1.

From an industry-based view, how would you characterize

competition in this industry?
a) European market

“EU integration accelerated throughout Western Europe in the 1990s”

In the 1990s, competition in Europe went in two main directions: regional

integration in Europe and globalization. In 1990, the European integration process
accelerated, leading to small companies embracing their ambitions to scale their
economies to defeat larger competitors by mistakenly entering the market. Central and
Eastern European countries also start to open their markets to Western European
companies to attract more investment. That is a great opportunity for starup companies
and small businesses looking to expand their businesses. “This means that firms such
as AGRANA, based in a relatively smaller country, Austria (with a population of 8.2
million), needed to grow its economies of scale to fend off the larger rivals from other
European countries blessed with larger home country markets and hence larger
economies of scale.”

b) Making use of resources

From using inoculants of fruit trees, it has succeeded in diversifying its product
lines, increasing its competitiveness with other businesses. Above all, it still keeps the
orientation of utilizing the wrong products to save costs and maximize benefits.
AGRANA's production focus is on agricultural producers who do not have the
cohesion to maintain effective bargaining. “To capitalize on its accumulated
knowledge of the refinement process, AGRANA decided to diversify into the fruit-
processing sector”
 Another opportunity is the cheap and abundant human resources. That is an
important factor for the company to ease the burden of expanding production and
increase sales. However, this can also be a big problem because cheap labor means a
high unemployment rate. Expansion into a low-income market lowers the price of the
goods sold and the payback time can take.

c) Relationships
During the Cold War, the official relations between Western Europe and CEE
were lost, but informal links such as culture and history remained very close. And after
the end of the Cold War and the fall of the Soviet Union, a great opportunity arose for
European companies to enter the CEE market. Due to the great pressure of EU
integration, CEE created attractive investment conditions for Western companies, but
most of them failed.

For Austrian firms such as AGRANA, the timing of the CEE countries’ arrival
as potential investment sites was fortunate. Facing powerful rivals from larger Western
European countries but being constrained by its smaller home market, AGRANA has
aggressively expanded its foreign direct investment (FDI) throughout CEE. Most CEE
countries have since become EU members. As a result, CEE provides a much larger
playground for AGRANA, allowing it to enhance its scale, scope, and thus its
competitiveness

2. From an resource-based view, what is behind AGRANA’s impressive

growth?

AGRANA was formed in 1988 as a holding company for three sugar factories
and two starch factories in Austria. Operating after more than 30 years, now AGRANA
is one of the leading suppliers to these multinational brands around the world. With
revenues of US$2.6 billion and capitalization of $1.4 billion, AGRANA is the world’s
leader in fruit preparations and one of Central Europe’s leading sugar and starch
companies.

Innovating tailor-made products according to market trends

After the European Union reorganized the European sugar market, AGRANA
was motivated to seek new directions to ensure the growth of its business in the future.
AGRANA decided to diversify into fruit processing in the future. With know-how on
the refining and processing of agricultural ingredients available, "AGRANA produces
fruit inoculants and produces fruit juices to sell them globally to bottled water and
beverage businesses. ".

AGRANA has capitalized on its accumulated knowledge of the refinement

process and decided to diversify into the fruit-processing sector. This specific
knowledge helps AGRANA company from being imitated by other competitors and
make AGRANA diversify into those new segment smoothly. AGRANA manipulate
their knowledge to prepare fruit and the manufacturing of fruit juice concentrates to
sell them globally to fruit juice and beverage bottlers and fillers.
 Strong cost competitiveness when cooperating with many businesses
around the world

Over the growth period across the world, AGRANA expanded. The chosen
consistent acquisitions policy of AGRANA´s CEO Johann Marihart was only possible
because of existing relationships and a huge amount of capital. AGRANA benefited
from existing relationships to the food and beverage industry from the sugar and starch
sector, whereby the diversification into a new sector was a bit more straightforward.
With the existing relationships, it was easier to find on the one hand acceptors for the
new AGRANA products and on the other hand new business partners in the area of
distribution for example. Furthermore, “Johann Marihart believes that growth is an
essential requirement for the manufacturing of high-grade products at competitive
prices.” For this very reason, AGRANA is prospecting for new growth opportunities in
the future. Hence, AGRANA has started to diversify into the biofuel sector to ensure
future growth and expansion of the company.

Talented leadership

Running a world-class company is not easy and letting it follow its trajectory,
growing more are more difficult.

AGRANA's CEO, Johann Marihart, believes that growth is an essential

requirement for the production of high-end products at competitive prices.

