Economics for Business and Management Oz Assignments

Economics for Business and Management Oz Assignments

Economics for Business and Management Oz Assignments

Introduction

This industrial report explores the fishing industry within Australia. It describes the setup of the fish industry inorder to give advice to a new firm seeking entry within this industry. The competitive environment between the new firm entering into the industry and main firms in the industry such as Blaslov and Lee fishing firms or companies is also elaborated (Food and Agriculture Organization of the United Nations 2012). The market structure in the industry and elasticity of demand of the products within the industry are explained in the report where the product takes on elastic price elasticity of demand. The Porters analysis is used when explaining the competitive nature of firms in the fishing industry within Australia. Using Porter’s analysis, the five Porter forces where described. These forces are; Threats caused by entry of new firms, Suppliers' Bargaining Power, Buyers' bargaining power, Threats rising from substitute commodities, and rivalry among different players. The SWOT analysis was also used to describe the Strengths, Weaknesses, Opportunities and threats within the fishing industry in Australia. The different risks and their main source together with their mitigation are fully described as well as the Government policy on Competition and non-competitive organizational behaviour within the industry.

 Structure of fishing Industry in Australia

The fishing industry in Australia involves activities concerned with culturing, taking, preserving, processing, transporting, storing, selling or marketing fish and fish products within or outside Australia. The fish industry is among the fastest primary growing industry. It involves aquaculture where 10species of aquatic animals are farmed and also wild fishing where different kind of species are caught (David and Andrea 2018). Aquaculture contributes 34% of total seafood production. The different species of fish caught and farmed in Australia include Atlantic salmon, barramundi, mud crabs, southern Bluefin tuna, molluscs, crustaceans, finfish, and many other types of fish (Food and Agriculture Organization of the United Nations 2012). The fish industry produces around 230,000 to 240,000 tons of fish per year. There is an increasing demand of fish within Australia, the demand surpasses the supply therefore causing a need for consumption of imported fish. The industry imports fish from neighboring developed countries such as China, Japan, and India which are among the largest fish producing countries within the world (Clark 2017). The industry contributes an estimate of $2.4 billion. Around 200 marine species are caught for commercial purposes. The major species include lobsters, scallops, oysters, tuna, and prawns. In 2015-2017, an estimate of 10,985 individuals were assumed to be employed in aquaculture and commercial fishing. 5,385 operating in aquaculture while 5,600 employees in fishing enterprises (Clark 2017).

Australia has an extra big fishing zone which ranges from tropical to sub-Antarctic but production is less due to small continental shelf, low nutrient-rich upwelling and nutrient runoff. Therefore, the fisheries of Australia need to be well managed. The commercial inland fisheries are smaller compared to estuarine and marine fisheries. Australia exports much of its high quality fish products (Australian Bureau of Agricultural and Resource Economics (ABARE) & Fisheries Research and Development Corporation (FRDC) 2009). There are very many fish firms operating within the Australian industry and these offer different services to the natives. Therefore this leads to production of high quality services due to competitions among these companies. Some of these firms include; Lee fishing company, Blaslov fishing company, and Austral fisheries.

Operation of a firm to react to competitors within this industry

While looking at the operation of a firm in the industry so as to give a reaction to its competitors, two important points are to be considered. One of these two points is the Competitive environment and the other is how to maintain this environment through maintaining competitive advantage.

The competitive environment

There are very many firms within the fishing industry, these firms are over 1000. They offer fish supply and production to both local and global market. The size of Market in the fishing industry is extra-large, there is always an increasing demand of fish which cannot be quenched by the available supply. The total supply of fish annually is estimated to be 240,000 tons which increased from a mere fixed 230,000 tons every year. Given the fact there are very many fish firms within the industry, there are also main firms within the industry. Some of these include; Blaslov fishing industry, Lee fishing company, and Austral fisheries. These are very large companies in Australia employing a good number of individuals.

The market structure within the fishing industry is monopolistic competition which identifies there is ease of entry of new firms into the industry. This means that the firm would not get any restrictions into the market. Inorder to compete favorably within this market structure, there is need for the firm to produce high quality products. Within the industry there exists firms producing quality products which are used as exports to neighboring countries (Bray 2014). The new firm ought to also export its products in case they meet the standard of other countries, therefore it should acquire advanced technologies so as to deal with its products. The products to be produced by the firm are perishable goods needing advanced technology. Therefore, because of constant price trends, advanced technology within the industry, a large market size both local and international, and the ever increasing demand of goods and services within the country; the new firm would gain revenue.

