Economic Efficiency Of Stocker Cattle Industry - Analysis Of Australian Agricultural Company Limited

Discuss about the Economic Efficiency Of Stocker Cattle Industry.

Australian Agricultural Company Limited was established in the year 1824 as a company for the development of lands. This was done with the assistance of the Crown Grant of the British Parliament of 1,000,000 acres in the area of Port Stephens of the New South Wales Colony. The company became specialised in the field of cattle enterprise by the end of the Second World War after facing several challenges and undergoing changes in their operations. The company operates in the sector of farms and feedlots and have a land coverage of around 7 million hectares in Queensland and the Territory in the North. The company is headquartered in Brisbane and is listed on the Australian Stock Exchange since the year 2001 (AACo 2018). The CEO of the company is Hugh Killen, and there are more than 500 employees in the company at present. AACo is a public company and is ranked 729 among the top 2000 businesses in Australia. The company specialises in the production of Wagyu beef and grain fed beef. The beef that is produced by them feeds almost 1,000,000 people or more every day throughout the whole world. The company is one of the largest producers of meat products.

The company operations are divided into three segments. They are properties, cattle and Livingstone beef. The company manages and owns several properties, farms and feedlots in the areas of Northern Territory and Queensland. The company is also involved in the finishing, processing and breeding of cattle and they also grow fodder crops and grains to help the production of livestock. Moreover, the company manages a herd of cattle which consists of approximately 500,000 cows. Additionally, the Livingstone Beef facility is located in the Northern Territory in the South of Darwin (Juan Ding et al. 2014). The daily capacity for the production of cattle is 1000 head. The facility for beef produces beef for exporting and also produces hides and other rendered products. The company also aims to sell and market their branded beef globally in different markets. The innovation team of AACo works judiciously to run breeding programs which are world class, and these programs are run in association with the units of bull breeding (Kahn and Cottle 2014). Different technologies are adopted by the company which include the evaluation and recording of the performance, testing of the feed efficiency, Total Genetics Resource Management (TGRM) and several other technologies. Since the company own their cattle, that is why they can capture the feedlot, paddock and performance carcass and they link this ability into the programs that they initiate regarding the breeding programs. The company also has several properties which contribute to their operations (Ash et al. 2015). All of these properties are positioned strategically to align with their supply chain. These properties are used for the growing and the breeding of cattle along with their finishing. The properties and land are also used for growing fodder crops as well as grains to support the production of cattle.

External Analysis - PESTEL

The revenue generation unit of the company is their meat processing unit which incurs the most profits for their company. They are one of the most successful global producers in the field of meat and agriculture with their different units gaining a lot of revenue. The different brands of the company are Darling Downs Wagyu, Mater Kobe, Wylarah, Kobe Cuisine and Westholme (Giacomazzi, Talamini and Kindlein 2017). They have around 19 cattle stations which are owned by them, two cattle stations which are on a lease, seven properties which are agisted, two feedlots which are owned by the company, a facility which processes beef and two farmed which are owned by the company. All of these facilities are the contributing factors to their high production rate and good quality of products which are consumed by people all over the world (Moreland and Hyland 2013). Due to their global existence, they can explore different areas of the market and penetrate in those beef consuming areas and give competition to the other big players who are present in the market.

The PESTEL analysis is used to determine the external factors of the market where the company is operating in. The analysis determines the different political, economic, social, technological, environmental and legal considerations which will be helpful for the company is operating in the global market. The PESTEL analysis is as follows:

