Business Environment Study: Abundant Produce Limited

Competitive Environment and Customer Demand

Today’s world of business is becoming more competitive. Any given business organization is likely to face stiff competition in its industry from the other business organizations within the industry offering similar products and services (Thangavelu & Jiunn, 2014). A business organization should be ‘smart’ enough to compete favorably in such kind of competitive business environment. The success of a business organization is defined by its level of profit. The focus of any business organization is to maximize its profit. In order to achieve the maximum profit, a business organization should engage in efficient productivity (Stevenson & Wolfers, 2012). An efficient production process involves proper utilization of the factors of production in the best way possible. Efficient productivity lowers the costs associated with the production process. Lower costs of production enable a business organization to consequently offer its products and services at cheaper prices. A competitive business environment also requires the business organization to upgrade its quality of products and services. Customers are attracted to businesses which offer quality products and services at reasonable which consider their level of income and the current state of the economy (Subramaniam, McManus & Zhang, 2016). The business report involves the study of a business in the economy of Australia which is listed in the ASX Companies. The economy of Australia is among the world economies currently doing well. It has been observed that the economy of Australia has always been producing positive results even during the times of economy recession. In this economy, the industries are subjected to stiff competition nationwide as protectionism in most industries has been withdrawn. Quality of products and services and skilled labour force in Australia defines the success of most of its industries (McLean & Ian, 2015). Therefore any business of organization is subject to competition from similar organizations within the industry and should devise means of survival in such competitive business environment to reap maximum possible outcomes.

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The business report involves the study of the Abundant Produce Limited. Abundant Produce Limited is an Australian Company which is listed among the ASX Companies (Rosa, Izan & Lin, 2014). This is a small company which is in the Agricultural Industry (Consumer Products) under the sector of consumer staples and the sub-industry of Agricultural Producers. It specializes in offering Agricultural Products and Services. The company majorly concerns itself with offering food crops, tomatoes production and cucumbers. It is also concerned with cultivation, research and development services. Abundant Produce Limited actually engages in production of seeds which are capable of growing in harsh conditions which may be poor soil quality, lack of enough water (water scarcity) and extreme temperatures which occurs in places which do not have the modern greenhouses. Abundant Produce Limited targets farmers as the major customers to the company. Majority of its customers are located in the Middle East and Asia since these places most of the times plant crops without the use of modernized greenhouses which use the modern technology in farming (Holland & Ramsay, 2014). The company is also currently targeting the tomato market and the potential markets in South-east Asia and it requires only winning a small percentage of this South-east market in order to succeed.

Production Costs and Scale

However Abundant Produce Limited faces stiff competition from companies in the same agricultural sector offering similar products and services. Some of these companies are the Bellamy’s Australia Limited and the Blackmores Limited. Both of these companies are listed in the ASX Companies in Australia (Jones, 2012). Bellamy’s Australia Limited is a food and beverage which engages in provision of organic foods. Bellamy’s sells its products to various customers in Australia such as pharmacy chains, supermarket chains and independent stores as well as direct online selling to customers. It also deals with exporting products to Singapore, Hong Kong, Vietnam, Malaysia, China and New Zealand. Bellamy’s products are highly demanded and this has seen its expansion recently and even has an office located in Shanghai and Singapore. Blackmores Limited is an Australian company which deals with health supplements. Its products are highly demanded with the current results indicating that its products are in more than 17 markets in the Asia Pacific Region. Abundant Produce Limited is also facing stiff competition from India and China in the tomato market who dominate about 40% demand for seeds globally and then Turkey follows with 6% with other small companies like Abundant Produce Limited remaining with 40% to share. A good example is the Mosanto which major in Agricultural Products and the DuPont (Grossman, 2013). These are big business and are the giants in the Agricultural sector.

Based on the information gathered, the competitive environment in Abundant Produce Limited operates is closer to the perfect competition. This is explained by the various factors in the industry faced by Abundant Produce Limited. The industry consists of large number of companies which supply similar products to the customers. This means that each company sells a given proportion of products to the customers in the industry and alone cannot influence all the other companies. Various companies within the industry offer similar products and also products which are close substitutes to those of their competitors (Harcourt, 2013). This means that the buyers will automatically opt for the close substitutes incase abnormality such as rise in prices results in products of their interest. Customers are also vast in number with the various companies in the industry able to even export their produce worldwide. There is also freedom of joining or exiting the industry. The competitive nature within the industry allows for other investors willing to enter the industry to join if they feel that they can offer their products and services efficiently and cope with the competition. The environment also allows for the companies which are outdone in terms of competition to exit the industry.

