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Introduction
Pendux Incorporation is a private limited company that was established in 2000 within the coffee industry in US. The firm’s headquarters are located at New York. Pendux Incorporation deals with retailing and wholesaling of roasted coffee. The management of the firm ensures that its products are of high quality. Over the past few years, the firm has experienced enormous growth in the domestic market. This has been achieved through establishment of a number of outlets within the domestic market. This has resulted into an increase in the firm’s level of profits.
To improve on its competitive advantage, the management of the firm is considering expanding the operations of the firm into the international market. The strategy that the management is considering in venturing into international business is foreign direct investment. The investment destination that the management has considered is Australia. To undertake, foreign direct investment effectively, it is paramount that the firm have sufficient capital. The management of the firm intends to source capital from the investors to undertake its expansion strategy. A concrete understanding of the investment destination is important. This will serve in convincing the investors about the feasibility of the business. This project involves identification and analysis of the various factors related to international business. The objective of the discussion is to determine the feasibility of the firm succeeding in the foreign market.
History of Australia
Australia has a rich history which dates back to ancient times. The county was not inhabited until the emergence of the stone culture. It is estimated that the initial settlers in Australia arrived fifty thousand years ago. This population was small but it grew with time as a result of improvement in the climatic conditions. By the time the first British settlers arrived at Sydney Cove, there were approximately 300,000 aboriginal individual in Australia. These individual spoke 250 different languages. During this period, there was no political structure. This made the European to settle in the in Australia which resulted into war in which most of the aboriginal individuals were killed especially in Tasmania (‘Background note: Australia’, 2009).
During the 20th century, the Australian government entrenched in the constitution a law aimed at protecting the aboriginals. Most of the Australian states were established during the 18th century. These include; New South Wales, Western Australia, Tasmania, South Australia, Victoria, and Queensland. Australia attained independence and became a common wealth country in 1901.
Australian Demographics
Australia’s terrain is generally low lying with a total geographical area of 7.7 million square kilometres. Currently, Australia has an approximate population of 21.8 million with an annual growth rate of 1.7%. Its population is composed of the aboriginals, Europeans and Asians. The aboriginals are estimated to be 2%, Asians 6% and the Europeans 92% of the population.
There are various religions in Australia which include; Catholics 26%, Anglicans 19%, Buddhists 2.1%, and Christians 19%. The country has a low mortality rate of 4.7 for every 1000 individual. On the other hand, life expectancy in Australia is 78 years for males and 83 years for the females. The country’s total work force is 10.8 million. The major economic sectors include agriculture 3.3%, manufacturing 9.8%, mining 1.5%, retail trade 11.3%, and construction 9.2% (‘Background note: Australia’, 2009).
Australia’s main exports include; iron ore, coal, meat, wool, gold, wheat, machinery products and other transportation equipments. In 2008, the country’s total exports amounted to US$178.9 million. The country’s major trading partners are Japan, US, China, New Zealand and South Korea. On the other hand, the country’s imports include; computer, telecommunication machines, office machines, petroleum and petroleum products. The main suppliers of these products are US, Singapore, China, Japan and Germany. In 2008, the country’s total exports were estimated to be US $187.2 million. In 2009, Australia’s rate of exchange averaged A$ 1.25 per US dollar. The rate of unemployment in Australia is relatively low. By September 2009, the rate of unemployment was 5.7% compared to that of US which was 9.8% (‘Australian rate of unemployment’, 2009).
Economics of the country
There has been a steady growth in the economy of Australia in the past few years. For the past seventeen consecutive years (from 1992 to 2009), Australia’s average annual rate of economic growth has been 3.3%. This has resulted into an improvement in the countries competitiveness as an investment destination. It is estimated that the annual economic rate of growth will increase with a margin of 2.75% during the 2008/2009 fiscal year. This is a relatively higher rate compared to other members of OECD (Organisation of Economic Cooperation and Development) which is estimated to be 2.2%. In 2009, the country’s Gross Domestic Product (GDP) averaged 893.6 billion US dollars (‘A stable and competitive economy’, 2009). By 2008, the per capita income in Australia was estimated to be US$38,000 (‘Per capita income’, 2009).
Australia has a high productivity in relation to labour, industries and agriculture. The high rate of economic growth has resulted into an improvement in the living standards of the citizens. This has culminated into an increase in the consumers’ purchasing power.
The steady economic growth rate has resulted from effective economic management. In addition, this has culminated into a low rate of inflation of 2.5%.
Coffee industry businesses such as coffee roasting, wholesaling and distribution are growing at a fast rate in Australia. Despite the entry of firms such as Hudson, Starbuck, and Gloria Jeans, these firms have not been able to exploit the total coffee market. This means that there is a high potential of Pendux Incorporation succeeding in the Australian coffee industry. The minimal economic barriers will also enhance the success of the firm in this market (‘Coffee’, 2004, p.4).
