Developing a framework for export competitiveness in the agrifood sector: the case of the Australian beef industry

Abstract

This thesis addresses the topic of Australian beef producers achieving export competitiveness in the Indonesian market. Australia has long been one of the world’s largest beef exporters; however, export competitiveness has gained higher importance for the industry, particularly due to changes in beef production, rapid expansion of the international beef trade, and certain threats and opportunities arising from changed competitive situations in beef export destinations. This study developed a multilevel framework to analyse and illustrate industry export competitiveness. The framework employed a macro-, meso- and micro-level design to explain export competitiveness while drawing knowledge from the disciplines of strategic management and economics. The macro level of the framework measured the global trade competitiveness of major beef exporting countries by following the principle of comparative advantage; followed by estimation of intensity of competition within the Indonesian market through a residual demand model. The meso level analysed the impact of the Indonesian government’s trade policies on Australian beef export competitiveness. For the purpose, an Almost Ideal Demand System (AIDS) model was utilised to estimate the demand elasticities for local and imported beef. The micro level utilised cluster analysis to identify customer segments by measuring the preferences of Indonesian beef consumers. For the cluster analysis, the study employed a survey method to a sample of 497 consumers in multiple supermarkets in Jakarta, Indonesia, to estimate their preferences for different intrinsic and extrinsic attributes of beef.The macro level analysis revealed important structural features of the industry’s trade competitiveness in both frozen and chilled beef exports, where Australia was found to have comparative advantage globally for both categories. Notwithstanding this status, the export competitiveness of the Australian beef industry has declined over time, perhaps due to the real effective exchange rate. The residual demand elasticity analysis showed that Australia lacked market power in the Indonesian beef market for the frozen beef; however, it enjoys market power in the chilled category. However, a recent shift in the trade policy environment, caused by Indonesian government interventions allowing market access to low-cost competitors, could be a threat for Australia given that it mainly exports low-value frozen beef. The meso level findings suggest that the demand for Indonesian domestic beef is own-price inelastic, while the demand for imported beef is own-price elastic. The meso level results show that Indonesia employs a high degree of interventionism in beef trade policy, which could significantly affect industry export competitiveness. Further, the system dynamics analysis evaluated future scenarios for possible interventions by the Indonesian government and their impact on beef demand and competitiveness. The scenario analysis informed that, despite increasing competition, Australian beef has potential for growth in the Indonesian market. Therefore, it is anticipated that the Indonesia-Australia free trade agreement (IA-CEPA) which was ratified in early 2020, will result in elimination of trade restrictions and may have a positive impact on the competitiveness of Australian beef.Finally, the micro level cluster analysis identified three segments based on consumption and buying preferences, namely: 1) quality-conscious convenience chasers; 2) beef-loving affluent rationalists; and 3) price-sensitive value seekers. The cluster analysis also showed the significant impact of demographic variables of family size, household income, and level of education and occupation on the consumption and buying preferences of Indonesian beef consumers.Specific to the objective of this research, the study developed a framework for export competitiveness while combining the perspectives from economic and strategic management literature. The framework developed in this study is conceptually innovative and applicable to a variety of agrifood industry contexts for modelling export competitiveness. Based on the theoretical framework and empirical analysis, the findings indicated that consideration of a linkage between comparative advantage and competitive advantage approaches; trade policies; market segmentation; and product differentiation is important to understand competitiveness from a holistic perspective.The study makes three specific contributions. Firstly, it demonstrates that a better understanding of the underlying drivers of export competitiveness accounts for demand-side factors such as product differentiation particularly in the context of Australian beef industry; therefore, comparative advantage and competitive advantage approaches are combined to analyse agribusiness export competitiveness. Secondly, it considers the trade policy perspective to highlight how interventions by the importing country’s government affect the competitiveness of high-value agrifood products. Thirdly, it advocates that the process of matching beef production systems with consumer preferences has become important in policy and marketing initiatives in developing countries. Accordingly, market segmentation and focused differentiation strategy can increase the economic value of agrifood products such as Australian boxed beef.The study helps policymakers, government officials, industry associations and beef exporters to assess their competitiveness and focus on how to promote the Australian beef industry by directing scarce resources to the areas where they count the most. This study has contributed to the extant literature in the agrifood sector for theoretical and empirical analysis of export competitiveness; however, further empirical research is suggested to apply the framework to other agrifood industries to improve the limitations of this study.