EC400 Agribusiness Economics and Finance Research Paper Sample

EC400 Agribusiness Economics and Finance Ass 2

Instructions

• Assessment 2 is a group assignment, and each group consists of not more than 3 students.

• Nominate just one group member to submit the assignment however the name of all group member names must be on the cover sheet.

• Cover page information: Need to provide the following details on the first page of your word file.

S. No.                                Student ID                                                    Student Name

1.

2.

• All group members are responsible for their groups submission as no exceptions will be provided for late or incomplete submission.

• Please ensure the academic integrity of your submission.

• If a student in a group has not contributed, other group members have the right to inform the lecturer.

• Assessment-2 has two components (Part 1 & Part 2). Provide reference list under each part in a separate page.

• Please note that this assessment requires substantial research (see the assessment criteria below).

Assessment 2 consists of two parts. Part 1

Describe and assess the market structure of the Australian Pulse Growing Industry by answering the following questions.

Important Note:

This question requires background research from the IBISWorld database website
https://my.ibisworld.com/au/en/industry-specialized/od5542/about. In addition, you must use additional reference sources to support your answers.

(a) Name the market structure of the Australian Pulse Growing Industry. List and explain the key assumptions/characteristics of a market structure that the Australian Pulse Growing Industry belongs to? (6 marks)

(b) What is the basis of competition, market share concentration and any barriers to entry for the Australian Pulse growing industry. (4 marks)

(c) By using graph, define and explain allocative and productive efficiency of this market structure and its impact on the consumer.

Part 2 – Business Report Question

You are working in a Leading agricultural product company on the ASX in Australia. After reading the information presented in “Product differentiation and oligopoly”, your boss has asked you to submit a business report based on the following aspects of oligopoly for improving the product differentiation in his products.

“Choose an oligopoly industry from Australia with product differentiation. Using the characteristics of market structures, compare it to the case if it would be a monopolistic competitive market. Explain the different types of non-price competitive strategies used by this industry. Why do this industry engage in non- price competitive behaviour in its products.”

Solution

Part 1

a. Market Structure of the Australian Pulse Growing Industry.

According to this strategy, the market structure of any given sector is one of the crucial components that must be maintained in order to keep a sustainable approach. According to Giwa.org.au (2022), the market structure of the Australian pulse growing sector is a low market share cluster. As per the MBA assignment expert, This industry is a global leader in its field, and the market structure reflects this. The market share that is linked with low concentration is characterized by a number of variables, some of which include the dominance of the small market player, the level of rivalry within the sector, the rate of self-growth, and the fragmented market policy. On the other hand, the Australian pulse market is characterized by oligopoly because of the rivalry that exists within the market. This competition contributes to the continued maintenance of the industry's level of productivity. Because of the way the market is structured, it is easier to comprehend the market policy of Australia's pulse market as well as the market concentration.

The industry of cultivating pulses in Australia has a low market share concentration, which contributes to the market structure of the business. When there are not many buyers in a market, the number of businesses is low, and a low number of companies is linked to lower levels of both company productivity and business credibility. As a result of the presence of competition within this low market approach within the Australian pulse sector, monopolistic business attitudes are not shown amongst these industries. The following is a list of some of the fundamental features of this market structure:

When it comes to the business of producing and exporting pulses, Australia is considered a rather minor player. In addition, there is a lack of coordination between the various businesses on the pricing and availability of the containers. As a consequence of this, the expansion of revenue shifts in accordance with the availability of the pulse. On the other hand, in order to reduce the risks associated with the market as a whole, the operator of this market has implemented a number of technological safeguards (Olmstead-Rumsey, 2019). In more recent times, the conventional strategy for this sector has been to anticipate unstable growth.

The oligopoly market structure is present in the Australian pulse growing sector. In an oligopoly, a few dominant companies control a large portion of the market, and their decisions may significantly alter market dynamics.

Few dominating enterprises: A small number of dominating enterprises that hold a significant portion of the market are what distinguish the Australian pulse growing industry. Market pricing, production levels, and other market factors are significantly influenced by these companies.

Product Differentiation: In the Australian pulse growing sector, product differentiation is key. Different businesses could specialize in cultivating certain varieties of pulses, such chickpeas, lentils, or beans, allowing them to distinguish their goods based on quality, diversity, or other factors.

