as follows:

PESTEL Analysis

Description

Political factors

The political framework of the country has never been simple as it includes a multi-player and multi-dimensional purview. The Governing Body of the country mainly constitute of what is informally known to be the Big Five, consisting of the Governor, Minority Leader, Assembly speaker, Senate Minority Leader and the Senate President. With the system of plural voting, the Californian political environment has many contending political parties with individual vested interests.

With the immense political rivalry among the contending parties, lobbying, cartels and nexus forming are frequent illegal practices in this system, which also have significant effects on the overall industrial environment of the country, thereby posing as one of the important factors in the nut industry of the country as well (Gupta 2013).   

Legal Factors

The legal framework of the country has remained robust and there are well defined laws in the aspect of doing business in California. These includes the security of the employees, Affordable Care Acts which give time to the enterprises to meet their tax requirements and also laws regarding cost adjusted minimum pays and classification of workers. However, the legal framework of the country allows easy access to guns and other fire weapons too, thereby making the security a big issue of question. This can pose as one of the factors helping in the large-scale theft in the nut industry of the country, which again is having its impacts on the companies and their employees as there are strict employee laws present in the economy.

Economic Factors

The economy of California is a combination of extremes. On one hand the country is recognized as the sixth largest economy in the world, in terms of the GDP and GDP growth rate dynamics. Over the years, the economic growth pattern has been impressive in the country. However, the country scores relatively much lower when it comes to the overall development and welfare of the residents of the country. California surprisingly is one of the nations having the highest poverty rates in the world. This in its turn indicates towards the presence of an extreme inequality in the overall framework of the country, which has its implications on every aspects of the economy. The extreme disparity in distribution of economic growth may also be expected to have its implications (mostly adverse) on the industrial sector of the country too and there may be linkages between this income disparity and the theft issues in the nut industry and other related industries in the country in the recent times (Ho 2014).

Social- Cultural Factors

The socio-cultural environment of a country sometimes directly and sometimes subtly influences the business operations that are carried out in a country. In case of California, the cultural environment of the country, though being primarily related to the socio-cultural trends of the USA, is mainly a confluence and cultural amalgamation of many countries like Spain, Mexico, Asia and others. This can be seen in the languages, food habits and lifestyle patterns in the country. California has a prolonged history of immigrations and still opens door to immigrants from all over the world. This, over the years has had lots of implications on the overall economy as well as the industrial sector of the country (Alkon, Cortez and Sze 2013).

Technological Factors

In the last few decades, the country has undergone significant technological up gradation, which had its effect in the overall lifestyle of the residents of the country as well as in the industrial sector of California. The technological advances on one hand have contributed immensely in augmenting and increasing the overall productivity of the industrial sector. However, with newer technologies, theft, fraud and cheating have also become easier, which in its turn is having negative implications in many industries including the nut industry of the country (Conlon 2016).

Environmental Factors

The environmental condition of the country is more or less favourable for human inhabitation and industrial development. Water is one of the issues of concern, the resource being limited. However, the overall environment of the country facilitates agriculture and primary production as a whole and also encourages people to participate in the same due to low cost of production and high productivities. The environment of California can be considered as one of the primary factors behind the growth of its primary product industry (Rahman, Saharuddin and Rasdi 2014).

Micro Analysis:

The following section tries to analyze the overall condition of the pistachio industry of California, which is one of the primary victims of the large-scale nut thefts, using the Porter’s Five Forces Model:

Porter’s Five Forces Model

Figure 1: Porter’s Five Forces Model

(Source: E. Dobbs 2014)

Bargaining Power of Consumers:

The consumers of Californian pistachio do enjoy some bargaining power as Iran poses as a competitor. Though the quality of the latter is lower than what produced in California, the prices are also low which attracts customers. The theft, by increasing the price of the nuts further may affect this situation even more adversely (Lee, Kim and Park 2012).

Bargaining Power of Suppliers:

Compared to the customers the bargaining power of the suppliers in this market is less as there are not many options available domestically. However, the huge demand of the Californian pistachio in all over the world somewhat increases their power to bargain, as 40% of the total production is exported outside the country, which is considerably jeopardized by the recent and continuous and bothering problem of massive scale thefts of pistachios in the country (Wu, Tseng and Chiu 2012).

Threat of potential entrants:

The pistachio market of the country has been consistently one of the growing markets with huge prospects. However, the market is relatively unstable than the other forms of nuts as the demand dynamics in this market is relatively fluctuating. Nevertheless, with the new notion of impulse eating and organic food branding the market is seeing prospects and therefore there are threats of new entrants in the market, provided the problem of theft is solved (Han, Porterfield and Li 2012).

 

Rivalry among existing firms:

There are few big players in this market and each of them enjoy considerable market share in the domestic and international market. There is no considerable evidence of rivalry among the firms in the domestic market of California. However, the overall Californian pistachio industry faces stiff competition from that of the Iranian cheaper counterpart, the competition becoming even steeper with the thefts. The market in Hong Kong, for example has been recently taken over by Iran (Dul?i?, Gnjidi? and Alfirevi? 2012). 