The size of the economy has become a deciding factor for manufacturers in an
increasingly competitive environment. In both the sugar and starch segments,
AGRANA has evolved from a locally operated company to one of the major Central
European manufacturers in a very short period of time. Extensive restructuring in the
Sugar industry and the Starch Division has allowed AGRANA to continue to operate
efficiently and competitively in the European market. Since the decision to diversify
into 2003, Marihart has pursued a consistent acquisition policy to strategically exploit
opportunities in fruit and juice products focusing industries. He has taken wise steps
for the company.

As can be seen, the human factor is indispensable behind success.

3. From an institution-based view, what opportunities and challenges have

been brought by the integration of EU markets in both Western Europe and
CEE?

The home market from the European Union is one market which everyone has
free movement with goods, services, capital and people. This was not always the way if
we look back before the time of the EU we had a Europe which was overfilled with
conflicts and wars. Because of the foundation of the EU we got a lot of opportunities in
the Western Europe and in Central and Eastern Europe but also challenges because it's
not easy to bring so many different countries together with different rules, cultures,
norms and ethics under one big Union.

a) Western Europe
The Western Europe refers to the countries in the west of Europe, where the
distinction is different depending on the context. But the borders between Western
Europe and CEE were once determined by the ratio of power between USA and
UDSSR during the Cold War. Europe was then divided in half by the Iron Curtain.

Opportunities
One big opportunity for Western Europe is that the firms can get cheap human
capital for their own work. Even today a blue-collar worker in Germany earns a lot
more than in Poland. Another point is that the firms can invest in other enterprises from
the CEE. So they can grow extremely fast as we have seen this with the AGRANA
Company. With the difference in culture between Western Europe and CEE the firms
can enter in a new market which can be really profitable.
 Challenges
But the fact, that the firms can get so cheap human resources, is on the other
hand also a problem. Because of the cheap human resources, the own home country
workers will lose their job and the unemployment rate of the country will rise. Another
challenges is, that firms from the CEE area can expand to the Western Europe area, so
there is the danger, that it will get dumping prices. The other culture and norms makes
the whole situation a lot harder. The firms have to consider lots of different aspects.
When they don't do that the new branches cannot rise and flourish in the CEE
countries. These a few challenges for the Western part of Europe and it is not easy to
solve these problems.

b) Central and Eastern Europe

The Central and Eastern Europe countries include all the Eastern bloc countries
west of the Iron Curtain, which was collapsed in 1989-90. Also included are the three
Baltic States Estonia, Latvia and Lithuania.

Opportunities
For the CEE states the integration of EU markets brought with it many
opportunities grow economically and politically. One of the big opportunities is that
the CEE countries can benefit from the higher level of living from the Western Europe
countries. Everybody can work easier and live in another country. So if you want to
leave your home country and settle down somewhere else that is no longer a problem.
We still see this phenomenon to this very day in the Western European countries. More
and more people are coming to live in the country than emigrate. The firms which can
make business in the CEE countries are creating new workplaces and paying taxes on
the profit. So the whole country and the government have the chance to raise their level
of living.
 Challenges
Of course there are on the other side also challenges for the CEE countries. One
of them is that the countries have to pay attention to their own experts in the country. A
lot of firms in the Western part of Europe want to win the elite of the country over.
This can be very dangerous for the own economy. The second aspect is that because of
the globalization the poverty gap is getting bigger and bigger every day. The CEE
countries have to be very careful that they don't lose the access to the industry states.

4. From an international perspective, what challenges do you foresee

AGRANA facing as it continues its expansion into other regions, such as East
Asia?

With the expanding strategy which AGRANA is using, they can discover new
cultural and language challenges. In Asia, AGRANA has already had experience
because they had a 50% stake in concentrates manufacturer Xianyang Andre Juice Co.
Ltd in 2006 and the firm started a joint venture for apple juice in concentrate, located in
Yongji, China.

However, they might have difficulties, because their business model which they
use in Europe and America, and other Western countries might not work well in Asia,
which means they might have problems while adapting to new business culture.
Because in Asia, many countries have their business culture related to the countries’
traditions and these traditions almost will not be changed.

Therefore, their business standards such as management or ethics might not

match well with the Asian culture. Needless to say, misunderstandings and
miscommunication would be one of the biggest challenges for AGRANA.
Additionally, their products might meet the difficulty of popularity, because it is not so
profitable for a Western company to open a branch in Asia while there are a lot of
native companies in China. Also, AGRANA might have to face the problem of climate
and transportation, the weather in Asia is different from Europe, the firm might have to
spend a lot of money to keep products fresh, then it is a long-distance to export and
import ingredients or products from two different continents. However, if AGRANA
stays sensitive to areas' cultures and traditions, they can avoid some basic mistakes.