New Zealand Agri-Tech Industry Internationalization and De-Internationalization

New Zealand Agri-Tech Industry: Internationalization and De-Internationalization

The competition in the global Agri-tech market is fierce from foreign and domestic fronts. New Zealand companies in the Agri-tech market face stiff competition from the United States, Israel, and Ireland, reducing their market share in domestic and foreign markets. Therefore, Agri-giant should expand its global products market and adopt measures that reduce overall production costs to increase its competitiveness in the Agri-tech market. This report highlights existing global markets for Agri-tech products and evaluates how Agri-giant can adopt offshore manufacturing and innovation to improve its market share.

Global Market for Agri-tech Products

Agri-giant should also expand its exportation of Agri-tech products to Thailand. Thailand is amongst the largest importer of Agri-tech products globally; the country aims to increase crop yield, establish better farm management practices, and improve cold-climate vegetable production (Saunders, 2019). This provides an opportunity for Agri-giant to innovate its products to support precision agriculture and enhance harvesting and post-harvesting logistics. Thailand provides a broad market for Agri-tech products; thus, investing in this market will increase Agri-giant market share.

Secondly, Agri-giant should de-internationalize the exportation of Agri-tech products to Australia to increase its competitiveness and market share. Australia’s Agri-tech market is highly competitive from both domestic and foreign fronts. It is the largest market for New Zealand Agri-tech products and is physically closer to New Zealand, implying stiff domestic rivalry among competitors and leading to a reduction in the company’s market share and income.

In addition to Thailand, Agri -giant should expand its exportation of Agri-tech products to North America. Although there is a niche for differentiated New Zealand products in the North American market, the Agri-tech companies have not adequately explored the market. This provides an opportunity for expansion. According to Saunders (2019), North America has a large market that can absorb a high volume of Agri-tech products and create demand for the broad category of these products. Furthermore, North American markets pay a premium for quality products; this provides an opportunity for the company to charge higher prices on its products compared to prices in the other markets, increasing its revenue.

Additionally, Agri-giant should expand its exportation of Agri-tech products to South America. South America provides a suitable market for the exportation of Agri-tech products. The region is experiencing a rise in corporate farming and an increase in the number of agricultural firms adopting the best global Agri-tech products; this provides a market for Agri-giant products (Saunders, 2019). Additionally, New Zealand enjoys the advantage of being the first mover in the North American market, implying a broad and loyal customer base, an opportunity that Agri-giant can use to expand its market share.

Risks Mitigation

Exportation of Agri-tech products to physically distant countries such as China, Brazil, East Europe, and the Middle East and offshore manufacturing exposes the company to social, political, financial, and economic risks.

Financial and Economic Risks: Selling to physically distant countries and engaging in offshore manufacturing exposes the exporter to currency fluctuation, foreign exchange risks, incidences of economic downturn, broken contracts, and the failure of the business to pay (Brouthers et al., 2016). Although the risks mentioned above also exist domestically, the risks increase when companies sell or conduct business operations internationally. Businesses should buy credit insurance; this protects the business against non-payments, contract cancellation, and currency fluctuation risks to mitigate financial and economic risks (Hoke et al., 2019). Foreign exchange risks are prevalent in exportation; therefore, the business should understand and evaluate possible foreign exchange risks in these global countries where they operate and measure its exposure to minimize its impacts on profits.

Social Risks: International exportation exposes the business to direct and indirect activities that affect local and global communities. Social issues such as child labor and human rights issues, environmental degradation, involvement in terror financing and bribers, expose the business to social risks (Brouthers et al., 2016). These activities negatively impact business brand, reputation, credibility, and ultimately company’s sales. For instance, physically distant exportation and offshore manufacturing introduce business operation chain, linking the company to activities of the other companies in chain, this increases company exposure to indirect social risks. According to Hoke et al. (2019), to mitigate these risks, the company should ensure that its direct employers can spot any potential social issue in the domestic company and the other companies in the business chain and plan to deal with these risks.

Political Risks: Exportation exposes the business to different political risks such as political violence, outright expropriation, conversion and transfer risks, and repossession risks (Hoke et al., 2019). These events impact business negotiations for physically distant exportation and business operations for offshore manufacturing. Political risks are unpredictable. Thus, the most effective way of mitigating this risk is buying political risk assurance (Hoke et al., 2019). Additionally, the business can keep watch on the political happenings of all the countries it operates in and exports to ensure it takes swift actions to avoid any political challenge that can last longer.

Internationalization Activities to Improve Market Share

Offshore Manufacturing: The company can shift its manufacturing activities and operations to offshore countries with cheap and readily available factors of production such as labor and raw materials (Brouthers et al., 2016). This will reduce the cost of production, making the manufactured products more competitive abroad. For instance, an Agri-giant company can establish its manufacturing and production plant in India, Vietnam, China, or the Philippines, where the overall production cost is low.

Innovation: the Agri-giant company should upgrade its current products to meet the Agri-tech market’s ever-changing needs. Smart agriculture is rising, and demand for products that enhance crop management and rotation, indoor agriculture, post-harvest logistics, traceability services, and sensor and smart farm equipment continues to rise (Saunders, 2019). Therefore, the Agri-giant company should upgrade its harvesters’ products to include harvesting-related services, electric fences products to cater for crop management and rotation and develop products that enhance indoor agriculture. This will improve the company’s market share and competitiveness.

Economies of scale: The increasing scale of existing business will reduce the overall cost of production by spreading overheads and fixed costs and increase capacity utilization allowing the company to produce more products that ultimately lead to expansion in the product market (Brouthers et al., 2016). Additionally, a decrease in production costs allows the business to sell the products at low prices, enhancing its competitiveness in the global market.

Conclusion

New Zealand Agri-tech market experience stiff competition from domestic and foreign fronts. Activities such as offshore manufacturing, economies of scale, and innovation can help Agri-tech companies increase market share and remain competitive. New Zealand Agri-tech industries export to Thailand, North America, and South America; however, these businesses have not fully exploited these markets. There are tremendous opportunities that companies can use. Similarly, the Australian market is crowded and highly competitive companies. Thus, businesses should de internationalize their operations from the Australian agri-tech market. Nonetheless, exportation exposes the business to economic, financial, social, and political risks that companies should adopt measures to curb.

References

Brouthers, K. D., Geisser, K. D., & Rothlauf, F. (2016). Explaining the internationalization of business firms. Journal of International Business Studies, 47(5), 513-534.

Hoke, E., Marada, J., & Heinzová, R. (2019). International trade risks. In MATEC Web of Conferences (Vol. 292, p. 01047). EDP Sciences.

Saunders, C. (2019). Sustainable agriculture–life beyond subsidies: Lessons from New Zealand. Journal of Agricultural Economics, 70(3), 579-594.