Agrana, established in 1988 as an Investment Company for 2 and 3 starch and sugar factories, has expanded to become a global organization operating in at least 26 countries with around 55 manufacturing plants. Primarily dealing with fruit, sugar, and starch, the company specializes in distributing fruit concentrates and preparations to companies that produce soft drinks, dairy products, and baked goods. Their diverse range of commodities creates an enticing experience for potential customers.
Originating from Austria, the industry faced numerous challenges in establishing itself throughout Europe and becoming a multinational corporation. It had to contend with organizations from more influential countries in order to gain a competitive edge. However, it was not until 1989 when the Eastern and Central Europe markets opened up that the industry experienced significant growth in its customer base and forged partnerships with larger countries.
Furthermore, Nestle, Coca cola, and Pepsi have joined forces with this company, thus contributing to its growing popularity (Farnell and McDonald, 2010). In light of the reorganization of the sugar market in Europe, Agrana has been compelled to concentrate on future strategies for expanding the company as per the European Commission’s requirements.
Agrana has encountered strong competition from established countries, leading it to pursue additional marketing efforts to enhance its competitiveness. In addition to its traditional sugar and starch processing activities, Agrana has expanded into sanitization and processing of agricultural raw materials like beet and cereals. The company has also ventured into fruit processing, biofuel production, and beverage manufacturing, reflecting its diverse production strategy (Agrana’s strategy, 2010).
Agrane, under new management, is determined to produce excellent products and sell them at competitive prices. This focus on cost-effectiveness and restructuring various divisions has allowed Agrane to operate efficiently and competitively. Additionally, Agrane has successfully implemented an acquisition policy that has enhanced the fruit and juice sectors. To improve performance, Agrane has adopted a tripod strategy which includes industrial, resources, and institutional levels. According to Porter’s five forces, Agrane faces competition from other companies in the market, the potential for substitute products, customer purchasing power, threats from contingents, and the possibility of new entrants into the market.
In order to enhance its focus, differentiation, and cost leadership, the company has implemented market segmentation strategies and other generic strategies to stay competitive. Additionally, it has acquired companies both locally and internationally, leading to an expanded customer base. As a result, its annual gross profit has consistently increased, as stated in its financial reports.
Agrana utilizes various methods to manage risk in its operations, including strategic planning and control. These risks encompass credit, liquidity, commodity prices, interest rates, and currency, all of which Agrana works to mitigate in order to avoid losses. The company also places a strong emphasis on ensuring quality and providing satisfactory customer service as a means to maintain customer loyalty. These efforts have helped Agrana establish a customer-centric approach to its operations (Annual report 2008/09; Agrana’s financial report, 2009).
When considering its resources, Agrana has and is predicted to become a large organization. This is because it is able to utilize both physical and intangible resources, and it has access to locally available raw materials. Its fiscal year reports indicate a notable increase in its finances, the establishment of new plants, and advancements in machinery and equipment to compete with international companies. Agrana also demonstrates strategic planning and management across all its plant operations and distribution chains (Peng, 2009).
Agrana employs approximately 8000 people, attributing its growth and ongoing support to this workforce. Additionally, the company possesses intangible resources stemming from frequent innovations and a strong reputation, which have allowed for expansion beyond sugar and starch refining to include agricultural product refining and biofuel analysis. Agrana places significant emphasis on environmental sustainability, with a focus on reducing pollution. The company sources its main raw materials – sugar, fruits, and starch – locally, ensuring they are environmentally sustainable and easily accessible. Furthermore, Agrana has embraced importing these raw materials to enhance productivity in other countries. By utilizing by-products from sugar and fruit processing, the company produces isoglucose and alcohol. These practices ensure that Agrana has sustainable resources and positions it as both a local and global supplier.
The CEE initially held stronger policy formation power and prevented Agrana from expanding its market to member countries until 1989. However, this restriction was lifted, allowing Agrana to enter new markets. As a result, Agrana was able to form partnerships with internationally recognized companies like Nestle, Coca Cola, and Pepsi, which enhanced its global recognition. The pressure from EU integration prompted CEE to encourage Austrian companies to invest in their countries, but unfortunately, many of these investments have been unsuccessful.
Despite Agrana’s continued determination and strategic planning, its focus was diluted by the encouragement from the EU to embrace diversification. This led to further development of Agrana, as the sugar reforms encouraged expansion and growth in the production of biofuels such as ethanol and isoglucose. This was necessary because the EU regulates prices of wheat and corn, which kept fluctuating. While this diversification caused Agrana to lose some of its specialization, it also expanded its customer reach.
The unpredictability of the EU’s regulations on tariffs and barriers has led Agrana to proactively plan and purchase surplus products in advance. This is done to avoid the risk of running out of importable raw materials. While this practice ensures consistency in the supply chain, it also results in excessive spending on raw materials instead of allocating funds to other areas. However, despite indirectly controlling Agrana and its operations along with the Central and Eastern Europe, the EU has facilitated the company’s expansion. As a result, Agrana is able to offer customers a wide range of products and has even expanded into third world countries.
Although this organization is thriving, it will face various challenges as it expands globally. These challenges include terrorist attacks, particularly in the Middle East, which target non-natives and pose a significant risk (Facts turn one, 2009). Additionally, the organization will encounter difficulties due to inflation and fluctuations in raw material and finished product prices, especially in politically unstable countries prone to frequent tribal clashes.
The utilization of corporate governance poses a significant obstacle due to the strained relations between EU countries and those in the Middle East. This creates a major problem in promoting foreign products. Anti-globalization protesters have raised concerns that this system primarily benefits the country of origin and exploits its own people. They argue that only unskilled workers with harsh working conditions are employed, leading to environmental pollution.
The regulations for product entry barriers vary between countries. If Agrana’s tariffs do not align with those of a particular country, it will have a negative impact on the expansion of its market. Furthermore, the company’s diverse product range may result in a lack of specialization and potentially lead to failure. Additionally, in some Middle Eastern countries, the lack of locally available raw materials, particularly fruits due to limited farming practices, poses a challenge for Agrana’s operations. Moreover, the scarcity of skilled laborers will result in incurred losses for the company.
Strategic planning and segmentation strategies are necessary to address these challenges. These measures help prevent making hasty decisions and taking high-risk actions that can lead to irrecoverable losses.
References
Agrana’s annual report for the year ending February 28, 2009 can be accessed at http://www. agrana. com/fileadmin/inhalte/agrana_group/annual_reports/GB2008_agrana_E_WEB. pdf. The company’s financial report and credit information for 2009 can be found at http://www. companiesandmarkets. com/files/downloads/3_quickview_sample. pdf. Agrana’s strategy for 2010 is available at http://ir. agrana. com/en/2010/agrana-at-a-glance/agranas-strategy/. The RCB Investors’ Conference presentation from Zurs can be accessed at http://www. grana. com/fileadmin/inhalte/agrana_group/presentations/2009_2010/RCB_Invconf_Zuers_170409_WEB. pdf. Additionally, there is an article titled “Fact Turns One” available at http://www. delfji. ec. europa. u/en/whatsnew/FACT_one. pdf, which discusses Agrana’s achievements. Furthermore, a PowerPoint presentation on global strategy by Peng W is available at Columbian State Community College and can be accessed at http://www.slideshare.net/bowenjw/global-strategy-1456613#/slide-1. Finally, information on Porter’s Five Forces model for industry analysis can be found at Strategic Management: A Model for Industry Analysis by the International Center for Management and Business Administration, Inc (2010).
