Strategic Management Assignment: Strategy Formulation of Futuris Corporation
Task: This strategic management assignment focuses on your understanding and appreciation of Strategic Actions and Strategy Formulation. You are required to identify a corporation in the Fibre focused Agribusiness sector of Australia.
Strategic management refers to the setting up of objectives, analysis of the competitive environment, internal aspect of business, evaluation of strategies for better organizational performance. The present report focuses on the identification of the strategic management process within the Futuris corp in Australia. The present study focuses on the identification of fibre focused agribusiness Futuris corp and its business units. Business level strategies and the competitive environment of the company are also going to be discussed in this task. Evaluation of the strategic approach of the business and implementation of a suitable plan for the future strategic direction of the firm is also going to be discussed in this task.
Fibre focused Agribusiness
Futuris Corporation (FCL) is an Australian ASX ranked agriculture business that has changed its name to Elders Limited (Elders.com.au, 2021). The company was founded in the year 1839, focusing on wool broking. The primary focus of this business is to help people find success in the agriculture business. This company has more than 2000 employees to support their agriculture operation. It is necessary to state that Futuris hasn't been going well, and in 2008 and since then, the company decided to focus more on agriculture (Fionalake.com.au, 2021). The company has 14.9% AACo shares regarding the development of a cattle's firm.
The business unit, products and service lines
The company has a standard business unit that supports its overall business operation. The company has a human resource department, accounting department, sales department, marketing department, purchasing department and manufacturing unit. As mentioned by Zhang et al. (2018), surviving needs of the agriculture business in Australia depends upon digital technology adoption. The Futuris Corporation has products like that is Livestock, grain, farm supplies and wool. The main operation of this agriculture business focuses on Rural products that mean it supplies the products and services developed in the rural farmhouses. The products include agricultural chemicals, animal health care products, wools, and rural merchandise, fertilizer and seeds (Elders.com.au, 2021). Elders also operates the Killara feedlot located in the UK and provides Australian meat in China. In addition to this, real estate services like lifestyle estates, sales of farm, feedlots and livestock exporters and financial services are also provided by this organization.
Business revenue units
In the fiscal year, 2020 September 2,092.6$m continuing sales revenue have been achieved by this company (Investors.elderslimited.com, 2021). In that year, the company leveraged 30% shareholding in the CGX for improvement of the grain value proposition and improvement of the gain value for the future as well. Improvement of revenue in the area of Livestock and Wool has been fostered by the increased uptake of raw materials. The organization retained sales revenue of $m 1,626,032 in the year 2019, while it reached to $m2,092,618 in 2020.
Figure 1: Comparison of the sales margin of Futuris Corporation 2019 and 2020
(Source: Investors.elderslimited.com, 2021)
This type of sales volume increase and increase in their revenue generation has impacted the overall brand reputation of Elders Limited. High revenue has helped the company to focus on the creation of value for all the stakeholders in Australia (Investors.elderslimited.com, 2021). It is also important to contribute $44.0 million in gross margin to the company and achieve competitive benefit. The importance of such high revenue to the company is to implement Eight Point Plan by the end of 2023.
Business level strategies
Porter's generic is the competitive strategy that helps businesses to determine the scope of achievement of competitive benefit in the marketplace (Islami, Mustafa & Latkovikj, 2020). With the help of this strategic framework, a business level strategy of Elders Limited can be identified; these are as follows:
The high revenue of Elders Limited is due to the lower cost strategy. Price control and lower price tactics have helped the company to increase its market share as well as sales growth.
The firm also focuses on the differentiation strategy so that it can offer different forms of financial as well as non-financial agricultural services to its customers different from its competitor. Elders Limited have innovative research and development farmhouses that have helped them to develop new agriculture devices (Elders.com.au, 2021).
Focus strategy used by business to understand the dynamics in the market and focus on a particular niche market (Viltard, 2017). Under such a strategy, the company has focused on supplying meat products to China, where the demand is very high. Based on the overall discussion, differentiation along with a lower price strategy would be suited for the company even in future. A lower price would help to attract large customers, while the differentiation would help them to offer attractive goods and services to customers and beat its rivalries.
With the help of Porter's five forces, competitive issues faced by the business organization are usually identified (Bruijl, 2018). In the case of Elders Limited, issues are as follows:
- Rivalries: Threats from the rivalries are very high for the Elders limited. Primary rivalries of this agriculture business are AACo, Mitsui & Co and Wesfarmers.
- Power of suppliers: As the company itself produces and supplies agricultural goods to consumers, the power of other suppliers is usually low.
- Power of buyers: The purchasing power of consumers in Australia is very high (Larder, Sippel& Argent, 2018). Hence, the high power helped Elders limited to increase scale volume and generate high revenue
- New substitute: The development of substitute goods is very low because almost all the rivalries provide the same type of agriculture products or services to their consumers.
- New entry: Threats from new entry are also very low in the Australian agriculture sector due to the presence of high market rivalries.
