The Halderman Company: Success in the Changing Global Soybea

The Halderman Company: Success in the Changing Global Soybean System

 

Executive Summary

This report provides an analysis of the reason for the success of the Halderman companies in the soybean industry in the U.S., and the competitive advantages of this company comparing to competitors from countries like Brazil and Argentina. In addition, some suggestions is given to the CEO of the Hadlerman companies in terms of managing future growth and the firm’s international strategy.

 

This report finds that the reason for the success of the Halderman companies in American soybeans industry can be mainly attributed to three factors: Steady increase of soybean demand, technological and financial power, and innovation. In addition, when comparing to oversea competitors, the Halderman companies also have competitive advantages in areas such as: Factor condition (technological power), supporting industry (financial power), demand condition (increasing demand of soybeans world-wide till 2030), and government (agriculture support program). The former three are sustainable competitive advantages whereas the last one is not sustainable.

 

The report also provides suggestions to the CEO of the Halderman companies with regard to managing future growth in the soybeans market and being a strong international company: To continue to maintain the technological and financial power over other competitors, establish cooperation with oversea competitors, and enter market in other developing countries.

 

1.The Halderman Company: Success in the Soybean System in the America

 

In the early twenty-first (21st) century (around 2002 ~ 2003), the global soybean market has witnessed a dramatic increase. As can be seen in Figure 1, in the U.S market, there is an increase up to 42% in soybean production from the early twentieth (20th) century (around 1990/1991) to the early twenty-first (21st) century (around 2002/2003). Moreover, due to increase of demand from developing countries like India and China, it is expected that the growth of soybean industry will last till the year 2030 [Ray & Kevin, 2003].

 

Among those world-leading soybean producers, the Halderman companies: Halderman Farm Management Services, Inc. (HFMS), and Halderman Real Estate Services, Inc (HRES), are very successful players in the U.S market. According to the company’s history, the Halderman company has grown to 40 full- and part-time staff members managing more than 650 farms, selling and acquiring over 150 properties and performing over 400 appraisals annually [Company history, 2012]. The reason for the Halderman companies’s success in the U.S soybean industry, at a time when the industry and the agriculture business sector have been characterized for the dominance of one of the "big sister"(Cargill, Bunge, Louis Dreyfuss, ADM) downstream and have been highly fragmented and heterogeneous upstream, can be largely attributed to the following three factors:

 

a.Steady increase of soybean demand

 

Besides demand from America itself and other developed countries, rising living standard in developing countries such as India, China and other Southeast Asian countries has lead to a dramatic increase in the demand of soybean and related products as consumers in those countries increase the share of protein in their diets [Ray & Kevin, 2003]. In addition, new usage of soybean in areas like biofuels, industry oil, and even automobile parts have also imposed increasing demand of soybean. As a result of the booming demand of soybean around the world, American soybean industry has witnessed a demand of soybean both for domestic and oversea market, and the Halderman companies, as a major player in the U.S soybean industry, have benefited significantly in this period.

 

b.Technological and financial power

 

Technological and financial power is another important reason for the Halderman companies’ success in the soybean industry. Wide use of high-tech machinery and latest farming technologies have help the Halderman companies to reduce their production costs for soybeans. As shown in Figure 2, the total farm production cost for soybeans in the U.S is just 25% and 40% higher than that in Brazil and Argentina considering the higher land value and workers’ salary in the U.S comparing to that in Brazil and Argentina.

 

Moreover, the financial power is another critical factor that helps the Halderman companies to be successful. Easy access to capital and professional financial has helped famers and farms to exploit new market opportunities and expand their business.

 

c.Innovation

 

Different from competitors from Brazil and Argentina, besides traditional farm management business, the Halderman companies are also very innovative to exploit new filed and create more value. For example, two different companies have been established: The Halderman Farm Management Service, Inc. (HFMS) and The Halderman Real Estate Service, Inc. (HRES). Through these two companies, the Halderman companies can provide both professional farm management service and real estate management service to customers. For example, HFMS provided professional farm management services to more than 650 farms with a total market value of more than $460 million. And HRES worked with farm owners to determine appropriate type of lease arrangement, and HRES even offered approximately 100 different lease types [Ray & Kevin, 2003]. All those innovations have helped the Halderman companies to be successful in the soybean industry.

 

Despite the success in soybeans industry in America, the Halderman companies also need to pay great attention to competitors in the South: companies from Brazil (e.g., Grupo Maggi) and Argentina (e.g., El Tejar, S.A.). Therefore, the Halderman companies need to think about its distinctive core competencies and comparative advantages comparing to its Brazilian and Argentinean competitors. In the following section, we will discuss the competitive advantages of the Halderman companies.

