Agriculture Reference
In-Depth Information
5
International agribusiness
Objectives
•
Understand why agribusinesses may choose to seek out international markets
•
Develop an understanding of the importance of international markets to U.S. food and
agribusiness fi rms
•
Describe some of the challenges that agribusinesses face when pursuing international
markets
•
Understand the elements of a society's culture, and how these elements shape the oper-
ating environment for an international fi rm
•
Identify the different methods that food and agribusiness fi rms might use to enter inter-
national markets
Introduction
Why would an already successful domestic agribusiness consider entering the more risky
international marketplace? After all, selling into unfamiliar international markets is full of
uncertainties. The agribusiness could be conservative and continue with its strategy of
expanding into other U.S. markets. But, despite the unknowns, there are many reasons why
a U.S.-based fi rm would want to “go global.”
In many U.S. food and agribusiness markets, market growth is leveling off and the market
is approaching maturity, or a time of slow growth. At the same time, the markets in many
other countries are growing very fast, or have the potential to grow fast, offering new busi-
ness opportunities. For example, China is one of the fastest-growing markets in the world. In
2010, USDA's Foreign Agricultural Service (FAS) cites China as the fourth largest market
for U.S. agricultural exports (
www.fas.usda.gov/itp/china/India_Chinamarket022010.pdf
).
Prior to economic reforms in 1978, nearly four in fi ve Chinese worked in agriculture; by
1994, only one in two did. The British Broadcasting Company (BBC) recently reported that
although China's per capita income is only a fraction of that in many industrial countries, it
has grown by an average of 10 percent a year for the last two decades (
http://news.bbc.
U.S. agribusinesses are also fi nding that their competition in the domestic market is
increasing from foreign-owned and controlled companies. Foreign fi rms have entered
the U.S. market bringing new competition, replacing domestic competitors, and/or have
joined forces with domestic agribusinesses. In any case, the competition in U.S. agribusiness
markets has become increasingly fi erce as each fi rm, U.S. or foreign, tries to capture a
larger piece of the market. Combining the increased competition in the U.S. market from