Macro Business Environment

Abundant Produce Limited offers products at prices which are relevant and relative to the customers’ level of income. This means that Abundant Produce Limited is likely to experience a relatively elastic demand curve. An elastic demand curve results when the amount of products and services drastically changes due to a small change in the determinants of demand of a company. The determinants may be the price of the products and services, price of the close substitutes, consumer level of income and many others (Butlin, 2013). Our case involves the price of Abundant Produce Limited products and services. This therefore means an attempt by the company to raise its prices above the normal prices will result to greater losses as its products and services will be abandoned by the customers. This is due to the fact that there are various companies in the industry and outside the industry which may tend to offer similar goods or close substitutes at relatively low prices to cut off competition. This therefore means that the company must offer prices which are considerate of the customers’ level of income and the overall market price for it to succeed (Garnaut, 2009).

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Abundant Produce Limited involves the use of various factors of production to produce its agricultural products. Factors of production may be taken to mean the materials used or rather the inputs used in producing the output. Majorly the factors of production employed by Abundant Produce Limited include land, labor and capital (Goodwin-Stewart & Kent, 2016). The land refers to the company’s premises where its daily operations take place or it can be taken to mean the company’s production zone. Labor refers to the workforce or rather the employees employed by the company to undertake the production process. Capital as a factor of production is a little bit complex. It refers to the tools which may be machinery and equipment which are used in the production process (Balatbat, Lin & Carmichael, 2010). Abundant Produce Limited employs both fixed and variable factors of production. The fixed factors of production include the premises of the company. This means that anything associated with the company premises in as much as production of products and services is concerned may not vary much as the quantity of goods demanded particularly seeds increases. The variable factors of production used by the company include labor and machinery. As the quantity demanded increases more employees and machinery are likely to be increased by the abundant Produce Limited, in order to cater for the extra products and services required by the customers. From the information gathered the cost structure of the company can be explained. Cost structure shows the relative proportions of variable and fixed costs incurred by a business. Cost structure can be narrowed down into smaller units which may include customer, product, product line, division, service or the geographic region. The cost structure of an organization is used in determining its product prices. Putting Product, Service, Product line and Customer costs into consideration, Abundant Produce Limited variable costs are lower than the fixed costs (Bansal, 2017). Therefore a conclusion is made based on the cost structure of the company that it is a medium company which is still growing as compared with other big companies in the industry.

Overview of Abundant Produce Limited and Industry

The macro business environment refers to the external factors which affect the performance of a business organization and thus must be considered when making the business decisions since they may adversely affect the business (McLean, 2014). These factors include the country’s prevailing level of interest rates, inflation rates, weather conditions, dollar value, competitors and the political stability. Abundant Produce Limited is in Australian and therefore, the Australian economy has been discussed.

Australia is among the best performing nations in Asia Pacific economically. It has enjoyed economic freedom for a relatively longer period, actually more than 20 years economic freedom (Rostow & Rostow, 2010). It has done great over the past years as it has never posted a negative result even during the economic recession. Australia is among the countries with strong political stability. It is a democratic country. The political stability of Australia provides a supportive environment for both the internal external investors to operate their business activities. The gross domestic product of Australia is currently at 1360 (USD bn). Australia is also experienced a rise in the total population growth (Sinclair, 2016). This implies that it has a great future as the high population will provide skilled labour force and also create investments in the country. The unemployment rate is currently at 12% meaning that the government of Australia is doing its best to ensure that it deals with the problem of unemployment. The interest rates currently stand at 1.5%. This is a relatively low and favorable rate of interest. The Reserve Bank of Australia has continued to maintain the interest rates at a low rate of 1.5% to encourage investment in the economy. This is due to the fact that business organizations and new investors as well as the residents of Australia can borrow capital at relatively low interest rates and invest much fostering the economic growth. Considering the inflation rates, they currently stand at 1.3%. This is the annual variation percentage in inflation rates. This shows that Australia is a relatively stable economy with no adverse changes in price of goods and services. This attracts more investors to join the stable economy. Considering the tax rates in Australia, the tax system is not that much favoring. The company income tax is relatively high. An evaluation of the tax system levied on foreign investments shows that the international tax system of Australia is relatively high (Soytas & Sari, 2015). In fact the foreign investors in Australia are not attracted by the low taxes but by the stability, prosperity and the future of the economy. This may adversely affect some of the Australian business which venture in the export business as the other countries may possibly retaliate and levy high taxes on them. Considering the exchange rates, the exchange rate of the Australian dollar against the US dollar is currently at 0.72. This is good exchange rate and actually indicates that the Australian dollar has gained value over the last years. Currently the economy of Australia is undergoing growth but at a slow rate.

