The Role of Alliances in the Australian Meat Industry

Summary

Strategic alliances are agreements between independent firms to co-operate amongst themselves so that they can compete more effectively with others. Firms decide to enter into strategic alliances because it helps them achieve some strategic end that they are unable to achieve as efficiently by other means. Vertical alliances involve firms at different stages of the supply chain. Horizontal alliances involve firms at the same stage of the supply chain. Three worldwide trends in the food industry, agribusiness and business in general have made strategic alliances more common, particularly in food industries that are in competition with red meat.

By recognising and responding to these trends, the red meat industry attempted to maintain its profitability over the longer term. In wealthy countries, competition for the consumers' food dollar has intensified. Consumers are more demanding and have an ever-expanding range of choices as food markets become more fragmented. In the 'newly emerging' countries of Asia, diets are expanding to include non-traditional, western foods.

Food companies are competing by seeking new ways to provide additional 'customer value' to these more discerning or new consumers. Strategic alliances offer one means to create additional customer value-for example, if customers want to be sure their food is safe, retailers need to have an integrated supply chain so that they know their suppliers and can trace back their supplies. The so-called 'industrialisation of agriculture' has also encouraged strategic alliances and the more industrialised sectors such as poultry have operated strategic alliances for many years. Successful competition with these industries will require that the red meat industry adopt similar alliances. Businesses everywhere are using strategic alliances to shift their 'boundaries' to give them more scale so that they can compete. This ranges from greater use of contractors to complete 'outsourcing' of supply as in the case of Nike.