Task 1: Importance of International Market Research
Global market studies are crucial for any company that seeks to conduct its operations in the global market (Sinkovics & Sinkovics, 2020). It reveals norms and practices within cultural, economic, and regulatory environments of potential markets. For Example, understanding and analyzing cultural dimensions of a particular country facilitates the way that some products can be adjusted to match the particular culture to gain acceptance and satisfaction. Such cultural information is useful in avoiding cultural blunders and even in choosing right ways to present information.
Additionally, it offers the following benefits:
Competitive Analysis: When businesses analyze the competing businesses, they are able to identify the unique selling proposition, the weaknesses and strengths of the competitors (Hafezi et al., 2020). It also offers information that can be used to develop strategies that offer a competitive edge, for example, strategies that may target areas that differentiate competitors’ products or adapting a product in a certain country to suit the consumers.
Risk mitigation: Investing in foreign countries is not easy and comes with many risks (Pegan et al., 2020). However, through research, several important decisions can be made in order to enhance the risk management strategies of the businesses by including back up plans, investing in different business or joining certain markets at other time so as not to disrupt.
Opportunities for Innovation: By identifying gaps in the local market and seeing what other firms are doing, businesses can come up with new ideas for their products or services to fill the gap (Sinkovics & Sinkovics, 2020). It also helps companies to be prepared for any competition since they are always working on ways to come up with better solutions in market conditions.
Task 2: Evaluation of IGS’ Readiness for International Expansion
Intelligent Growth Solutions (IGS) is prepared to embark on expanding globally, supported by investments, collaborations, and cutting-edge technologies. Recent funding rounds are a testament to this readiness: a £22.5 million Series C and a £42.2 million Series B have attracted significant funding from COFRA Holding AG, DC Thomson, and S2G Ventures (Walker, 2024). This financial base is essential for expanding their operations internationally, as it offers the funds required to implement their cutting-edge vertical farming system in various regions.
IGS’s readiness can also be seen in its megaprojects, such as cooperation with ReFarm, which plans to build a 900,000 sq. m GigaFarm in the Food Tech Valley of Dubai (Marston & Taylor, 2023). This will try to switch out 1% of the UAE’s imported food and also recycle over 50,000 tonnes of food waste per year; this clearly demonstrates the capability of IGS to undertake such a large and worthwhile operation (Marston & Taylor, 2023). Not only do such projects prove their technological edge but also their commitment to sustainable and progressive agriculture.
The technology that has been developed by IGS is also quite liberal and adaptable since it is designed to suit the needs of the various markets in the globe. They use efficient LED lighting, sophisticated water management systems, and climate control that ensures crops are grown 30%-50% faster as compared to traditional farming methods (Scottish Development International., 2023). This flexibility is essential in the penetration of the market share to areas with different climatic and economic conditions.
Moreover, the company has an advanced approach to the international research network and cooperates with such organizations as the James Hutton Institute from Scotland and the University of Queensland from Australia (IGS, 2023). This network is designed to advance the technology that is behind vertical farming by testing it in different climates and fine-tuning crop cultivation recipes. They also assist in enhancing the technological edge of IGS and expand their networks abroad for research purposes.
The role of leadership is vital in the direction of the expansion of IGS. The recent appointments of Andrew Lloyd as the CEO and Sonya Hotson as the CFO are highly experienced to steer the company through this phase (Achard, 2024). It is expected that their leadership will strengthen the company’s strategic management and operational management, which are crucial for managing growth on an international level.
Furthermore, IGS has been able to uphold high standards of social and environmental governance as evidenced by the B Corp accreditation. This certification proves their commitment to sustainable business operations, which is a key element that builds confidence in the global marketplace (Certified B Corporation, 2023). Combined with a rapidly growing workforce and a solid portfolio of international projects, IGS has all the potential to become a leader in the vertical farming industry on an international level.
Figure 1: Overall B Impact Score of IGS
(Source: Certified B Corporation, 2023)
Task 3: Comparative Market Evaluation of Italy and Australia
Australia emerges as the most suitable market for IGS to expand into due to its stable political system, favourable legal system, a growing economy, and a technologically developed market. All these factors come together to provide a perfect setting for IGS’s vertical farming technologies to thrive.
Political Stability
On the global scale, Australia gets a percentile rank of 81.6% for political stability in 2022 (Trading Economics, 2024). This stability is beneficial for companies such as IGS because it creates a stable environment in which to operate. The threat of regime changes or politically induced instability is low, which makes the context suitable for long-term planning. Political stability is important because it minimizes risks and ensures that there are no disruptions in business, which is essential for IGS to work on developing new products and services.
Regulatory Quality and Corruption Perceptions
Australia also has a high level of regulatory quality, which is crucial for foreign investors. The country is ranked 14th globally in ease of doing business, which is an indication of good and efficient legal environment that fosters business operations (Statista, 2024). This high regulatory quality indicates that companies can engage in activities with certainty that the laws are well defined and that compliance will be strictly enforced.