Abundant Produce Limited’s Competitive Landscape

Considering the Australian macroeconomic conditions, Abundant Produce Limited is likely to experience favorable economic environment during the coming years. This is due to the fact that the Australian tax system favors small businesses and also the level of interest rates is low. This means that the company can acquire capital in form of loans at relatively cheaper prices for its expansion. The inflation rate annual variation percentage is also low. This indicates that the Australian economy is much stable and is supportive for small businesses growth. The population of Australia is growing and factors of production are readily available. This means that Abundant Produce Limited is not likely to experience shortage of factors of production. Skilled labor will be readily available as Australia is currently encouraging serious education reforms in the country. At least everybody is encouraged to acquire 12 years of education. Abundant Produce Limited exports its products to various countries outside Australia. Considering the current and the future dollar value of Australian currency against the US dollar, the company is likely to experience favorable conditions in as much as exchange rates are concerned.

Abundant Produce Limited production process results to positive externalities. The company undertakes production processes which do not harm the environment as well as the surrounding community. Abundant Produce Limited has been producing seeds and other products which greatly help people. Farmers living in areas of poor soil quality and inadequate water as well as facing the challenge of lacking modernized greenhouses have benefited a lot. It has also offered job opportunities to people helping reduce the unemployment rate in Australia. Particularly the researchers have benefited since Abundant Produce Limited involves intensive research. It has also benefited the government through provision of revenue. Abundant Produce Limited pays taxes particularly the company tax to the government of Australia. This enables the government to raise revenue for its expenditure (Rodrik, 2013). Abundant Produce Limited encourages students to venture in research studies specifically the Agricultural sector. This enables the company to develop much as creativity and innovation result from the research studies. The company has also employed highly skilled labor force to help foster its growth by offering quality products and services. Abundant Produce Limited also offers its products at relatively low prices. This helps improves its market and raise its sales. The company has continued to offer its products at prices which are considerate of the consumer level of income and hence has continued to improve its sales.

Factors of Production Used by Abundant Produce Limited

The consumption of the Abundant Produce Limited products has generated positive externalities. The products it offers such as the seeds which are sold to farmers living in areas with poor quality of soil and inadequate water supply as well as lacking improvised modern greenhouses help the farmers yield high amounts of harvest. The products are also offered at relatively low prices and consider the consumers level of income. Currently, Abundant Produce Limited has discovered pure organic approach to skin care. The product aimed at bringing the solutions to effects associated with chemical products on human skin. This is a product which is highly demanded as it has no effects on the skin as we have witnessed with most chemicals. Abundant Produce Limited has highly invested in research. This has led to discovery of wonderful beneficial customer products and more discoveries are yet to be done.

The sustainability practices put in place by the Abundant Produce Limited are likely to improve its productivity in the long-term period. This is due to the fact that the sustainability practices will lead to production of quality products and services at relatively cheaper prices which mind the level of consumer income. The production activities do not harm the environment and thus the company will continue to operate.

Considering the Australian macroeconomic conditions, Abundant Produce Limited is likely to experience favorable economic environment during the coming years. This is due to the fact that the Australian tax system favors small businesses and also the level of interest rates is low. This means that the company can acquire capital in form of loans at relatively cheaper prices for its expansion. The inflation rate annual variation percentage is also low. This indicates that the Australian economy is much stable and is supportive for small businesses growth. The population of Australia is growing and factors of production are readily available. This means that Abundant Produce Limited is not likely to experience shortage of factors of production. Skilled labor will be readily available as Australia is currently encouraging serious education reforms in the country.  

Conclusion

Abundant Produce Limited is a medium company which engages in production of agricultural products in Australia. It majorly concerned with cultivation, research and development services. It has helped improve farming in areas with poor quality soils and inadequate water supply as well as lacking modernized greenhouses. Majority of Abundant Produce Limited customers are located in the Middle East and Asia. The supportive Australian business environment has enabled the company to grow much. This is due to the fact the political environment of the country is stable, interest rates and inflation rates are relatively low, exchange rates are relatively good and the tax levied on the company is low considering that it is a medium company (Swan, 2016). Abundant Produce Limited has been doing great and is expected to expand in future.

Abundant Produce Limited’s Cost Structure

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