SOUTHERN SEAS is an Australian company situated at Port Lincolin dealing with the farming of one of the two main species of Bluefin Tuna, the Southern Bluefin tuna. Southern seas is one of the fast growing fish farming industries in Australia that has been in a constant improvement in supplying the Australian domestic market with fish products before specializing with Southern Bluefin Tuna fishing due to its demand in the markets plus its high prices.
Due to the depletion of Southern Bluefin Tuna populations evident by the fast decreasing values of the quantity of the fish yield and afterwards the application of quotas to counter the reduction of mature fish, measures were taken to supplement the shortages through ranching. The farming process is involving and quite expensive but with consistency and constant need for improvement, Southern seas company mission, they have successfully been able to win a huge domestic market share more than other competitors who have been both serving the local market while still involved with exportation of the same fish to Japan, America, France and other countries.
With the current achievements, facilities and the demand for the Bluefin Tuna in the international markets; Southern seas is contemplating on engaging in exportation of the Southern Bluefin Tuna to Japan. This is due to the ready demand and high prices of the Bluefin Tuna in Japan which goes even beyond $23 per a kilogram. Despite the fact that there is ready market in Japan, regulations, transportation cost, technology, quality of SBT and the changing conditions in the market are factor which are needed to be evaluated before putting resources into the expansion opportunity to be certain of the risks attached to the investment.
The Southern Seas needs to engage in international business transactions. Their stability in the domestic market is a good ground to reaching the internationalization opportunity but the two have difference in the strategies to be applied in market entry, product development, marketing in general and the level of risks in question. Many organizations shun from engaging in international trades due to the higher risks of internationalization as compared to the normal domestic trades.
The choice of expanding the business to Japan is acceptable because Japan is the greatest consumer of Bluefin Tuna in the world from its own waters, from exporters from Mediterranean regions, Australia and others.( Fischer, ed. 1973) These fish are currently facing the threats of extinction due to the high rate of reduction of mature Bluefins, the capturing of juveniles interfering with their spawning and the long durations taken by these giant fish to mature. The introduction of breeding, hatching and maturing of the Southern Bluefin Tunas in captivity is a milestone in the quest to supplement the shortage of the fish meat in the markets.
Gap in domestic market
Since it is easier and safer in engaging in domestic trades more than the international trades due to a number of factors like the levels of risks, trade regulations, higher costs of business and higher levels of knowledge of the markets in domestic than the shallow and broad knowledge of international markets; it is more reasonable for a firm to exhaust the domestic market first before engaging in a more risky international investments.
In this case, Southern Seas have already exhausted the domestic market and has identified an opportunity to grow and expand its borders to the international markets while still serving their current well established market share which is supposed to support them in expansion.
The industry market potential
This assessment is done to ascertain the demand in the target market that a company wants to extend its services to. This includes the current demands and the current suppliers or competitors in the market that one is going to face. The assessment helps the investor to device proactive strategies to the market that will ensure the business sales among the already existing traders and reactive strategies to the market predictable and unpredictable changes. The Japans Bluefin tuna market is the best in the world due to its traditional meals use like sushi and sashimi. Japan consumes all the three main types of Bluefin tuna one of which is the one Southern Bluefin Tuna fished in Australia and hence the open opportunity for exportation. One of the main markets is Tsukiji Market commonly known as 'fish market' but also sells other food stuff in it. It is a wholesale market where Tuna are auctioned to the wholesalers who then slice them up to sell to the retailers. The Australian southern Bluefin Tuna is preferred for sushi which makes them price high and get high demands.
The market is faced with a shortage of the tunas and the competition is growing stiff as measures are taken to counteract the tuna black markets rampant in French regions.
Competition is always external force acting on a business. One entering itno the market must be aware of all his competitors, their strengths and weaknesses, the prices they charge, the quality of goods or services they provide and formulate strategies that will enable one to grab some market share in the competition space. It is very important to learn ones competitors in relation to ones strengths and weaknesses in order to be able to establish a competitive advantage over the competitor.
Southern Seas is introducing a business competition to the market with existing traders who have gotten themselves market share. These includes their fellow Australian traders who have got a built reputation in serving the Japanese market which means that if Southern Seas have to fit itself into the market without facing rejection or being driven out, it should first be set its entry strategies well to capture the market rather than rushing for profits. Being new to export industry there is need to strategize well.