Maintaining Competitive advantage

Within the Australian fish industry, since there exists a number of firms; the process of branding is paramount. Branding identifies a process of creating a unique image or name for given products inorder to differentiate them. The sole purpose of branding is to ease advertisement and differentiate products. Some of canned products for the different fish firms are branded. All new firms within the industry should also brand there products. Within the Australian industry, different services are carried out by the different firms so as to offer better services to their customers (Bray 2014). Some of these services include; supplying services-offering of aftersales services for example transportation and discounts. The industry also encourages sale of products where value is added; most of these commodities are canned and preserved since fish is perishable. Preservation of fish adds revenue to the industry and also encourages establishment of new firms within the industry (Food and Agriculture Organization 2009). All Australian fish exports in Australia are dominated with high value final products. Some of these final products exported include preserved fish fillets and frozen prawns  

The porters Analysis to further explain the fishing industry.

Through using this analysis, the five porter forces are described in relation to the fishing industry (Michael 2008). These porter forces are; new firm or entrants threats, Suppliers' Bargaining Power, Buyers' bargaining power, Threats rising from substitute commodities, and rivalry among different players.

Chart describing Porter analysis, source: (Michael 2008)

Using "Porter five forces" analysis, the new firm can possibly build an adequate competitive advantage within the fish industry.

The analysis;

Threats rising from new Entrants

New entrants within the fish industry come up with better ways of doing business as well as innovation within the industry (Fisheries Research and Development Corporation & Ridge Partners 2010). This causes pressure on existing firms therefore causing reductions in prices and costs. Therefore the established firm should be in position to manage the challenges caused by entry of other firms. These can be tackled through building economies of scale, innovating new services and products, and more product development and research (Fisheries Research and Development Corporation & Ridge Partners 2010).

Suppliers bargaining power

Suppliers of equipment used in fish industry can possibly decrease their margins (Le´de´e et al 2011). This lowers the profitability of fish products due to increased costs. The established firm could possibly overcome this through building an efficient supply chain having a number of suppliers.

Buyers bargaining power

Buyers are over demanding where they need best offerings present at the most minimum price. This affects the fish firm since it causes reduced products. This can be overcome by establishing a larger customer base, producing new products, and rapid product innovations.

Threats rising from substitute services or products

This is a very big threat since the industry has a lot of substitutes, the profitability of the firm will suffer. This can be overcome or tackled through making the firm to be service oriented rather than product oriented. The firm may also increase switching cost for its customers (Hsu 2011).

Rivalry among different competitors in the fish industry

The existence of rivalry may lead to decrease of profitability within the industry due to price falls. Therefore to tackle this; the fish industry should build a sustainable or better differentiation, the finance industry should build scales so as there is better competition.

SWOT Analysis

While using the Swot Analysis to analyze the fishing industry in Australia, the "strengths", "Weakness", "Opportunities", and "Threats" of the fish industry are analyzed. According to the research carried out, the following were analyzed.

Strength

  • Big market share

  • favourable foreign policy

  • Customer loyalty.

  • Unpolluted and healthy sea

  • Unexploited inland fisheries resources

  • Untapped deep sea and offshore sea resources

  • Good management plans for the fish industry(Bray 2014)

  • international collaborations

  • Advanced fishing techniques

Weakness

  • lack of product diversification

  • Low priorities to aquaculture compared to sea-fishing.

Opportunity

  • Increased advertisement

  • Potential market

  • Increased production to meet the market base

  • Can be source of foreign exchange to the country

  • Strategic location where it’s possible to access international and important regional markets (Food and Agriculture Organization 2009).

  • Employment and income source

  • Tourism

  • Expansion of Australia's global fish market.

Threats

  • Stiff competitions within the industry due to many firms

  • Stiff government policies controlling the fishing

 

How elasticity of demand will affect the advised firm

The firm is operating under monopolistic market structure. The demand of the products are elastic whereby a small change in price of a commodity will cause a very big change in quantity demanded. Therefore the new firm has to maintain its prices constant so as to avoid shifts in quantity demanded and amount of revenue (Bray 2014).

Graph showing the elasticity of demand of the products produced by firms in fisheries.


