ASSIGNMENT 1 – RESEARCH ON THE INTERNATIONAL DIMENSIONS OF BUSINESS the international dimensions of wilmar international under the global value chain

Re s e a r c ho nt h eI n t e r n a t i o na lDi me ns i o nso f Bus i n e s s–Thec a s eo fWi l ma rI n t e r na t i on a l By Duong Luu Tien-s3715474 Political Economy of International Business Dr John Walsh Royal Melbourne Institution of Technology Hanoi Campus ASSIGNMENT – RESEARCH ON THE INTERNATIONAL DIMENSIONS OF BUSINESS RMIT University Vietnam BUSM4696 – Political Economy of International Business Subject course BUSM4696 Location & Campus RMIT Vietnam, Hanoi Campus Student name Duong Luu Tien Student number S3715474 Lecturer Dr John Walsh Word count - 1650 (not citation, references, and headline) TABLE OF CONTENTS I Introduction I.1 History Context I.2 Business Overview II The International Dimensions Of Wilmar International Under The Global Value Chain II.1 Research and Development II.2 Production Tropical Oil Oil Seeds and Grain II.3 Logistic III Challenge of Wilmar International as an International Business IV Conclusion V Appendices VI References 11 I Introduction Agribusiness is considered the foundation of civilization For these purposes, the domestication of living organisms allowed humanity to part ways nomadic living and settle Agribusiness has continued to thrive at the local, state, regional, and international scales as communities grew Also, agribusiness can shape the living standards of each nation, with a high living standard, could examine the property of a nation, organization, and society Therefore, this essay will examine the case of Wilmar International, a leading agribusiness group in Asia for assessment of an international market The structure of the essay goes as follows: (1) a brief description of Wilmar International's history and the current status of the corporation, (2) evaluation in the international dimension’s aspect of Wilmar International, related to the value chain theory, the annual reports, and some specific data of Wilmar International I.1 History Context The Wilmar Group was co-founded by Mr Kuok Khoon Hong and Mr Martua Sitorus The company first founded was Wilmar Trading Pte Ltd which only had a paid-up capital of SGD100,000 and five employees The first project bringing the revenue to the company was PT Agra Masang Perkasa – a 7,000 oil palm plantation in West Sumatra, Indonesia In 2007, the company merged with Kuok Group's palm plantation, edible oils, and grain processing lines From 2007, the company has formed a joint venture with many companies such as Nizhny Novgorod Fats, Oils Group, Delta Exports Pte Ltd, etc, (Wilmar International Annual Report 2019) I.2 Business Overview Wilmar International Limited is a public agribusiness corporation, established in 1991 and has the headquarter location in Singapore Their business activities involve food processing and investment holding companies In particular, the merchandising and processing division of Wilmar comprised of (1) palm oil and lauric products merchandising; (2) palm oil processing and refinery operations; (3) grinding, further processing, and refining of a variety of edible oils, oilseeds, grains and sugar (Wilmar International Annual Report 2019) In general, the company has generated:  Over 500 manufacturing plants  Extensive distribution network covering over 50 countries and regions  Multinational workforce around 90,000 labors  2019 Net Profit around US$ 1.29 Billion The company has been awarded as Asia's leading agribusiness group and has ranked as the largest listed companies by market capitalization on the Singapore Exchange In terms of Wilmar's agribusiness core strategy, it covers an entire value chain of the agricultural business, starting from Growing, processing, merchandising, and production of a wide range of agricultural products With the high credibility of Wilmar's portfolio, the preferred alternative of customers and the food processing industry is Wilmar's range of high quality processed agricultural products In many Asian and African countries, its consumer-packaged goods have a leading share Wilmar can extract margins at a certain step of the value chain through size, convergence, and the logistical benefits of its business model, thus reaping operating synergies and cost efficiencies II The International Dimensions of Wilmar International Under The Global Value Chain The value chain in agribusiness requires the connection of raw material producers, intermediaries, manufacturing firms, distribution markets, service providers, and various parties whose practices facilitate the competition and maintenance of each other in the marketplace through the implementation of developments in the value chain processes (Jibuti Mariam, 2020.) Therefore, Wilmar International has utilized and their business strategy of Wilmar's is to establish an integrated model enveloping the