There might be an opportunity in the market and other favorable gaps but with no ability to invest. These requirements are the regulations that dictate the way of operating the business, government policies, quality assurance requirements, the technology and resources to facilitate the investment. The Southern Seas has got a good rapport within the Australian borders but the requirements outside the borders vary and the company must be in the position to upgrade its status to meet the international standards to be able to be allowed to engage in the exportation. There are usual trade licenses required to operate such business, duties and other fees but in this case Southern Seas is in a better position since the Australian government policies promote the exportation trade and the Japanese agencies are also encouraging the consumption of the Australian Bluefin Tunas. This is a good platform to start for.
The fish are required to be fresh and not bruised which means that the technology used in ranching, harvesting, transportation and storage of the fish has to be effective and up to date to be able to serve the international market to standards.
- Favorable government policies
- Good political relationship with Japan
- Potential to produce quality Tunas
- Australia has goodwill in Southern Bluefin Tuna production.
- They are new to international customers
- They have no market share in Japan
- Cheaper labor in Japan and other competitor countries
- The availability of market for the southern Bluefin Tuna in Japan
- The rising demand due to shortage of tuna supply
- Japanese agencies are recommending for Australia SBT
- The quotas and bans due to danger of extinction of the Bluefin Tuna
- High costs of feeding the Bluefin tunas in the ranches.
- Drop in market due to the recent Japan tragedy
- Quality tunas from the Mediterranean region and Black Markets
Southern Seas have a good background in the Southern Bluefin Tuna production in the domestic market. This means that they have a support from the well established domestic trade economically and in the trustworthiness in production of the tunas.
Government policies for trades in the Australia favor the exportation business. Since there is sufficiency in the production of the fish in Australia and the fact that exportation yields revenue and foreign money the policies tends to provide very attractive subsidies to exporters and provide good trading environment for them. So 'Southern seas' are entitled to the support from the government in its pursuit to internationalization.
The relationship between Australia and Japan is mutual such that they attract different cross investments and create favorable business environments for the trading of the two. The political stability of the two entities also promote more mutual interactions thus creating a very friendly business relations which means that since Southern seas is and Australian trading company will have a much better acceptance into the trading than any other foreign corporations. The long term export of the SBT to Japan has made the Japanese to have trust in the Australian fish producers which is goodwill. The same goodwill will market the Southern Seas as a producer and exporter of SBT from Australia.
The southern Seas Company has been engaging in domestic trading and productions and not exportation businesses. The elements of risks attached to the domestic businesses differ with the international business risks. And so being fresh to the exportation business it will take time for them to adapt to the new venture as the competitors are progressing.( Fischer, ed. 1973)
The complexity attached to the exportation requires new installations and strategies. New transportation modes require more funds and incurring of more expenses that the company has not been used to while the old competitors are carrying on with the business with no perceived extra expenses.
Japanese has cheaper labor due to low cost of living. This translates to a lower production cost which guarantees them a better flexibility in the prices they charge. Since Australian labor is more expensive than this means that the Japanese fishermen are at better position in supplying their own domestic market.
Although the Japanese Tuna are more preferred to imported tunas, the decreasing quantities in the fish harvests globally is an opportunity for the Southern Seas to supply its Southern Bluefin Tunas to Japan.
The recent earthquake that has hit Japan has lowered the demands due to the trauma that the customers are undergoing. Although the greater threats is in the quotas and bans that are facing the trading of the Bluefin tuna due to the exploitative nature of fishing of tuna juveniles. This effect is more accelerated by the illegal fishing of juveniles and the Bluefin Tuna Black Markets rampant in the French regions.
Conclusion and Recommendation
In conclusion, despite all the weaknesses and threats to the business there is a good opportunity for expansion. Business is risking and the fact that the element of risk is higher in internationalization reflects the higher returns to the investment. The only thing that is needed is a good marketing strategies and an appropriate market entry strategy that will facilitate more certainty in the investments. With the recent hatching technology of the tuna, there is a chance to supplement the shortage and sustain the market though the ratio of growth to the food supplements to the tunas is approximately ten to one. I recommend that the Southern Seas should consider internationalization since it will increase its revenues, enable the company to enjoy economies of scale and with the current achievement in the domestic market, internationalization is worth a try.