•    Political – The Australian Agricultural Company operates in several countries, and hence there are a large number of political factors that create an impact on them. Since it is a global organization, it has to adhere to different kinds of political situations in different countries (Emel and Neo 2015). To operate smoothly, they need to ensure that the country they are operating in has political stability and that their products are in demand. Every country might have different taxation and regulations which the company needs to understand and follow.
•    Economic – Economic factors such as growth rate, inflation rates, and economic cycle will depend on and be different in every country. All of these factors along with others will have a great impact on the economy and the growth of the company in the global market. Another economic factor that should be considered by the company is the spending capacity of the customers that they have targeted (Beck et al. 2013). Understanding this would help them to form strategies which will help them to gain more profits.
•    Social – The social and cultural practices of a country has a great impact on the operations and even the culture of the organisation. The products that the company sell would have to be socially and culturally acceptable for the people of the country that they are based in (Daanje 2013). If the consumers do not demand the products, then the company would not be able to succeed in the market. The beliefs and views of the people will also play a great role in the success of the company.
•    Technological – Technology is a changing factor in the current times, and this change has created a great impact on every business. Australian Agricultural Company Limited also needs to change themselves according to the different technological changes to grow in their field (Acar 2015). The technological analysis is an important factor for the company as adapting to the changes in the technology will help them to increase their profitability. Technology helps them to deliver more quantity of products and in better quality. IT also has a great impact on the structure of cost and expenditure of the company.
•    Environmental – Environmental factors play a huge role in the functioning of the company. The environmental standards and norms are different for every country, and the company has to adjust to them according to the country that they are functioning in so that a negative impact is not created in their profitability and operations as well (National Academies of Sciences, Engineering, and Medicine 2016). The different climatic and weather changes are to be determined before the company decides to establish themselves in the market.
•    Legal – This is one of the most important factors which needs to be analysed by the company before they start their operations in any country. This because legal factors are always different for every country and not adhering to them would result in the company being stuck in a legal battle which would affect their brand name and image and in turn their profitability (Grice, Stone and Watson 2013). Moreover, the company should also determine the legal framework of the country that they want to enter is strong enough to protect their secrets so that they do not lose their competitive edge due to the theft of their product secrets.

AACo has been diligently protecting their resources which are the basis of their production systems. They develop initiatives which are aimed to provide environmental sustainability. The company uses natural resources which are the most important part of their production. The land is managed so that they can meet the capacity of the production (Wiedemann et al. 2015). Moreover, their condition is maintained so that they can withstand the different seasonal conditions and have a long carrying capacity. They also keep a deep understanding about the aquifers of groundwater so that they can monitor the quality of water in all of their properties. Different property plans are also initiated which would help them to recognise the areas with high conservation value of biodiversity. The company also has several capabilities which would help them to grow in the market. The make continuous innovations and developments in their processing units which creates positive impacts on their production quality and quantity. They also make several developments in the field of the supply chain so that they can ensure a smooth supply of their products (Sun and Bosch 2014). The company is also competent in maintaining their strategic balance regarding their feedlots, properties and farms which is their most important resource. They also have a diversified range of operations which is the fact that contributes to their high scale of productivity. The competitors of Australian Agricultural Company Limited are NAPCO, S. Kidman & Co., The Consolidated Pastoral Company and several others who are present in the agribusiness sector (Australia 2015). However, AACo has always strived to maintain a competitive edge over their other competitors. The company has determined that they have a strong supply chain which gives them an advantage and they could align this with the production numbers of the internal cattle, and this strong supply chain would enable them to have a continuous supply of their products globally (Jie, Parton and Cox 2013). The other strategies that are established by the company are to build good relationships with the consumers by ensuring that they deliver products of high quality and in the right time frame so that it satisfies the demand of the consumers.

Internal Analysis

AACo is a leading player in the field of agribusiness which is the contribution of their excellent products and services and the business strategies that they have adopted. However, there are different ways in which they could incur more strategic benefits. They are an integrated company who provide a diverse range of products. However, they could concentrate on the utilisation of its resources for the diversification of more brands of beef by adopting innovative methods which would attract the customers. The innovation should not only be done on the products but also on the technology so that they can produce in much lesser time than they already are and this would lead to the reduction in the operational costa as less time will be spent on production and more time will be devoted to the proper supply of the product to the different consumers. Along with the fast production, the quantity of the product should not be compromised as well as this is their advantage which is the good quality of products that they deliver. New and developed marketing techniques could also be established by the company so that they can attract and target more customers and this would increase the sales of their products. The penetration of the company in more new markets is also important as this will help in their expansion and also increase the profitability of the company. These recommendations will help the company to decide on a strategic direction for their future.

