Agriculture Reference
In-Depth Information
international companies with the opportunities in international markets, the threat is clear:
if a U.S. food or agribusiness company doesn't produce and sell it, someone else in the
world will!
So, why should an agribusiness manager be interested in better understanding interna-
tional business? In this chapter, we will explore this question and identify some of the rea-
sons why the international marketplace is of great interest to agribusiness managers. We will
also examine some of the reasons why doing business internationally may be challenging,
and some of the strategies agribusiness fi rms use to “go global.”
Why does U.S. agribusiness need international markets?
There are many reasons for agribusinesses, and the U.S. economy, to be interested in the
international business arena. From an economic standpoint, the exporting of U.S. agricul-
tural products boosts employment within the U.S. economy. In 2008, it was estimated
that more than 8,000 jobs were created for every $1 billion in agricultural exports (this is
down from the 18,000 jobs estimated to be created by every $1 billion in agricultural exports
in 1998) (
www.ers.usda.gov/Data/TradeMultiplier/econeffects/2008overview.aspx
)
. This
implies that nearly 920,000 jobs in the agricultural sector were the direct result of farm prod-
uct exports of $115.4 billion in 2008. Agricultural exports help boost rural economies:
approximately one-third of those agricultural export jobs were located in rural areas.
Although most of these rural jobs are in the production of agricultural products, others are
in more labor-intensive industries such as wholesale and retail trade, services, and food
processing and feed processing.
Benefi ts from doing business internationally
From a managerial standpoint, international markets hold appeal for a number of reasons.
Some of these reasons are shown in the list below:
•
Exports and sales
•
Take advantage of scale economies
•
Capture benefi ts of a global brand
•
Reduce risk by diversifying across markets
•
Lower costs of production
•
Access lower-cost raw materials through international sourcing
•
Broaden access to credit
•
Leverage experiences from operating in international markets into domestic markets
While each reason in the list may not be part of a specifi c international opportunity for an
agribusiness fi rm, the list does provide a snapshot of several important reasons agribusi-
nesses fi nd international business attractive.
Clearly, one reason to pursue international markets is to expand sales by capitalizing on
growth opportunities in other countries. Some newly industrialized countries are experienc-
ing extraordinary growth when compared with established markets such as the United States,
Europe and Japan. Entering a newly industrialized country may offer agribusiness compa-
nies a piece of this potential for rapidly growing sales and profi ts. In addition, product life
cycles can often be extended by selling products in foreign countries. The potential for
expanding international sales is especially important if the domestic market is experiencing