Figure 2: Porters five force of Elders Limited
(Source: Possessed by author)
Plan and evaluation strategy
It has been identified that there is a constant change in consumer demand in the Australian agriculture sector. It has also been identified that climate volatility impacts the production of agricultural products (Theland.com.au, 2021). In the case of Elders limited, the climate factors also affect the production of wool from the far producing animals. In addition to this, COVID 19 situation made it next to impossible to import goods and agricultural services to consumers. A growing trend in the agriculture sector in China also decreases the profitability of Elders limited, and sales have decreased. In order to cope with the situation, a certain strategic plan is required, these are as follows:
Balance the production process
1 to 3 months
3 to 6 months
Merger and acquisition
6 to 9 months
9 to 12 months
Table 1: Timeline for the future strategy of Elders limited
(Source: Developed by author)
Balance the production process:
Climate change badly affects the growth and profitability of Elders Limited. It is necessary to reduce waste by reducing production as per the demand of consumers. It would help to balance the demand for goods and its supply process.
This would be the most important strategy that can help the Elders limited to manage the demand of consumers and handle them by differentiating the products from rivalries.
Merger and acquisition:
It would help to manage high competition from the end rivalries. Merger or partnership not only helps to sustain in a highly competitive market but it would also help to manage legal as well as political threats from the import and exporting process by Elders Limited.
In the pandemic era, Elders limited the need to follow digital channels to make customers aware of their services and goods. It would help to make the sales and revenue generation process constant with the consumers’ needs.
Based on the overall discussion, it is recommended to the Elders limited to conduct partnership so that pressure from rivalries can be managed. In addition to this, the organization is recommended to follow a lower price strategy so that more customers are attracted to them. The firm is also recommended to follow the focus strategy so that it can regain target strength regarding the supply of agricultural goods to its customers. China was the big agriculture product importer for Australia, but they have started their farming in a more innovative way. In this regard, profitability and exporting facilities have decreased. In this case, Elders limited can follow the differentiation focus on specific country areas so that Elders Limited can export the product to country's other than China.
From the overall discussion, it can be Futuris Corporation is an Australian ASX ranked agriculture business that has changed its name to Elders Limited. This agriculture business provides chemicals, animal health care products, wools, and rural merchandise, fertilizer and seeds to its customers. In the fiscal year, 2020 September 2,092.6$m continuing sales revenue have been achieved by this company. But the high market competition, constant climate change and change in consumer demand have created issues for the sustainability of this agriculture business. In this regard, a lower price strategy can be best suited for attracting large customers and holding high profit. Differentiation focus on specific country areas can be another important strategy that can help thyme company to manage issue high market competition as well.
Bruijl, G. H. T. (2018). The relevance of Porter's five forces in today's innovative and changing business environment. Available at SSRN 3192207.https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3192207
Elders.com.au, 2021.Futuris Corporation. Retrieved from: https://elders.com.au/ [Retrieved on 23rd April 2021]
Fionalake.com.au, 2021.Elders Limited, Futuris Corporation, and the Australian Agricultural Company.Retrieved from: https://www.fionalake.com.au/blog/news/elders-limited-futuris-corporation-and-the-australian-agricultural-company/[Retrieved on 23rd April 2021]
Investors.elderslimited.com, 2021.2020-Annual-Report.Retrieved from: https://investors.elderslimited.com/investor-centre/?page=annual-reports [Retrieved on 23rd April 2021]
Islami, X., Mustafa, N., & Latkovikj, M. T. (2020).Linking Porter’s generic strategies to firm performance. Future Business Journal, 6(1), 1-15.https://link.springer.com/article/10.1186/s43093-020-0009-1
Larder, N., Sippel, S. R., & Argent, N. (2018).The redefined role of finance in Australian agriculture. Australian Geographer, 49(3), 397-418.https://www.researchgate.net/profile/Nicolette_Larder2/publication/320587230_The_redefined_role_of_ finance_in_Australian_agriculture/links/59f2f7a8a6fdcc1dc7bb34d4/The-redefined-role-of-finance-in-Australian-agriculture.pdf
Theland.com.au, 2021.The top ten issues were affecting Australian agriculture. Retrieved from: https://www.theland.com.au/story/4801143/top-ten-issues-affecting-australian-agriculture/ [Retrieved on 23rd April 2021] Viltard, L. A. (2017). Strategic mistakes (AVOIDABLE): the topicality of Michel Porter’s generic strategies. Independent Journal of Management & Production, 8(2), 474-497.https://www.redalyc.org/pdf/4495/449551140013.pdf
Zhang, A., Jakku, E., Llewellyn, R., & Baker, E. I. (2018).Surveying the needs and drivers for digital agriculture in Australia. Farm Policy J, 15(1), 25-40.https://www.researchgate.net/profile/Airong_Zhang/publication/324486222_Surveying_the_needs_ and_drivers_for_digital_agriculture_in_Australia/links/5acff5bca6fdcc8784119031/Surveying-the-needs-and-drivers-for-digital-agriculture-in-Australia.pdf