Entry Barriers: Oligopolistic marketplaces often have high entry barriers, which restrict the number of new businesses entering the sector. Entry-level obstacles in the Australian pulse-growing sector may consist of scale economies, access to distribution networks, and the need for specialized expertise and technology.

b. Basic competition of the Australian Pulse Growing Industry

Due to the low market share approach, the monopoly system is not applicable to the pulse industry of this country. The Oligopoly business approach is shown by the Australian pulse industry and the competition has been shown by the market share holder. This healthy competition can bring a sustainable market approach as well as long-term productivity (Wang &Werning, 2022). On the other hand, it can help to understand the business motive which should be maintained by the higher authority. This industry is working with the local, state as well as national bodies to develop the business properly across the country.

There are no big players within this industry so the small players have maintained their competition through some competitive aspects. The price of these field pulses in the regional market as well as the international market can be affected by the price of pulses in Canada, and Europe. Based on recent assessments, the competition in the pulse industry can increase productivity among companies. This is a good sign for long-term development. Since this industry has developed properly, the sustainable and profitable approach increases day after day.

Market share cluster

The market share concentration can be identified through the combined market share of all the firms that are related to this particular industry. Along with it, concentration can be measured by the total production amount of a small number of firms. In the case of the Australian pulse industry, the market concentration is low which means the top shareholders of this industry cannot influence the other shareholders as well as the competition is very high (Gerigk, MacKenzie&Ohndorf, 2020). Besides, there are no large market players within this industry to facilitate business across the world. The production of the pulse is not very high and that’s why the market is so fragmented. The pulse industry of Australia is related to Pulse Breeding Australia (PBA) which helps to analyze the breeding capability of the pulses and develops new pulse varieties.

Barriers to entry in this industry

The remote location is one of the major barriers to the Australian market and the companies have faced problems due to this factor (Privacyshield.gov, 2023).
The governmental policies regarding this pulse industry are also another barrier to establishing the business. The technical barrier to trade (TBT) agreement is also another part that is also related to this business.

c. Explain the allocative and productive efficiency of this market

Impact of these efficiencies on the consumer

The allocative and effective efficiency, both have an impact on the consumer of Australia and it helps to understand the overall perspective of the consumer of this country towards this industry. The allocative efficiency of the pulse industry assures that the resource is efficient for the consumer by considering the need of the consumer. It is important to consider the effective decision regarding the distribution of the resources of this pulse. On the other hand, productive efficiency considers the needs of the customer in this industry by managing the productivity. This country is a low pulse producer and due to this tendency, the production efficiency which is related to the raw materials is not properly maintained by this industry to maintain the customer’s needs. In addition with it, allocative efficiency helps to maintain the lowest price of the good which is the main priority for some consumers. But in the case of the quantity, the low quantity is delivered through this approach and this situation is also shown by the Australian pulse market.

PART 2 – BUSINESS REPORT QUESTION
 
Executive Summary

This report's objective is to assess the oligopoly market strategy as well as the product differentiation of the Australian sector, both of which are connected to this method of doing business. In addition to this, comparison of the oligopolistic market with the monopolistic market has been done in order to characterize the features of this specific industry as belonging to the oligopolistic market. The farming industry is not related to the monopoly business because of the competition. Market price is determined by the shareholder. The impact of both these approaches has been analyzed by the researcher to understand the effect of this approach on the Australian market. On the other hand, the parallel equilibrium theory focuses on analysing the oligopoly market of the farming industry.

1. Introduction

The Australian oligopoly industry has given some thought to product diversification, which contributes to a better understanding of the current state of the Australian market. Additionally, the level of competition has been lowered as a result of this product differentiation, and the one-of-a-kind product has the ability to demonstrate its relevance within the market. The agricultural sector in Australia has given considerable thought to the oligopoly business model, along with the benefits and drawbacks associated with it. "Product Differentiation and Oligopoly" is the name of this report's working title. In the following report, the secondary qualitative data collection will be taken into consideration for the purpose of evaluating the tactics and the features that are associated with the aforementioned subject matter.