absolute value chain of the agribusiness, from the first stage of origination to processing, trading, merchandising branded products and distribution (Wilmar International nd) Wilmar International is an agribusiness-based company, therefore the product of the company is categorized as daily necessities products Applying to the Global Value Chain Smiling Curves, it can be seen that main factors could affect its business: Research and Development, Production, Logistics II.1 Research and Development Wilmar International has located the R&D department in countries: China, Singapore, and Indonesia Wilmar's activities support business operations by improving manufacturing processes to safeguard the consistency of the existence of the products, also strengthen the quality and innovate new products From the Smiling Curves, it can be seen that the R&D segment is considered as a key fundamental of the global value chains of the business to improve the quality and range of product and finally the efficiency of the overall operation In general, Wilmar has over 600 scientists and is located globally engaged in RnD activities focusing on innovation of the products, food technology, and production productivity Wilmar's actions put the department in a country that requires high skill labor, with creativity and deep research, developed countries such as Singapore Also, as the purpose first to invade the Asian market Wilmar chose China as a department of R&D due to its countries famous for catching up with many new technologies from developed countries into applications Also, from a cultural perspective Chinese, people usually follow up with a high expectation of academic performance Hence, in China’s policy on Research and Development, it has been risen steadily in recent years it had yet to yield any “breakthrough” results that would help the country to achieve its technological goals (Hoang 2019) Therefore, choosing China as an R&D location seems to be a wise choice for Willmar’s By choosing one developed country as a headquarter and developing countries as a support department for technologies and innovation, Wilmar's strategy could be considered wise and saving lots of money instead of putting locations as developed countries due to the skilled labor of developed countries is expensive II.2 Production In terms of production is the lowest curve of the model However, as an agribusiness-based company, this is a crucial part of Wilmar International With the value chain from the R&D contributing a successful part of the production of tangible activities Relating to the agribusiness of Wilmar's activities, most of the revenue comes from cultivating, manufacturing, and merchandising of tropical oils, oilseeds, grains Fertilizers, sugar, and shipping did not have a significant revenue share; however, this segment has diversified the corporation and its support back to the distribution and merchandising sector Tropical Oil Plantation Wilmar has a total planted area of around 232,940 hectares As a benefit of joint ventures, the company has its plantation in Uganda and West Africa of 46.000 Under the smallholder schemes in Indonesia and Africa, the company has directly managed 192,906 Manufacturing and Merchandising The company processes merchandise from their plantation smallholders and third-party suppliers In the tropical oil segment, their key location to merchandise and manufacture is mostly in India and Indonesia which have market shares around 20% and 30% Also, the company has the leading producer and seller market in countries such as Vietnam, Bangladesh, India, Indonesia… In 2018, by their good performance from merchandising activities and downstream processing margins In 2019, the overall sales volume for the manufacturing and merchandising business has increased by 5% to 25.6 million MT in 2019 However, weaker commodity prices in the current years led overall segment revenue to decrease by 9% to US$ 15.54 billion in 2019 compared to US$17.06 billion in 2018 Oil Seeds and Grain Manufacturing In terms of the Oilseeds and Grain segment Wilmar International Is considered as a leading player with an extensive presence in many parts of the world corporality China, India, Vietnam, Russia Eating a wide range of oilseeds, intro protein meals, and edible oils The protein meals are produced mostly for the animal feed industry while oil is largely sold to the Group's Consumer Products business Wilmar's operation includes flour and rice milling as well as the production of rice bran oil Through joint ventures, Wilmar has extended wheat and rice miller not only in China but also in Indonesia, India, Vietnam, and Thailand Consumer products Wilmar International's consumer product segment mostly includes edible oil, rice, flour, noodles, sauce, and condiments mass-produced in China, Indonesia, India, Vietnam, Bangladesh, Sri Lanka, and several African countries With