The main sources of risks for the firm as well as necessary risk management

The main source of risks within the industry is poor quality production. This could cause restrictions of the company's fish products or totally banned as exports to major countries such as USA, Canada, and other countries. This could be solved through using advanced technology, skilled manpower, and better production techniques.

The other source of risks is failure to understand the market potential both local and international. This could possibly lead to low revenue and losses. This could only be mitigated through using economic experts to study and analyze the fishing industry for the firm.

competitive Government policy on Competition and non-behavior with in the industry

In April 1995, the Australian government council signed agreements which were three in total to establish a "National Competition Policy" for the country (Australian Government 2016). The agreements give a definition of a comprehensive reform package restricting competitions among firms in all formats. The different rules can be read in conjunction with "Principles underlying fisheries legislation throughout Australia – National Competition Policy Scoping paper (April 1998) prepared by the Centre for International Economics" and "Guidelines for NCP legislation reviews (Feb. 1999) prepared by the Centre for International Economics." These competitions among firms in the fishing industry and other industries can be controlled by the government through; Governing the exit and entry of individuals and firms out and into markets, controlling production levels and prices, restricting quality, location, and level of services and goods available, and other policies as stated by the government. Therefore the firm should follow competition restrictions as stated by Australian government (Fred and Frank 2002).

Conclusion

According to the report, the fishing industry is one of the sources of food and revenue to the different people within Australia. It involves Aquaculture where 10 species are farmed and also sea-fishing where different kinds of species are caught. This industry operates under monopolistic tendencies where 240,000 tons of fish are caught annually and sold both locally and internationally. There is competition in the industry among different numerous companies through this comparative competition law is governed by the government through the three agreements that were signed by its council. Therefore, a firm entering the industry should fully understand the different setup of this industry to avoid risks of losses.

References

1. Australian Bureau of Agricultural and Resource Economics (ABARE) & Fisheries Research and Development Corporation (FRDC).2009. "Australian Fisheries Statistics 2008," http://www.abareconomics.com/publications_html/afs/afs_09/09_FishStats.pdf
2. Australian Government.2016.Regulation of Australia’s marine fisheries and aquaculture, PC News, https://www.pc.gov.au/news-media/pc-news/previous-editions/pc-news-november-2016/fisheries
3. Bray, Dianne. 2014. "Aquaculture". Fishes of Australia. Retrieved 30 September 2014, http://www.fishesofaustralia.net.au/home/content/175
4. Clark, A.2017. The Catch: The Story of Fishing in Australia. Canberra: National Library of Australia. ISBN 9780642279064.
5. David, M., Andrea, B .2018.Australian Government, Department of agriculture and water Resources ABARES: Australian fisheries economic indicators report 2017, Financial and economic performance of the Eastern Tuna and Billfish Fishery, http://www.agriculture.gov.au/abares/research-topics/fisheries/fisheries-data
6. Fisheries Research and Development Corporation & Ridge Partners. 2010. Overview of the Australian fishing and aquaculture industry: Present and future (A report supporting the development of working together), FRDC, Canberra: The National Fishing and Aquaculture RD&E Strategy.
7. Food and Agriculture Organization of the United Nations. 2012. Cooperatives in small-scale fisheries: enabling successes through community empowerment. International Fund for Agriculture Development.
8. Food and Agriculture Organization.2009. National Aquaculture Sector Overview: Australia". Archived from the original on 13 April 2009. Retrieved 2009-04-25, http://www.fao.org/fishery/countrysector/naso_australia
9. Fred, W., Frank, M. 2002.NATIONAL COMPETITION POLICY REVIEW OF COMMONWEALTH FISHERIES LEGISLATION. http://www.agriculture.gov.au/SiteCollectionDocuments/fisheries/domestic/ncp_report_sep02_final.doc
10. Hsu, Y. 2011. Design innovation and marketing strategy in successful product competition. Journal of Business and Industrial Marketing, 26(4), 223-236. doi: 10.1108/08858621111126974
11. Le´de´e, E.J.I., Sutton, S.G., Tobin, R.C., &DeFreitas, D.M. 2011. Responses and adaptation strategies of commercial and charter fishers to zoning changes in the Great Barrier Reef Marine Park, Marine Policy, 36, 226-234.
12. Michael E. Porter. 2008. "The Five Competitive Forces that Shape Strategy", Harvard Business Review, (Vol. 88, No. 1), pp. 78-93. PD