2. Case study

2.1 Description of the case study

Product differentiation refers to the process by which a business sector brings a new product to the market that is unique in comparison to the other products that are currently available on the market. To maintain a consistent strategy throughout the market while taking into account the requirements of the target audience, the industry must differentiate its offerings while simultaneously improving their overall quality. On the other side, the oligopoly consists of a few of really big corporations that control the majority of the market, while the smaller enterprises have not been able to establish themselves as well as they had hoped.
The agricultural sector likewise takes an oligopoly approach, and this industry has the potential to enhance its commercial potential via the use of certain new business strategies. This industry has been successful in capturing a significant portion of the market by using a product differentiation business strategy, and according to Sheng and Chancellor (2019), this strategy has the impacting potential to maintain its position as a sustainable one. This business is not tied to the monopolistic techniques, and the agricultural sector has proved that it has certain features, such as higher sales while having a smaller number of major enterprises.

2.2 Justification in case of oligopoly market

The strategy of an oligopoly has been taken into consideration by the farming sector in Australia, and the farming industry as a whole is managing its sustainability by virtue of its commercial character. Oligopolistic competition, according to the viewpoint of Mongey (2021), takes into account similar services along with the fact that it helps to manage pricing but not the market. When the oligopolistic structure of the agricultural business is taken into consideration, it has been shown that rice farming rose by 63% in 2022 (Abs.gov.au, 2022). In this particular scenario, the price was kept at the same level by the farmers as well as the stakeholders in order to accomplish this goal. On the other hand, it is impossible for the businesses that are affiliated with this sector to compete against one another.

Farmers have been blamed for this market's restricted competitive attitude in the past. Additionally, as a result of their being less rivalry within the market, the agricultural sector has been able to achieve better levels of profitability with certain crops. Additionally, it serves as supporting evidence for the oligopoly business strategy. According to Mongey (2021), one of the most significant economic theories is partial equilibrium. This theory is connected to the oligopoly market, and it offers assistance in comprehending the competitive demand side. Another factor that is associated with the agricultural business in Australia is product differentiation.

2.3 Monopolistic competitive market

Oligopoly is a business model that may be learned from this country's agricultural sector, which also contributes to a better understanding of the agricultural sector from a business point of view. In addition, the nature of the firm does not resemble monopoly in any way, and the researcher has examined a few pieces of circumstantial evidence to back this up. According to Giwa.org.au (2022), a monopoly market is one that is controlled by a single vendor that specializes in the sale of certain items as well as services. On the other hand, the agricultural sector of the Australian economy is characterized by the presence of a large number of vendors who provide their wares to customers in accordance with the preferences expressed by those customers. On the other hand, the price of the items is determined only by this one vendor; there are no other stockholders involved in the determination of the pricing (Ren, Hu, & Cui, 2019). Although there is less competition in this market, the companies that are in it are committed to maintaining price control by taking into account all of the internal factors at play, including political, economic, and social factors, among others. Because of economic, legal, and institutional restraints, there is a significant obstacle to overcome before joining a market that is dominated by oligopolies. The situation is different when talking about a corporation that has monopolistic power. The agriculture sector in Australia has its greatest challenge in the form of variable conditions, as well as the preferences of individual customers.

2.4 Product differentiations

Product differentiation is followed by the Australian farming industry and as a result, this industry can be modified its business approach by mitigating all the challenges that are related to the oligopolistic. On the other hand, the agricultural products that are developed by the company can be compared between the desired output and the cost of the product. The cost of the farming product is determined by the competitors of the agricultural industry. 55% of land has been used by the farmers for farming along with 24 % of water has been extracted for this purpose of farming. Besides it, the number of goods and services that have been exported by the Australian farming industry was 11.6 %( Agriculture.gov.au, 2023).

Table: wheat production for Australian selected states
(Source: Abs.gov.au, 2022)

Table: Canola production (2018-2022)
(Source: Abs.gov.au, 2022)

Table: Cotton production (2018-2022)
(Source: Abs.gov.au, 2022)

Along with it, the farmers of Australian farmers have minimized pesticide usage which is also a differentiated approach for the product. These are the results that help to know that the Australian industry has followed the product differentiations.

2.5 Product differentiations reason

The agricultural sector of Australia is one of the few that permits product diversification. This is mostly due to the industry's emphasis on preserving its competitive environment, which is an essential component of the oligopolistic market structure. As a result, Australia's agricultural goods are among the most desirable on the market. The differences between this product and others on the market are shown by a few pieces of proof. On the other hand, the motivation behind this market strategy is to lessen the impact of the difficulties brought on by competition (Caliendo & Feenstra, 2022). New rivals entering the market, the power of the customer, and the possibility of a substitute product are all problems that must be overcome.

