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

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By Duong Luu Tien-s3715474
Political Economy of International Business
Dr. John Walsh
Royal Melbourne Institution of Technology
Hanoi Campus


ASSIGNMENT

1

–

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

1

- 1650 (not citation, references, and headline)


TABLE OF CONTENTS

I. Introduction....................................................................................................................................3
I.1. History Context..........................................................................................................................3
I.2. Business Overview.....................................................................................................................3
II. The International Dimensions Of Wilmar International Under The Global Value Chain....4
II.1. Research and Development......................................................................................................5
II.2. Production................................................................................................................................6
Tropical Oil..................................................................................................................................6
Oil Seeds and Grain.....................................................................................................................7
II.3. Logistic.....................................................................................................................................7
III. Challenge of Wilmar International as an International Business...........................................8
IV. Conclusion.....................................................................................................................................8
V. Appendices......................................................................................................................................9
VI. References...................................................................................................................................11

2

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 ha 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
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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 5 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 3 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

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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 2 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 3 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 ha. Under the smallholder schemes
in Indonesia and Africa, the company has directly managed 192,906 ha.

Manufacturing and Merchandising
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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.

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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 3 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.

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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

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Figure 3: Wilmar International operation republished from Wilmar International Annual Report
2019

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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. 4.
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 , 1 September, viewed 26 November 2020,
< />Humphrey, J 2019, Global Value Chain, Edward Elgar Publishing, United Kingdom.

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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.
our-businesses/research-development>.

Publishing, OECD 2013, Interconnected Economies: Benefiting from Global Value Chains, Organization for
Economic Cooperation & Development, France

Pye, O 2019, 'Commodifying sustainability: Development, nature and politics in the palm oil industry',
Oxford: Elsevier BV, September, vol. 121, pp. 218-228, viewed 26 November 2020, RMIT Library database.

Wilmar International 2019, Wilmar Annual Report 2019, Wilmar International , Singapore.

Wilmar International 2020, Corporate Profile, Wilmar International, Singapore, viewed 26 November 2020,
< />
Wilmar International 2020, Research & Development, Singapore, viewed 26 November 2020,
< />
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