Introduction: Interpretation of ADM Company’s Development Strategy in One Article!
The vast majority of South America has a warm and humid climate, suitable for agricultural development, and agriculture is of great significance to various countries in South America, with a large proportion of residents engaged in agricultural planting and production. In order to seize agricultural resources and markets in South America, control the trade of food and other agricultural products, and earn more profits on this basis, ADM Company adopted a unique business strategy to enter South America in a large scale, gradually building its own market.
The “reverse direction” enterprise development model
South America is the production and processing base of ADM Company, but in the early stages of its entry into the South American market, it did not directly produce and process agricultural products in the target countries. Instead, it vigorously developed agricultural trade by exporting a large amount of certain agricultural products to the region; Subsequently, a logistics company was established to connect transportation channels, strengthen logistics construction, and actively expand the transportation network. In addition to acquiring transportation fleets and ocean going vessels, port operation rights are also obtained through leasing.
The frequent trade of agricultural products based on the developed transportation industry has led to a decline in the price of this type of agricultural product, lowering the market price of similar agricultural products in South America and achieving the goal of squeezing out similar agricultural production and processing enterprises. After controlling agriculture and agricultural product production in South America, occupying resources, and gaining control, ADM Company adopted a localization strategy and began to independently carry out agricultural product production and processing business in South America. From then on, ADM Company completed the reverse development model of “trade logistics production”.
Looking at investment from the perspective of stages
In order to achieve the integrated operation of “production, warehousing, transportation, processing, distribution, and sales”, ADM Company has gradually penetrated into various links such as agricultural product planting, transportation, processing, and sales from the initial production and processing, and adopted different investment methods for different industrial stages.
In the agricultural production process, ADM company adopts the form of contract farming to integrate farmers into its global production system.
In the agricultural product processing stage, ADM enters through direct investment, including new construction investment and mergers and acquisitions. ADM acquired soybean producers in Brazil in 1974, establishing its first processing base in South America; The large-scale soybean processing plant built in Paraguay has increased its oilseed processing capacity by 25% in South America; In addition to sole proprietorship, ADM also entered the South American market through joint ventures.
For example, ADM has partnered with UruboC ‘. abreba in Brazil to establish two sugar alcohol companies for the production of biofuels primarily intended for use in Brazil.
In terms of warehousing and transportation, ADM Company attaches great importance to investing in grain storage and transportation in South America, mainly through mergers and acquisitions and greenfield investments. For example, out of the four ports in Paraguay, three are operated through leasing.
In the sales process, ADM company acquired a large number of factories in South America and entered the sales process through acquisitions. For example, selling and exporting oil and protein products in Bolivia.
Seize the dominant position in the market
ADM company’s ability to quickly capture the South American market and develop into a global leader in agricultural products, forming a monopoly trend in certain fields, is inseparable from its market dominant position.
Firstly, in the early stages of entering South America, ADM company dumped agricultural products into target countries at prices lower than production costs, lowered prices, squeezed out target companies in South America, and quickly occupied the market.
Secondly, according to the company’s global strategy, reconstruct the production and sales network of agricultural products, and gradually monopolize the production and trade of agricultural products using an unequal trading system, gradually controlling the market prices of bulk agricultural products in South America, thereby enhancing its negotiation ability and discourse power.
Thirdly, ADM Company extends its industrial chain, expands its production scale, enhances its geographical coverage, and flexibly applies this industrial chain model to other businesses by integrating the production, processing, transportation, and sales of agricultural products. It quickly establishes new markets.
In short, ADM company uses various means to merge or acquire enterprises in target countries in South America, occupy resources, gain control positions, and obtain huge profits.
Resource layout strategy
South America has abundant agricultural resources and sufficient supply of raw materials for agricultural products.
From a geographical distribution perspective, it is the main production, processing, and export base for grain crops of ADM Company. Taking ADM’s pressing business in Brazil as an example, it has established a factory in Brazil, and its pressing capacity accounts for an absolute proportion of the total pressing capacity in Brazil. From the perspective of trade layout, ADM Company utilizes its international trade experience and transportation system advantages to transport raw materials and processed grains from South America to consumer regions such as Europe and Asia.
International trade forms a barbell shaped production, transportation, and sales chain. The barbell plates at both ends of the barbell are produced and consumed by a large number of European and Asian producers and consumers, respectively. The lever in the middle of the barbell is ADM company. It has become a key connecting point for the integration of international trade production and sales, expanding market share by selling the abundant agricultural resources of South America to Asia, Europe, and other regions.