From humble beginnings in the 1970s, Ecuador's shrimp industry expanded rapidly and aggressively, targeting vital coastal ecosystems in which to build gigantic shrimp farms. Today, Ecuador's shrimp industry occupies 500,000 acres of former mangrove forests, salt flats and agriculture lands along the country's Pacific coast. After two decades of solid growth, in the early 1990s, viral diseases and challenges from the environmental community began to impede the development of traditional shrimp farming. Now, a new way to farm shrimp has evolved that protects shrimp from disease and protects the environment from shrimp farming, creating the possibility that shrimp farming could become the cleanest agriculture industry in the world! Xavier is a shrimp farmer and owns 150 hectares of shrimp ponds in Ecuador. Typically, he will sell his shrimp to a packing plant which will clean and froze the shrimp and either export the frozen shrimp directly or sell them to an exporter. The foreign processors will then prepare the final products to be sold to the distributors and retailers. Upon learning about the chain his shrimp goes through, Xavier is now considering if he should try to expand into the value-added parts of the shrimp business.
This paper presents a strategic external analysis on the shrimp industry using two tools, namely, PEST analysis and Michael Porter’s Five Forces Model. Environment analysis is then summarised with the help of SWOT Analysis model.
Global expansion in this industry has put forward many opportunities for future growth. Xavier’s core competency and capability in the industry leverages competitive advantage for him. We have analysed the option of joint venture with foreign company which will help Xavier to solve many international business problems and also give him edge over others by providing further expertise in processing and marketing, as well as required investment funds.
2. PEST Analysis
PEST analysis is concerned with the environmental influences on a business. The acronym stands for the Political, Economic, Social and Technological issues that could affect the strategic development of a business. We have conducted PEST analysis of Ecuador’s shrimp industry to assess opportunities and threats in the long run. Political Scenario
External Environment Analysis
Political factors affecting industry/firm operations are tax policies, employment laws, environmental regulations, trade restrictions, tariffs and political stability. These factors are considered givens for an industry and contribute to decide the attractiveness of an industry. Ecuador is politically unstable. Despite its impressive wealth of natural resources and other advantages, Ecuador is impoverished as a result of years of political mismanagement and staggering corruption. As Ecuador's public sector is inefficient and suffers from endemic corruption the economy would benefit from increased privatization. To mark the progress in this area the government has made efforts to reform and streamline Ecuador's outdated tax system; tax collection accounts for an increasing share of government revenues. Ecuadorian banks turned a profit in 2001 and 2002 for the first time in years. However, the financial system remains weak, with few viable banks and virtually no effective regulation.
Internal Environment Analysis
As ASIA became producer of shrimps along with Ecuador, world prices of shrimps fell by 50% during the decade 1986-1996. But, at the same time the production increased to generate $1500 - $4000 US Dollar per hectare of shrimp pond. Due to unstable political situation, frequent power cuts might be real threat to expanding shrimp industry. This might become more vulnerable if Xavier also had to consider the packaging and processing of shrimps. Xavier uses some form of prescribe antibiotics that are added to the ponds as the diseases appeared which...