3. Conclusion

It can be deduced that the agricultural sector is operating under an oligopoly market structure. Furthermore, it can be deduced that the sector has explored a variety of various tactics, such as limited competition, sustaining productivity, and rivalry within the market. In addition to this, the business model used in this sector is distinct from the monopolistic business model, and the researcher has examined a great deal of information in order to have a comprehensive understanding of the situation. On the other hand, the sector continues to implement product differentiation methods that are associated with the oligopolistic business style. Because of the oligopolistic approach, it is essential that this product distinction be maintained in the appropriate manner. 

References

Part A

Journals

Gerigk, J., MacKenzie, I. A., &Ohndorf, M. (2020). Environmental policy diffusion, lobbying, and market structure. Retrieved from: https://www.researchgate.net/profile/Markus-Ohndorf/publication/344037075_Environmental_policy_diffusion_lobbying_and_market_structure/links/5f4eea56a6fdcc9879c0182b/Environmental-policy-diffusion-lobbying-and-market-structure.pdf

Olmstead-Rumsey, J., (2019) Market concentration and productivity slowdown. Retrieved from: https://mpra.ub.uni-muenchen.de/107000/12/MPRA_paper_107000.pdf
Wang, O., &Werning, I. (2022). Dynamic oligopoly and price stickiness. American Economic Review, 112(8), 2815-49. Retrieved from: https://www.nber.org/system/files/working_papers/w27536/w27536.pdf

Websites

Giwa.org.au, 2022. MARKET DRIVERS AND IMPEDIMENTS FOR AUSTRALIAN PULSES. [Online] Retrieved from: https://www.giwa.org.au/wp-content/uploads/2022/04/2022-GIWA-Pulse-Forum-AEGIC-Mary-Raynes-PPT.pdf [Retrieved on: 19th May 2023]

Privacyshield.gov, 2023. AUSTRALIA MARKET CHALLENGES [Online] Retrieved from: https://www.privacyshield.gov/article?id=Australia-market-challenges [Retrieved on: 19th May 2023]

Part B

Journals

Caliendo, L., &Feenstra, R. C. (2022). Foundation of the Small Open Economy Model with Product Differentiation (No. w30223). National Bureau of Economic Research. Retrieved from: https://www.nber.org/system/files/working_papers/w30223/w30223.pdf

Mongey, S. (2021). Market structure and monetary non-neutrality (No. w29233). National Bureau of Economic Research. Retrieved from: https://www.nber.org/system/files/working_papers/w29233/w29233.pdf

Ren, C. R., Hu, Y., & Cui, T. H. (2019). Responses to rival exit: Product variety, market expansion, and preexisting market structure. Strategic Management Journal, 40(2), 253-276. Retrieved from: https://www.researchgate.net/profile/Charlotte-Ren/publication/328224022_Responses_to_Rival_Exit_Product_Variety_Market_Expansion_and_Preexisting_Market_Structure/links/634d749212cbac6a3ed4b5af/Responses-to-Rival-Exit-Product-Variety-Market-Expansion-and-Preexisting-Market-Structure.pdf

Sheng, Y., & Chancellor, W. (2019). Exploring the relationship between farm size and productivity: Evidence from the Australian grains industry. Food Policy, 84, 196-204. Retrieved from: https://www.sciencedirect.com/science/article/am/pii/S0306919218302422

Websites

Abs.gov.au, (2022). AGRICULTURAL COMMODITIES, AUSTRALIA [Online] Retrieved from: https://www.abs.gov.au/statistics/industry/agriculture/agricultural-commodities-australia/latest-release [Retrieved on: 19th May 2023]

Agriculture.gov.au, (2023). AGRICULTURE'S PLACE IN AUSTRALIA [Online] Retrieved https://www.agriculture.gov.au/abares/products/insights/snapshot-of-australian-agriculture [Retrieved on: 19th May 2023]

Giwa.org.au, (2022). MARKET DRIVERS AND IMPEDIMENTS FOR AUSTRALIAN PULSES. [Online] Retrieved from: https://www.giwa.org.au/wp-content/uploads/2022/04/2022-GIWA-Pulse-Forum-AEGIC-Mary-Raynes-PPT.pdf [Retrieved on: 19th May 2023]