Analyzing the Agrium Inc Essay

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Agrium Inc.

Case Analysis

Agrium is an international fertilizer producer, marketer and agricultural products and services retailer. Agrium began in early 30s when Cominco Ltd., a mining company decided to go beyond their usual metal manufacturing and venture into the business of producing and marketing fertilizers. For more than 60 years, the company enlarged their business by acquiring properties that develop nitrogen and potash in different parts of Canada. Agrium operates in Africa, South America, North America, Australia and Europe.

Strength and Weakness

The most competitive advantage Agrium has is perhaps their affordable products with little or no variation localization.

Strengths

Agrium has over 500 retail shops in the United States and South America operating with the brand names Crop Production Services, Western Farm Service, and AgroserviciosPampeanos S.A.

The Advanced Technologies Agrium concentrates on are what the consumer stands to gain and the growth of the environment.

They have strong pricing powers over their customers and suppliers in the South and North America region.

In 2008 and 2009, they were awarded as one of the top employers of Alberta and the top employer in Canada respectively.

Weakness

Brand image is affected by environmental regulations

Lack of cordial relationship with foreign distributors

External Environment

Opportunities

Full scale expanding measures, mostly in the Asian continent's emerging economy.

Making bigger investments in the area of research and development within the department of Advanced Technologies. Additional Development and Expansion, probably an expansion into the exploration sector to gain better access to needed raw materials.

Leverage on existing partnerships in the industry for global expansion.

Break into new markets such as Africa.

Continuous integration into every community where they are situated. The world population is expected to increase by 1.1 billion more people in 2025; this estimated growth in population necessitates greater efficiency among crop-input companies.

Emerging new technological inventions in agriculture.

Large demands from China and India for commodities.

Global trade with European and Asian economies will boost foreign reserves.

Threats

More severe regulations on the environment in the fertilizer and agricultural sector.

The volatility of the industry with rising demand for products that are more sustainable and the entrance of new market players.

The costs of breaking into new markets. There may be varied agendas among Shareholders Influence Shareholders.

The advent of viable alternatives for Agrium products (MBA Skool, 2016).

According to analysis from SWOT results, Agrium Inc. has remained a frontline company with great potentials for more growth. This is not unrelated to the fact that the company acquires 2-3 new franchises per annum, has a strategic plan at corporate level with persistent local and foreign expansions through joint ventures and subsidiaries that are wholly owned. Additionally, with its international distribution channels and easy access to needed raw materials providing affordable products that can be easily accessed by the customers is not a problem. To help develop better relations with customers, it takes on an acquired name that the business has been operating with before it acquired the business (Klempnauer, 2012).

Corporate Level Strategy

This is a vertical integration in Agrium Inc. with a very stable value chain. It is a business with strategic positions and locations aimed at reducing associated shipping costs and time. Additionally, they design their plant efficiency to improve the workflow. One core strategy it adopts is careful approach to the ever changing demographics and the socio-cultural aging farming population (49-52 average age). It has equally mastered the art of dealing with customers irrespective of their capabilities and sizes by improving relations with customers continuously and by improving the quality of products and services. To Agrium, its retail segment's major strength depends on "its generation of cash flow which takes a countercyclical direction most times and stable earnings coupled with improved acquisition profile." "

The target of the company is to grow its interest rates before EBITDA-interest, tax, depreciation and amortization to about 1.3 billion by 2015. It aims at expanding its brand offers and minimizing acquisitions as a way of increasing its footprint on retail distribution (Nielson, 2014).

The strategy adopted by Agrium can be grouped broadly as;

Employees are a main focus

S & EHS continual enhancement- industry's top quartile

Social and environmental responsibility: (capturing carbon, efficient energy generation, taking care of watersheds, African initiatives & Safety on the farm).

In Corporate Governance-Agrium endeavors to ensure high transparency, accountability and business ethics (Wilson, 2012).

Case Update

The adjusted net earnings for first quarter were $7 million or $0.05 per share.

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You can find the adjusted net earnings reconciliation on page 2.

The second highest EBITDA was achieved by Retail for the first quarter, with very large margins across every key product line.

Impressive results were delivered by international Retail, while South America recorded the first EBITDA quarter, and Australia reached its first ever quarter in the local currency.

Wholesale has continued to record very impressive operational results. Nitrogen margins have remained very strong in this quarter, in spite of the low benchmark prices.

27 Retail locations were acquired by Agrium in the United States and Canada, which added the anticipated yearly EBITDA incremental of more than $11 million.

Agrium recorded a 6% decrease in consolidated marketing, administrative and general costs as compared to the corresponding period in the previous year, which demonstrate the firm's Operational Excellence initiative's ongoing results.

How has Agrium structured its business?

The business of Agrium's Advanced Technology is divided into 3 main units

Wholesale

Agrium Wholesale manufactures, distributes and markets nitrogen, potash products and phosphates to industrial and agricultural customers all over the world. The agricultural market is the main end consumer of the wholesale products. This agricultural market is mostly comprised of the grain growers, growers of oilseeds and several other agricultural crops whose growers wish to increase the yield or crops and their quality. Purchases from buyers of agricultural produce represent 86% of all wholesale sales. The remaining 14% sale represents several industrial uses. For instance, urea is utilized for the manufacture of resins for construction while potash is used to recycle aluminum. Nitrogen products are the major generators of most industrial sales recorded-mostly ammonia, ammonium nitrate, urea and aqueous ammonia-manufactured at West Canada, Texas and Ohio facilities, and sold in the U.S.A. and Canada.

Retail

As a leading source of solution to agricultural challenges, the retail arm of the business is dedicated to utilizing its experience to aid the growth of customers from three continents and make more sales-is a way that guarantees sustainability.

They distribute and market seeds of the best quality, nutrients and products that protect crops to help maximize the crop yield of growers. Sending out the products does not necessarily mean they are done. They engage more than 2, 000 agronomist from North America, who are directly involved with the growers, with the aim of customizing state-of-the-art management practices that are safe, sustainable and effective for maximizing crop production.

Advanced Technologies

Adding to its two major business arms, a strategic business arm was created by Agrium in 2006 to concentrate on the production and sales of specialized micronutrients and fertilizers. Known as Agrium Advanced Technology, this arm of the business focuses on fertilizers that are technologically advanced and other related products that enhances environmental friendliness while providing adequate pest control and improving yield.

What are the advantages and disadvantages of how Agrium has organized by geography and business unit over the past 20 years?

Advantages

Business locations that have been strategically positioned aim to reduce all associated shipping time and costs.

Positioned to attain plant functioning rates that are higher, leveraging its magnitude as well as scale with dealers, capture vital distribution synergies and logistics, as well as acquire market data internationally, from all stages involving the chain of crop input.

Disadvantages

Increased cost of moving into new markets as either a new plant has to be built, or expensive shipping costs associated with moving products to the new market.

Because of the way the business units are structured, it does not allow for immediate response and capturing of potential new business that falls outside the scope of their activities.

Has Agrium created an effective corporate culture? If so, by doing what specific things?

Yes. The mission of Agrium is to help make more food available for the entire world. To achieve this mission, treating its employees right should be top priority. The company has well over 15, 800 workers around the world and the company's corporate culture delivers several values that help enhance the health, safety, attraction and retention, inclusion and diversity, and learning and development of the employees. Agrium seizes every opportunity to celebrate its employees and treat them like its most important assets; the company is quite aware of the important role its commitment to employee welfare plays in its overall output. The company also encourages a working environment that helps stimulate and challenge the workers to learn new things, develop themselves and record.....

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