Threat of substitutes:

Pistachio, as a specific form of nut, though have many loyal customers, however, if priced that high can lose market. The presence of Iranian producers is one of the factors. Apart from that the increase in price and already fluctuating demand can lead to more consumptions of other forms of nuts as most of pistachio consumption takes place as a result of impulse eating and it is not a necessity good (Dälken 2014).

Firms capable of stopping nut theft:

The sheer magnitude and extent of theft in nuts industry in California shows that to tackle the problem, sufficient amount of precautions, security measures and man power will be required by the industry as a whole, which can only be provided by the big names in this industry which includes the following:

  • Paramount Farming (Acreage: 80,000)
  • Farmland Management Services (Acreage: 36,422)
  • South Valley (Acreage: 16,752)
  • Premiere Entities (Acreage: 32,334)
  • Agriland Farming (Acreage: 15,504) 

Resources and Capabilities Required:

To prevent the large-scale theft in the concerned industry first and foremost the firms have to increase their security framework and need to employ relevant and capable personnel for this purpose. The lands need to be protected properly, installing security cameras, electric fencing and others and special precautions need to be taken in the aspect of delivery and transport as most of the thefts take place in this aspect. Proper identification of transporters, hiring loyal people and empowering the guards with weapons can also to some extent help in mitigating the problem (Cordova and Vargas).   

Recommendations:

In the context of the extensive and continually increasing theft in the nut industry of California, it is of utmost importance on part of the firms as well as the government of the country to take proper actions regarding improving the security of the industry. For this the firms need to invest more in technological as well as manual safety framework in their lands and also in the transport facilities which they use. Continuous monitoring through cameras, enabling the guards with weapons and equipments such that they can confront the thieves and hiring loyal employees are of crucial importance on part of the firms in this industry.

 

References

Alkon, A.H., Cortez, M. and Sze, J., 2013. What is in a name? Language, framing and environmental justice activism in California's Central Valley. Local Environment, 18(10), pp.1167-1183.

Conlon, B., 2016. The Dynamics of Domestic and International Cargo Theft. SMU Sci. & Tech. L. Rev., 19, p.397.

Cordova, C.J. and Vargas, S., Corbas Marketing, Inc. and A California Corporation, 2016. Copper wire theft protection method and apparatus for wall-mounted pull boxes. U.S. Patent 9,252,580.

Dälken, F., 2014. Are porter’s five competitive forces still applicable? a critical examination concerning the relevance for today’s business (Bachelor's thesis, University of Twente).

Dul?i?, Ž., Gnjidi?, V. and Alfirevi?, N., 2012. From five competitive forces to five collaborative forces: revised view on industry structure-firm interrelationship. Procedia-Social and Behavioral Sciences, 58, pp.1077-1084.

Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.

Gupta, A., 2013. Environmental and pest analysis: An approach to external business environment. Merit Research Journal of Art, Social Science and Humanities, 1(2), pp.13-17.

Han, C., Porterfield, T. and Li, X., 2012. Impact of industry competition on contract manufacturing: An empirical study of US manufacturers. International Journal of Production Economics, 138(1), pp.159-169.

Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic analysis. European academic research, 2(5), pp.6478-6492.

Howitt, R., Medellín-Azuara, J., MacEwan, D., Lund, J.R. and Sumner, D., 2014. Economic analysis of the 2014 drought for California agriculture. University of California, Davis, CA: Center for Watershed Sciences.

Lee, H., Kim, M.S. and Park, Y., 2012. An analytic network process approach to operationalization of five forces model. Applied Mathematical Modelling, 36(4), pp.1783-1795.

Modernfarmer.com (2017). Sophisticated, Large-Scale Thefts Plague California's Nut Industry - Modern Farmer. [online] Modern Farmer. Available at: https://modernfarmer.com/2013/11/sophisticated-large-scale-thefts-plague-californias-nut-industry/ [Accessed 14 Oct. 2017].

Rahman, N.A., Saharuddin, A.H. and Rasdi, R., 2014. Effect of the Northern Sea Route Opening to the Shipping Activities at Malacca Straits. International Journal of e-Navigation and Maritime Economy, 1, pp.85-98.

Theguardian.com (2017). California cracking down as crime rings steal truckloads of nuts worth millions. [online] the Guardian. Available at: https://www.theguardian.com/us-news/2016/apr/14/california-nut-thefts-agriculture-shipments-almonds [Accessed 14 Oct. 2017].

Wu, K.J., Tseng, M.L. and Chiu, A.S., 2012. Using the Analytical Network Process in Porter's Five Forces Analysis–Case Study in Philippines. Procedia-Social and Behavioral Sciences, 57, pp.1-9.

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