 

2.Competitive advantage of The Halderman Company

 

In order to compete with soybean producers from countries like Brazil and Argentina which enjoy low human resources expense and economies of scale, it is critical for the Halderman company to find out its competitive advantage. In the following, we will discuss the competitive advantages of the Halderman company based on the determinants as proposed in Figure 2.

 

The Halderman Companies’ Competitive advantage 1: Factor Conditions

 

Technological power is definitely a competitive advantage of the Halderman companies. Though new technologies are being used in developing countries like Brazil and Argentina, there is still a long way to go for them to catch up with U.S companies. For example, Alvardo, CEO of Argentinean soybeans producer, once hoped to add real-time satellite monitoring of filed conditions. Even such technology was already feasible, Argentina’s poor exchange rate meant it was not yet affordable [Ray & Kevin, 2003]. So technological power is a sustainable competitive advantage of the Halderman companies.

 

The Halderman Companies’ Competitive advantage 2: Related and Supporting Industries

 

Highly developed financial market, as an important supporting industry to the soybeans industry, is another competitive advantage of the Halderman companies. As discussed above, this is a sustainable competitive advantage of the Halderman companies.

 

The Halderman Companies’ Competitive advantage 3: Demand Conditions

 

As shown in Table 1, the demand for soybean is expected to grow steadily till 2030 both in U.S domestic and oversea markets. Therefore, this is a sustainable competitive advantage of the Halderman companies, at least till year 2030.

 

The Halderman Companies’ Competitive advantage 4: Government

 

U.S. government support and subsidy for agriculture, including soybeans industry is also an external competitive advantage of the Halderman companies, though not sustainable. In U.S., government agriculture programs have evolved into multi-million-dollar systems of agricultural support. Comparing with companies from Brazil and Argentina that enjoy little or no government subsidies, this seems to be a competitive advantage for the Halderman companies. However, this competitive advantage is not sustainable because: First, U.S. is actually under heavy pressure to trim this multi-million-dollor farm support in WTO multilateral trade negotiation; Second, heavy subsidies actually hurt U.S. agriculture industry by lowering the comparative advantage of U.S farmers.

 

In words, the competitive advantages of the Halderman companies mainly lie in four areas: Factor condition (technological power), supporting industry (financial power), demand condition (increasing demand of soybeans world-wide till 2030), and government (agriculture support program). The former three are sustainable competitive advantages whereas the last one is not sustainable.

 

3.To be a strong International Player

 

Apparently, the trend for soybeans industry, and also agriculture industry as a whole, is going to be a global market. Therefore, following are my suggestions to the CEO of the Hadlerman companies in terms of managing future growth and the firm’s international strategy:#p#分页标题#e#

 

a.Continue to maintain the technological and financial power over other competitors;

 

b.Establish cooperation with oversea competitors

 

For example, HFMS can be a professional farm management service provider to soybean producers in Brazil and Argentina. Rather than competing directly in soybean market, the Halderman company can do business with other oversea competitors to generate more business values.

 

c.Enter market in other developing countries

 

As illustrated in Table 1, demand of soybeans in developing countries in Asia like China and India are strong through 2030, so it is wise for the Halderman companies to have a strong presence in those emerging markets.

 

4.Summary

 

At a time when the industry and the agriculture business sector have been characterized for the dominance of one of the "big sister"(Cargill, Bunge, Louis Dreyfuss, ADM) downstream and have been highly fragmented and heterogeneous upstream, the Halderman companies has achieved great success in U.S. soybeans industry in the early twenty-first (21st) century. The reason for the Halderman companies’ success in the U.S soybeans market can be largely attributed to factors including: Steady increase of soybean demand, technological and financial power, and innovation. In addition, when comparing to oversea competitors, the Hadlerman companies also have competitive advantages in areas such as: Factor condition (technological power), supporting industry (financial power), demand condition (increasing demand of soybeans world-wide till 2030), and government (agriculture support program). The former three are sustainable competitive advantages whereas the last one is not sustainable.

 

Looking forward, in order to manage future growth in the soybeans market and be an strong international company, my suggestions to CEO of the Halderman companies are: to continue to maintain the technological and financial power over other competitors, establish cooperation with oversea competitors, and enter market in other developing countries.

 

Reference

 

Ray A. Goldberg, Kevin Allison. (2003). The Global Farmer and the Future of Soybean Production, Harvard Business School Case Study 9-904-402, Oct.2003

 

The Halderman Real Estate and Farm Management Inc., Company history, retrieved from http://www.halderman.com/about-us/history.php, last retrieved on Apr. 9th, 2012