Putting Globalization and Concentration in the Agri-food Sector into Context



Current Agriculture, Food & Resource Issues

D. Sparling and E. van Duren


In this paper, we endeavour to put globalization and concentration activities in the
Canadian agri-food sector into context. The paper develops a framework for examining
globalization and concentration, drawing on available literature, and goes on to examine
merger and acquisition activity in the Canadian agri-food sector. The final section
discusses the implications for managers and policy makers.

Methods

The assessments presented in this paper were developed from a review of strategic
management and general business literature, relevant web sites, and an analysis of
trade and industry level data available through Canadian government departments and
web sites. To analyze Canadian food industry activities, a database using data from the
Annual Directory of Mergers and Acquisitions (1996-2000) was created. This allowed
detailed analysis of industry mergers and acquisitions by size, deal characteristics,
nationality of acquiring and acquired company, and motivation.

Globalization and Concentration: A Framework

A recent paper by Adelaja, Nayga and Farooq (1999) models food industry merger
and acquisition activity using causal measures that are related to the balance sheet.

Although this approach is empirically appealing and has thus been popular, in limiting its
analysis to financial measures, it misses dealing directly with the impacts of markets,
products and ideas. This approach can measure what has happened as well as firm
susceptibility to takeover, but it generally does not capture the real reasons behind global
expansion and acquisition moves that firms undertake. It cannot help agri-food managers
and policy makers deal effectively with the factors already in their future, factors that are
changing the global structure of the agri-food sector. This is the challenge that has been
recognized by leading management thinkers (Drucker, 1977; Ireland and Hitt, 1999;
Zahra, 1999). It is this challenge that we address in this paper.

Our examination of the processes of globalization and concentration is organized
using the framework illustrated in figure 1. The analysis follows the framework,
beginning with the factors driving the processes, examining factors facilitating the
activities and then moving on to an examination of current globalization and
concentration activities and their implications for managers and policy makers.

Drivers

We group drivers into three broad categories - markets and customers, products and
production and financial market influences. These factors are inextricably linked.

Markets and Customers

Markets for agri-food products have been changing in recent years. Consumer
demand for increased variety and year-round access to food products has led to global
sourcing of many products. Firms have initiated alliances or acquisitions to secure and
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