In addition, Australia ranks 14 on the Corruption Perceptions Index and its score is much higher than that of many countries, thus indicating that the environment for business in Australia is not corrupt (Transparency International, 2023). This also reduces chances of corruption and brings fairness in the competition this a plus for companies like IGS that rely on innovation and patent protection of their products.
Legal Framework
The country has a legal system that is conducive to business operations and has strong IPR and contract rights. The ‘Doing Business’ report suggests that Australia is ranked at number 14 among 190 countries in terms of ease of doing business and has a good legal framework that supports business operations (McKelvie, 2023). This is particularly advantageous for IGS, which is founded on various technologies and innovations that it possesses. The sound legal protection ensures that IGS patents and other forms of information are protected from theft, which provides a secure environment for technology advancement.
Economic Factors
The Australian economy is stable and strong with a GDP of $1.74 trillion and a GDP growth rate of 3.9% in 2022 (Statista, 2024). The economic stability and growth of the country points to a healthy market that is gradually developing a demand for sophisticated technologies in agriculture. Also, the inflation rate is slightly lower in Australia at 7.3% compared to Italy at 8.1% which means less fluctuations in the economy for long term strategic planning and investments (Ventura, 2024). A stable and growing economy creates a good market for the products of IGS hence enabling the company to grow in a sustainable manner.
Technological Advancements
Australia is one of the most advanced countries in terms of technology, both in the development and use of technology. The country is ranked 24rd in the Global Innovation Index and spends 1.68% of its Gross Domestic Product on Research and Development (R&D) (WIPO, 2023). This commitment to innovation perfectly complements IGS’s mission to incorporate advanced vertical farming technologies. Because of the high penetration of technology in Australia, the market will be more receptive to IGS’s sophisticated solutions, thus making it easier for the company to implement its solutions and for the market to accept them (McKelvie, 2023). The country has a solid investment in R&D, which creates a culture of innovation and encourages the improvement of IGS’s technologies through partnerships.
Global Connectedness
Although Italy has higher export values, the global connection to Australia especially in FDI is remarkable. Australia received $1.3 trillion of FDI in 2022 underlining the country’s attractiveness to foreign investors (Export Finance Australia, 2023). This increase in investment indicates the extent to which Australia welcomes foreign businesses and presents IGS with numerous opportunities for alliances and mergers. High FDI is a sign of good investment climate and business environment that is crucial for investors like IGS.
Supportive Business Environment
The Australian government has put in place various policies and measures that facilitate foreign investment in the country. Encouragement of private investment in R&D and digital development through the “Industria 4. 0” plan is another strategy that leads to the creation of businesses (McCalman et al., 2024). These government measures assist in guaranteeing that IGS has the chance to exploit financial incentives and a positive policy environment that would enable the company to make a proper entry into the market.
Therefore, based on the political stability, regulatory and legal protection, economic stability, and technology offered, the Australian market is ideal for IGS.
Task 4: Porter’s Five Forces Analysis for IGS in the Recommended Market
Threat of New Entrants (Moderate)
The industry involves the need for capital intensive investment and the application of advanced technology. IGS, therefore, has several strengths based on its established market position and a number of proprietary technologies. However, with no barriers to entry, and an increasing global focus on sustainable farming, new entrants could be a possibility. The Australian government has fostered innovation and the use of sustainable means, which may help in making entry barriers to ease in future and create room for new entrants (Dumbrell et al., 2024). However, IGS can avoid these threats by having a strong technological background and partners that will enable it to maintain its market share.
Bargaining Power of Suppliers (Low to moderate)
Australia has sophisticated supply chains for agricultural inputs such as LED lighting and hydroponic systems, which implies that the supply chain is not easily monopolized and there are always several sources for each of the inputs (Cook et al., 2022). However, some of the components have a few suppliers, which would make them more powerful in bargaining. In order to balance this, IGS can use its existing and new partnerships and constant development to establish a reliable and diversified supply chain with little to no interruptions and low input costs.
Bargaining Power of Buyers (High)
The consumers, including large retail chains and food distributors, are informed and expect high quality and sustainably grown produce (Jaeger et al., 2023). They have many options, including local crops and livestock products and imports, which improves their bargaining power. Therefore, to remain competitive in the market, IGS needs to target the strengths of vertical farming solutions, including quality, year-round production, and sustainability. Value-added services and better products will make the buyers stick to IGS and this will reduce the high bargaining power of buyers.
Threat of Substitute Products or Services (Moderate)
The two major substitutes are traditional agriculture and greenhouse farming, both of which can provide the necessary amount of food production. However, vertical farming has its unique benefits, including the use of less water, small space, and control over environmental conditions that make the growth of produce to be of high quality and consistency (Kabir et al., 2023). Further, the shift in consumer trends towards locally grown, organic, and pesticide-free products makes vertical farming more attractive. Using these unique selling propositions, IGS can effectively manage the threat posed by traditional agricultural practices.
