Agriculture Reference
In-Depth Information
of scale economies, risk reduction, lower production costs and access to lower-cost raw
materials, access to credit, and experience from operating in other markets. The internation-
alization of our world, our attitudes, and our abilities to be connected are greatly responsible
for the growing trend called globalization. Some companies have done away with their
domestic versus international distinctions and instead are competing in global industries
with global strategies and approaches.
Exports and international sales have become even more important to the food and agri-
business markets. With population and income increases comes the potential for increased
demand for high-value agricultural products. Such trends affect the entire food production
and marketing system.
Fueling the internationalization of our business world are the political, economic, and
demographic shifts occurring around the world—shifts that in many cases create new busi-
ness opportunities. The evolutionary steps taken by world leaders and governments to open
the doors to international trade include efforts of the North American Free Trade Agreement
(NAFTA), and the General Agreement on Tariffs and Trade (GATT), which is now the
World Trade Organization (WTO).
Challenges of doing business internationally include exchange rate fl uctuations, cultural
differences, accounting differences, and regulatory issues. Agribusinesses entering the inter-
national market generally do so using one of three general strategies: exporting, licensing,
and foreign production. Variations of these methods include indirect and direct exporting,
franchising, and foreign direct investment through acquisition, joint venture, or greenfi eld
investment.
Discussion questions
1. Discuss several of the benefi ts from doing business internationally.
2. Discuss some of the opportunities for smaller agribusinesses in the international mar-
ketplace.
3. Developed and developing countries have differing characteristics regarding the demand
for food. Discuss these differences and some of their implications for agribusiness
fi rms.
4. Defi ne food security and discuss how and why it affects agribusiness.
5. One of the goals of the World Trade Organization (WTO) is to reduce tariffs. How does
this improve world trade and how does increased world trade benefi t society?
6. What is “culture,” and why is the understanding of culture important?
7. How can cultural differences inhibit trade? Give an example.
8. How can exchange rates affect trade?
9. Exporting is one strategy fi rms can use to enter foreign markets. Discuss the differences
between indirect and direct exporting.
10. Discuss some of the advantages and disadvantages of using a joint venture to enter a
foreign market.
References and additional reading
Central Intelligence Agency .
World Factbook
. 2009 .
www.cia.gov/library/publications/the-world-
factbook
Connor , John M. and William A. Schiek .
Food Processing: An Industrial Powerhouse in Transition
.
2nd ed. New York : John Wiley & Sons . 1997 .