Conclusion

The Australian Agricultural Company is one of the best beef producers in Australia and the global market as well which focuses on the exporting of beef of high quality to several beef-consuming countries such as Taiwan, Russia, Chile, Japan, USA and others. The company has a vast area of land for their cattle and have excellent processing units which help them in the production of good quality of beef. The company sells their beef products under different brands which have their specialities and target market of consumers. Most of the revenue of the company is generated from their meat production units which is their strength. The PESTEL analysis that is done on the company will determine the understanding of the different factor in the external environment that would help in their strategic decision making process. The internal analysis will also assist in understanding their capabilities and advantages that they have over their competitors. The recommendations mentioned in the report will help in developing a sound strategic plan for the future of the company.

References

AACo., 2018. AACo - Perfecting the Art of Australian Beef. [online] Available at: https://aaco.com.au/ [Accessed 24 Aug. 2018].

Acar, A., 2015. Strategic Foresight in an Unstable Economic Environment (Bachelor's thesis, University of Twente).

Ash, A., Hunt, L., McDonald, C., Scanlan, J., Bell, L., Cowley, R., Watson, I., McIvor, J. and MacLeod, N., 2015. Boosting the productivity and profitability of northern Australian beef enterprises: exploring innovation options using simulation modelling and systems analysis. Agricultural Systems, 139, pp.50-65.

Australia, A.S., 2015. Contemporary business strategies and learning models in the agrifood industry.

Beck, P.A., Anders, M., Watkins, B., Gunter, S., Hubbell, D. and Gadberry, S., 2013. Improving the production, environmental, and economic efficiency of the stocker cattle industry in the southeastern United States. J. Anim. Sci., 91, pp.2456-2466.

Daanje, E., 2013. Dutch Produced Beef, the Best Beef.

Emel, J. and Neo, H. eds., 2015. Political ecologies of meat. Routledge.

Giacomazzi, C.M., Talamini, E. and Kindlein, L., 2017. Relevance of brands and beef quality differentials for the consumer at the time of purchase. Revista Brasileira de Zootecnia, 46(4), pp.354-365.

Grice, A.C., Stone, P. and Watson, I., 2013. Mosaic Irrigation for the Northern Australian Beef Industry: An Assessment of Sustainability and Potential: Synthesis Report. CSIRO.

Jie, F., Parton, K.A. and Cox, R.J., 2013. Linking supply chain practices to competitive advantage: An example from Australian agribusiness. British Food Journal, 115(7), pp.1003-1024.

Juan Ding, M., Jie, F., A. Parton, K. and J. Matanda, M., 2014. Relationships between quality of information sharing and supply chain food quality in the Australian beef processing industry. The international journal of logistics management, 25(1), pp.85-108.

Kahn, L. and Cottle, D. eds., 2014. Beef cattle production and trade. Csiro Publishing.

Moreland, H. and Hyland, P., 2013. Improving communication and increasing adoption of innovations in the beef industry. Journal of Science Communication, 12(2), pp.1-17.

National Academies of Sciences, Engineering, and Medicine, 2016. Nutrient requirements of beef cattle. National Academies Press.

Sun, D. and Bosch, O., 2014, April. Systems approaches towards understanding the barriers to innovation adoption in the Australian beef industry. In Proceedings of the 57th Annual Meeting of the ISSS-2013 HaiPhong, Vietnam (Vol. 1, No. 1).

Wiedemann, S., McGahan, E., Murphy, C., Yan, M.J., Henry, B., Thoma, G. and Ledgard, S., 2015. Environmental impacts and resource use of Australian beef and lamb exported to the USA determined using life cycle assessment. Journal of Cleaner Production, 94, pp.67-75.