Competitive Rivalry (High)
Intensiveness of rivalry in the Australian vertical farming industry is high. The sector faces stiff competition from the local and international players who seek to gain the largest market share through the integration of technology and mergers. The competition is further fueled by the fact that the scale of the potential is high and the growth rate of the sector is also high. That is why it is necessary for IGS to keep strengthening its position by enhancing and developing its technological offerings. The company can further bolster its competitive position by establishing partnerships with research institutions and obtaining governmental grants. This competition is not stagnant and hence the need for the company to be creative and flexible in the market.
Opportunities
Technological Leadership: IGS has adopted state-of-art vertical farming technology that places the company in a vantage point of competing with other players (Scottish Development International, 2023).
Growing Market Demand: The sustained increase in the demand for organic food and other food products that are sourced locally in Australia presents strategic market opportunities (Moghimi & Asiabanpour, 2023). It is also supported by rising knowledge of the public towards sustainability and the environment.
Government Support: Considering that innovation and sustainable agriculture are priorities for Australia, there are suitable policies for IGS to develop its business and possible financial support.
Threats
Intense Competitive Pressure: The competition from the traditional players and other players in the market leads to the need for a competitive edge and product differentiation in order to maintain the share of consumption (Khan, 2023).
Economic Fluctuations: It could be possible to have certain economic circumstances where there would be less demand for food on the market and therefore IGS’s products or less capital would be invested in the superior technologies in agriculture (Dumbrell et al., 2024).
Potential Regulatory Changes: Changes in the policy and legislation governing agriculture operations may result in increased costs of operations or a change in the market structure which could act as a limitation to the expansion of IGS (McCalman et al., 2024).
Task 5: Sales Forecast and Recommendation of a Suitable Business Partner
| Year | Product | Units Sold | Average Selling Price (AUD) | Total Sales (AUD) |
| 2024 | LED Grow Lights | 2,700 | 1,200 | 3,240,000 |
| 2024 | Hydroponic Systems | 2,000 | 3,000 | 6,000,000 |
| 2024 | Climate Control Systems | 1,600 | 4,500 | 7,200,000 |
| 2024 | Nutrient Solutions | 11,000 | 100 | 1,100,000 |
| 2024 | Total Sales | 17,540,000 | ||
| 2025 | LED Grow Lights | 4,400 | 1,200 | 5,280,000 |
| 2025 | Hydroponic Systems | 2,600 | 3,000 | 7,800,000 |
| 2025 | Climate Control Systems | 2,200 | 4,500 | 9,900,000 |
| 2025 | Nutrient Solutions | 15,000 | 100 | 1,500,000 |
| 2025 | Total Sales | 24,480,000 |
Table 1: Sales Forecast Table for 2 Years considering four Primary Products
(Source: Self-created)
Assumptions and Market Analysis
Nutrient Solutions
- Units Sold: Starting with 11,000 units in 2024 and then rising to 15,000 units in 2025, due to the constant demand for quality nutrients.
- Average Selling Price: It is sold at AUD 100, which is quite affordable given the intensity of competition in the nutrient solution market.
Climate Control Systems
- Units Sold: For instance, 1,600 units in 2024 and 2,200 units in 2025, attributed to the importance of accurate climate control in vertical farming.
- Average Selling Price: Fixed at AUD 4,500 due to the high level of sophistication and reliability of the systems.
Hydroponic Systems
- Units Sold: Initially, it is planned to produce 2,000 units in 2024, and due to the growing demand for environmentally friendly and profitable methods of farming, the number will increase to 2,600 units in 2025.
- Average Selling Price: For the superior technology and efficiency of its systems, IGS offers its software for AUD 3,000.
LED Grow Lights
- Units Sold: The first year of sales is 2700 units in 2024, which will grow up to 4400 units in 2025 because of the increasing demand for energy-efficient lighting in vertical farms.
- Average Selling Price: Priced at AUD 1,200 reflecting the company’s competitiveness in the market and the incorporation of high-quality technologies.
Recommendation for a Suitable Foreign Business Partner
In order to launch IGS into the Australian market, entering into a strategic alliance with AgriDigital, an elite Australian agtech company, is recommended, for the following reasons:
Technological Synergy: AgriDigital’s innovative blockchain solutions provide a clear and effective path for agricultural supply chains (Xu et al., 2019). The integration of IGS’s vertical farming technologies with AgriDigital’s digital solutions may offer a complete solution to enhance the traceability, minimize wastage, and enhance the efficiency for the Australian farmers.
Market Presence: AgriDigital mainly operates in Australia, which allows the company to have strong and long-term partnerships with farmers, traders, and other stakeholders in the agricultural industry (AWS, 2020). This understanding of the agriculture value chain, legal systems, and markets in Australia will be especially helpful to IGS as it thinks about how to enter the market.
Government and Industry Support: Another factor that makes AgriDigital trustworthy and efficient is that it enjoys support from the Australian government and industry bodies as noted by Xu et al. (2019). It can assist IGS in getting the necessary resources and networks that are vital for venturing into the market.
This synergy will, therefore, assist in the development of new and innovative ideas and their application in the agricultural sector, which will be advantageous for both companies.
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References
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