a very long period of development, they have created a farreaching sales and network of distribution to traditional retail outlets, supermarkets, and convenience stores Perceptively, in the China market, Wilmar has a significant market share for edible oils of around 45 percent, led by our flagship Arowana brand of products (Wilmar International Annual Report 2019) II.3 Logistic Earning from the benefit of product diversity of the corporation and as an integrated business model, Wilmar International has its logistic system without depending on the third-party logistic The corporation has its shipping segment and has been supporting the production segment This benefit has shown its operation greater flexibility and efficiency III Challenge of Wilmar International as an International Business As a manufacturer in agribusiness with a big scale of activities, corporations are usually involved in the violation of Global Corporate Social Responsibility As it can be seen in every company homepage, annual report, or their label products, Wilmar International has claimed their 'sustainable palm oil' However, the truth is their 'sustainable palm oil' is considered unethical by the violation of labor rights abuses in Wilmar's operation There is a fact about palm oil that is quite cheap and versatile Therefore, it facilitated the greed of Wilmar International Under the investigation of Wilmar's factory in Indonesia, it has found severe human rights violations at Wilmar and its suppliers' plantations This included forced and even child labor, discrimination on the basis, as well an as exploitative and unsafe work environment that placed workers' life in jeopardy The violations found were not isolated events, but Wilmar's subsidiaries' and suppliers' systematic business practices, in specific low rate of salaries, use of quotas and 'piece prices,' and the use of a complex financial and other penalty structure Workers, especially women, are employed in casual work arrangements, making them prone to violence (Amnesty International 2016) However, when it came to the official report to the companies and subsidiaries in Indonesia, none of the companies confirmed the violations and did any of them include concrete examples of measures taken in Wilmar's operations to be responsible for labor rights abuses IV Conclusion In conclusion, it is apparent that the high-efficiency level of Wilmar International is rooted from its utilization of fundamental segments of the Global Smiling Curve in agriculture business: Research and Development, Production, and Logistics This level of efficiency, as a result, has been contributing to the company's profits and reputation on the market However, when it comes to Global CSR - considered an ever-concerning issue in the globalization of international business, Wilmar, by taking advantage of the Indonesian government's poor law enforcement and lack of regulation, has ignored this concern in its agenda, like many others due to corporate greed, thus violated human rights obligations, causing pain and indignation to many laborers This business behavior should be condemned and criminally liable V Appendices Figure 1: Wilmar International revenue from 2016-2019, republished from Wilmar International Annual Report 2019 Figure 2: Wilmar International net profit from 2016-2019, republished from Wilmar International Annual Report 2019 Figure 3: Wilmar International operation republished from Wilmar International Annual Report 2019 Figur e 4: The smiling curves of Global Value Chain VI References 2017, 'Amnesty international calls out labor abuses in palm oil', Rodman Publishing, January, vol 54, no 1, p 80, viewed 26 November 2020, RMIT Library database 2020, 'Why palm oil in products is bad news', Amnesty International UK, 18 May, viewed 26 November 2020, Bansal, S & Dyer, J 2005, 'Planning for End-User Substitution in Agribusiness', Operations Research, June, vol 68, no Cucagna, EM & goldsmith, DP 2018, 'Value adding in the agri-food value chain', Wageningen Academic Publishers, March, vol 21, no 3, pp 293-316, viewed 26 November 2020, RMIT Library database Gunderson, M, Grey, A & Boehlje, M 2005, 'Segmenting Agribusiness Customers on Their Capital Expenditures', Department of Agricultural Economics Hoang, K 2019, 'China’s spending on research and development up 11.8 per cent to US$275 billion in 2018', South China Morning Post , September, viewed 26 November 2020, Humphrey, J 2019, Global Value Chain, Edward Elgar Publishing, United Kingdom 10 Jibuti, M 2020, ' Convergence and growth – conflicting goals of economics policy – A case study of Georgia', Environmental & socio-economic studies, March, vol 8, no 1, pp 1-8, viewed 26 November 2020, RMIT Library database Kenkel, P 2004, 'Customer Segmentation in Agricultural Cooperatives', viewed 26 November 2020, RMIT Library database 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