Marine Harvest Case
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Aquaculture is generally referred to as the organized farming of marine life for purposes of harvesting and allows for more efficient and controlled production of a given species than its wild caught alternative. Aquaculture growers are able to maintain quality control, in part through environmental control mechanisms. Maintaining proper temperatures, feeding intervals and cleanliness helps to ensure a healthy, high-quality product. Habitats can also be modified to control growth rates in cold-blooded subjects through sunlight management. The control species, or animal being harvested, is placed in an environment specifically designed to promote desired characteristics. By managing “husbandry” over generations, they are bread to resist disease and to pass desired genes to offspring. Ultimately, aquaculture provides the capability to manage the global demand for protein while reducing human reliance on already depleted natural fisheries. In this particular case, we will focus on Marine Harvest (MH), a firm that utilizes aquaculture science in the production of salmon.

A resource for combating global hunger crises, aquaculture does not come without challenges. The combination of large numbers of organisms in a relatively small area tends to promote the spread of disease. This tendency holds true with aquaculture and an entire crop of marine life can be lost to disease in a short period of time. A crop lost to disease can take significant time and resources to recover. Additionally, locations must meet specific conditions requisite to the health of the salmon. Physically, the location must have a current swift enough to carry away waste and fecal matter but not so swift as to make feeding difficult. Other difficulties including parasitic organisms, pollution to surrounding habitats, high capital demand and long investment return times must be overcome to realize a successful aquaculture operation.

Despite many challenges, the aquaculture industry is growing substantially and is set to significantly reduce the depletion of natural fisheries from wild capture. Figure 1 shows aquaculture production vs wild capture from 1950 through 2010 and illustrates the dramatic growth rate over the past decade. This growth is expected to continue with 50% of the worlds protein needs (an estimated 90 million tons) being provided by marine life produced via aquaculture farms by 2030.

As is common with many developing industries, aquaculture is a constantly changing landscape molded through innovative change. New developments in anti-disease technologies have worked in conjunction with genetic arrangement to help prevent harvest lost to disease. As is depicted in the case study, organizations like MH are working with environmental protection agencies to develop regulations and policies to promote better farm conditions and maintain a high standard for product quality.

MH is the leading global provider in aquaculture based protein, specifically salmon. CEO Alf-Helge Aarskog described the completion of Phase 1 of his corporate strategy by saying that they had successfully “learned how to farm salmon in a reliable, cost effective way.” In addition to being the leading global producer of farmed salmon, it led Canada, Scotland and Chile in salmon production as well as Norway, its domestic and most dominant market.

The Norwegian salmon aquaculture industry had significant barriers to entry, the first of which came in the form of licenses. A new market entrant needed to identify a site for their farm and a license, which was typically in the range of NOK45 million. Licenses were issued individually and outlined set a limit on the number of fish that could be produced at a particular site. Although licenses were tradable, newly issued licenses were handed out on an unpredictable basis making it difficult to plan the acquisition of a new license from the Norwegian governing body. This helps to solidify Marine Harvests position as an industry leader in Norway because it makes it more difficult for competitors to enter the market. However, Marine Harvest is approaching a Norwegian overall production cap and is experiencing local resistance in implementing new farms that are seen as an eyesore.

In examination of Marine Harvests financial records, specifically their balance sheet, we can derive further insight into recent firm performance. During the first year of operation, the company was profitable with revenues of 222.6 (presumed to be in millions although not stated in financial data) and net income at 57.3. In their second year of operation, they saw rapid growth with revenue increasing 306% to 905.7 and net income increasing in-step to 297.1. Although they continued to see drastic increases in revenue through 2007, expenses increased as well. Increased expenditures in administrative and operating expenses along with depreciation expense caused EBT earnings to be about a third of the prior year despite tripled revenue. These operating expenses caused to firm to break even in 2006 and fail to remain profitable through 2008. By 2009, low COGS and admin expenses

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Organized Farming Of Marine Life And Marine Harvest. (April 3, 2021). Retrieved from