Question: You are supposed to work for an Australian company which is planning to export wheat to Saudi Arabia, and you are required to write a report to a CEO for the plan’s approval. The report is...

STRATEGIC MANAGMENT
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STRATEGIC MANAGMENT
STRATEGIC MANAGMENT
Student’s name
Name of the Institute
1 Executive Summary
This report is about the analyzing and identifying the prospects for an Australian wheat production company in Saudi Arabian markets. The report will analyze the current trends in the Saudi Arabian markets, study the market dynamics of Saudi Arabian and the analysis of the nation using the PESTLE analysis. Based on the analysis, appropriate strategy will be devised and mode of entry to foreign markets will be recommended.
Currently, Saudi Arabia had ended the domestic wheat production as it is a water intensive industry and water is a scarce resource in the Saudi Arabia. It also has plans of reducing the consumption of other food items such as Barley and corn. However, wheat will remain the staple diet of the country used in Pita bread which is consumed on a daily basis. Thus, there is a huge demand of wheat and opportunity for foreign wheat producers. After analyzing the industry, direct export is recommended to the Australian wheat producer to expand in Saudi Arabian markets.
Contents
21
Executive Summary
52
Background
52.1
Introduction to the market
52.2
Trends in the market
62.3
Company's industry in Country
62.4
Considerations before entering the market
73
Country analysis
73.1
Political - SWOT analysis of Political System
83.2
Economic - SWOT analysis of Economic aspects
93.3
Socio-Cultural Issues - SWOT analysis of country’s Socio-Cultural aspects
103.4
Technology -SWOT analysis of technical aspects
113.5
Legal, Environment, Demographics
124
Strategy
124.1
Analyze based on diamond model
124.1.1
Factor input conditions
124.1.2
Demand conditions
124.1.3
Related and supporting industries
134.1.4
Firm strategy, structure and rivalry
134.2
Strategy recommended - Global Standardization Strategy
145
Mode of entry – Direct export
156
Recommendations/Conclusion
16Bibliography
2 Background
2.1 Introduction to the market
Saudi Arabia is a very big market for wheat. Wheat is the staple item in their diet and is mostly consumed in the form of Pita bread and local burgers called Samoli. It other usage is in local bakery that sells pizza, bruschetta and much more. Also, Saudi Arabia government ended the wheat production in the year 2015-16 as it consumes a lot of water which is a scarce resource in the region. Also, Government has to pay large subsidies to farmers for water and realized that importing wheat will be a better strategy (Ahmed, Hamrick, & Gereffi, 2014). Saudi Arabia Grains Organization (SAGO) is the main importer of wheat in the country and prefers the wheat originated from European nations, North America and Australia. Thus, Saudi Arabian markets provides large opportunities for wheat exporters around the world and particularly Australia as it is one of the preferred nations (Ahmed, et al., 2014).
2.2 Trends in the market
Market trends are very favorable. End of domestic wheat production in Saudi Arabia has been the positive indicators for wheat producers worldwide. Also, it is one of the main ingredient and used in large number of dishes which makes it one of the top thing on their import list. Though, there is lot of competition but increased demand provided the opportunity.
Per capita consumption of wheat in Saudi Arabia is around 290 grams per day which comes close to 105 kilogram annually which is quite a big number. Total consumption in the year 2015-16 was 3.5 million tonnes out of which 3 million tonnes was imported as there is large quantity of carryover stock (Grindle, Siddiqi, & Anandon, 2015). This simply tells that import quantity is going to increase in the future. Also, Consumption of wheat is also expected to grow at 2-3% annually for coming years.
2.3 Company's industry in Country
As the Government has ended the domestic wheat production, there is primarily no wheat Industry. However, there are small number of local farmers who are engaged in wheat production for the local mills. This domestic production accounts for less than 5% of the total requirement. The huge demand is fulfilled through imports. SAGO is the only importer of wheat in Saudi Arabia. SAGO floats public tenders and then do the reverse auction to select the vendors (Al-khatib, et al., 2014). Currently, SAGO is importing wheat through 2 main ports of Jeddah on Red sea and Dammam on Arabian Gulf and will increase the number of ports to 5 in future that can receive the wheat import as the demand will increase.
2.4 Considerations before entering the market
Market expansion is used by the organizations to continue the momentum of their growth. As their existing markets are towards maturity, they consider to explore new markets to continue the growth. However, company has to select the country very carefully and must consider some important criteria’s otherwise there is no dearth of case studies of the organizations that are quite successful in their domestic markets but were failure when trying to expand to international geographies. Some of the important...