This paper explores the case study by analyzing the challenges that the North Australian Pastoral Company (NAPCO) is currently facing. The paper will start with an introduction of case study and the reasons for analyzing it. Next, the analysis of the company’s challenges will be done using different strategic management models, including SWOT analysis, PESTLE analysis and Porter’s five forces. These models will help analyze the internal and external forces facing the company and how the company’s internal environment can adequately deal with the challenges in the external environment.
The case study addressed the challenges that the North Australian Pastoral Company (NAPCO) has been facing since its inceptive. Established in 1877, NAPCO is a leading company in the Australian cattle industry that specializes in beef production. Since its inception, the company has expanded its operations despite the many challenges that it faced earlier in its formative years. However, the most recurrent problem appears to be drought whose impact has been considerable for the beef producing company. This essay uses various strategic management models to examine the external and internal forces affecting the company and the extent at which the company’s internal environment is well adjusted to cope with external change in the industry and in its environment
The external and internal forces influencing the company can be analyzed through various strategic models. The first model to assess the external forces facing NAPCO is SWOT analysis. According to Osita, Onyebuchi, and Justina (2014), SWOT analysis is a strategic management tool that is used to analyze the strategic position of an organization by considering four different factors: strengths, weaknesses, opportunities, and threats. While strengths and weaknesses examine the internal business environment, opportunities and threats are used to examine the external business environment (Godfrey, 2016). The SWOT analysis for NAPCO is as follows:
- NAPCO is a leading company in the Australian cattle industry
- The company has several resources including more than 200,000 heads of cattle as well as over 5.8 million hectares of land
- The company has diversified agribusiness operations including beef production, meat processing, and cattle rearing
- Its many years of existence has enabled the company to adopt world’s best practices in beef production
- Strong global presences with regular exports to various countries including USA, Japan, South Korea, Latin America and the Middle East
- The company successfully rears drought resistant animals
- The company is a leader in environmental stewardship and property planning
- NAPCO has huge operating expenses mainly as a result of its costly meat processing plant
- Increasing complexity in meeting emission standards and attaining efficient water use
- Diversification into other meat products in terms of quality
- Opportunity to venture into new markets in the Middle East, Asia and Latin America
- Consider more valued-added meet products that could be accepted in other markets
- An opportunity to use technology to reduce production costs and improve quality
- Recurrent drought that results in the company losing its livestock
- High level of beef production across the globe with increased production from the USA
- The use of quantitative import restrictions in various markets overseas
- The rise of diseases such as bovine spongiform encephalopathy
- Increased domestic production of beef in countries like the USA and South Korea
- Increased exposure to climate change that poses the risk of severe drought, heat stress on cattle, lower land productivity and increased production costs
Another strategic management tool that could be used to analyze the external and internal environments of NAPCO is PESTLE analysis. According to Anna (2015), PESTLE analysis is a common approach of analyzing the external business environment to understand the strategic position of an organization. The model is a powerful tool in identifying several external factors that could impact the operations of an organization, including Political, Economic, Social, Technological, Legal and Environmental factors (Prasad, 2015). The following is a PESTLE analysis of NAPCO:
The political environment in Australia could potentially impact the Australian cattle industry and also the operations of NAPCO. However, Australian political environment is stable and progressive and supports investment. NAPCO, however also needs to deal with the political environment of its international market. With increasing political regulations regarding quantitative import restrictions and particularly restrictions and additional requirements on beef imports in oversea countries, NAPCO’s operations are likely to be negatively affected (Hanson, Hitt, Ireland & Hoskisson, 2014).
- Economic factors
Economic factors in different markets in which NAPCO exports to could potentially affect the operations and profitability in the long run. For instance, the global economic crisis could reduce the market and demand for NAPCO’s beef products, as witnessed in the 1997 Asian economic crisis as discussed in the case study. Other factors such as import and export policies, inflation, economic system and economic conditions in the local and international markets of NAPCO could affect the company’s operations, particularly the beef exports.
- Social factors
Social factors such as traditions, cultures, beliefs, and policies could affect the social demand for the beef producer in its markets. For instance, the changes in the consumption patterns in the USA have significantly affected the export of beef products to the USA. Similar social changes in Japan and other large markets for NAPCO could negatively affect the demand for the company’s products.
- Technological factors
Technology plays a critical role in influencing the demand and supply of products and services in today’s world. Technology promises efficiency and more effective business in inventory and supply management as well as marketing. For NAPCO, there is an opportunity to use technology to attain efficiency in beef production and also improve the quality of the meet produced. The company could also take advantage of technology to increase its brand awareness and marketing techniques.
- Legal environment
The legal environment, particularly legislation that touches on food processing requirements could potentially impact the operations of NAPCO. For example, food processing legislation in countries like USA and Japan, which are major foreign markets of NAPCO, could drive up the production and operational costs of the company. In addition, tighter regulations in these markets could make it difficult for NAPCO to continue exporting beef products.
- Environmental factors
Environmental factors such as climate change and laws meant to protect and conserve the environment could impact the cattle rearing and beef production business of NAPCO. Currently, climate change poses the risk of longer and drier droughts, heat stress on animals and lower productivity that could negatively impact NAPCO’s operations. In addition, environmental laws that touch on emissions, water use, and sustainable land-use practices could negatively impact the operations of NAPCO by increasing production and operational costs.
Another strategic management tool that could be used to assess the internal forces influencing the company is Porter’s five forces that according to Michael Porter, it helps to analyze the competitive strength and position of a company in an industry or market (Dobbs, 2014). The following is an analysis of NAPCO’s competitive strength:
- Supplier power – For NAPCO, supplier power is relatively low as the company gets its feeds from the large of tracks of land that it owns and manages. This makes the feed cost the least expense for NAPCOs (Mounter, Griffith & Fleming, 2015).
- Buyer power – The buying power of suppliers is considerably high given that the main markets, especially in Japan, are demanding more quality beef products that are free from diseases.
- Rivalry among competitors – The main competitors for NAPCO come from other countries, especially the USA, where producers are eyeing more profitable markets in North Asia, Russia, and Canada (Weaver, 2010).
- Threat of substitution – Close substitutes for the cattle industry include chicken, pork, and eggs. However, this threat is considerably low for NAPCO’s beef products
- Threat of new entrants – The threat of new entrants is relatively low considering because of the existing barriers in terms of costly infrastructure for beef production and high production costs.
Considering both the internal environment and the resources of NAPCO’s, the beef producer is considerably well adjusted to cope with the external changes in the beef industry. For instance, the company has an already established brand, and this places it at a competitive advantage over its competitors within Australia and globally. The company could also use its assets to finance technological changes in its production facilities to increase efficiency (Novakovic, Grujic & Vujadinovic, 2016). In addition, regarding management of emissions, water use and environmental sustainability, the company could consider adherence with the standards. And to deal with climate change, the company needs to consider alternative feeds or supply of feeds to address the challenge (Roman, 2016).
In conclusion, being a leader in the cattle industry in Australia, NAPCO has various strengths as well as internal resources that could help it maneuver around the existing challenges in the external environment. By concentrating more on its resources and maximizing opportunities, the company can achieve more growth and profitability.