Infrastructure and technology
Australia has a well established financial infrastructure which increases the capital available for investment. In addition, the effective lending rate by the financial institutions such as banks is relatively low. In March 2009, the lending rate was 3%.This makes it possible for firms to access capital to conduct their investments at a minimal cost. This increases the certainty of Pendux Incorporation succeeding in accessing capital in the foreign market. The financial system is well regulated by the government.
Australia has a well developed road network. This means that it will be efficiency in distribution of Pendux Incorporation products in the Australian market. There are also a number of air and sea ports in Australia. These ports equipped with the current technologies which enhances air and sea transport (‘A stable and competitive economy’, 2009).
Roasting coffee consumes a considerable amount of power. There is a sufficient supply of power in Australia that is domestically produced. The price of electricity in Australia is relatively low since it does not import electricity energy. This means that Pendux will operate cost effectively since the cost of energy is relatively low.
The communication network in Australia is efficient. There are various forms of communication in Australia. These include the print media, television stations, radio stations, and online communication. There is a well established electronic commerce system in Australia which supports e-commerce processes such as on-line marketing. The market also provides numerous coffee roasting technologies.
Political system of Australia
According to Kristina (2006), the Australian system of government is the constitutional monarchy. There is a written constitution which clearly defines the government’s responsibilities. These responsibilities relate to trade, foreign relations, immigration and defence. In addition, there is a well established parliamentary system with various federal elements. The federal system enables effective distribution of powers in the six states which include Tasmania, New South Wales, Queensland, Victoria, Western Australia and South Australia.
The country’s political system is based on various values which include; rule of law, religious tolerance, and freedom of speech.
The country has a local and federal system of voting. Voting is compulsory for all citizens whose age is 18 years and above.The three main arms of Australian government include; executive, legislature and the judiciary. Through these arms, the various powers of the government are outlined. There is an effective cooperation between the states and the national government in areas such as education, law enforcement, transport and the health system.
The main political parties in Australia include; Liberal Party, Australian Labour Party (ALP), National Party, Green Party and the Family First Party. Currently, the Australian Labour Party forms the Australian government from 2007 (‘Background note: Australia’, 2009).
The Labour Party is mainly concerned with the business interests. On the other hand, the National Party is conservative and mainly concerned with the interests of the rural areas. All the political parties in Australia are tied to various social welfare programs.
Australia has a very stable political climate. There have been no major wars, riots or conflicts in the past years. This means that political stability minimises the political risk which will enable Pendux Incorporation to be effectively established in Australia.
Legal environment
The Australian government has formulated a foreign policy aimed at establishing a good relation with US, China, Indonesia and Japan. This is aimed at harmonising Australia’s legal differences with these countries. The effect is that the legal environment will necessitate foreign direct investment in various industries in Australia.
Cultural aspects
According to Chuggin (2009), Australian citizens have developed a coffee drinking culture. This is evident from fact that there has been an establishment of a large number of restaurants and coffee specialty shops. This culture has been integrated by both the old and the young generations. This means that there is a high probability of the firm succeeding in this market. The consumers are more concerned with superior taste of coffee. Roasting coffee is an efficient way of maintaining the natural taste of the coffee. This means that the firm will have a competitive advantage in this market.
Role of Religion
Religion plays a significant role in maintaining social cohesion in Australia. It also contributes towards the maintenance of culture in Australia. Social cohesion is an important element for the success of a firm. This is due to the fact that there will be unity in the society in which the firm operates.
Education system
The standard of education in Australia is high. It is compulsory for children to attend school from the age of 5-15 years. Secondary education takes 6-7 years. After high school, there are various tertiary institutions that individuals who do not make it to university can attend. These institutions provide a wide range of courses which equips them with necessary skills. The education system enables Australian labour market to be efficient in terms of skills. By venturing this market, Pendux Incorporation will have access to a high skilled human resource.
Conclusion
Expanding the scale of operation is one of the strategies that the management of Pendux Incorporation has considered to develop competitive advantage. This can be achieved through conduction of foreign direct investment. Conducting a comprehensive analysis of political, legal, economic, cultural, labour market, infrastructure and technology is paramount. This is due to the fact that the management will be able to determine the feasibility of the international business strategy succeeding.
Recommendation
From the above analysis the management of Pendux Incorporation should supply specialty coffee to the Australian market. This is due to the fact that there is a high demand for this coffee product.
Reference
Australian Government.(2009).A stable and competitive economy. Department of foreign affairs and trade. Web.
Chuggin, M. (2009). What can you learn from outback coffee drinkers?. Hub Pages. Web.
Dot point. 2004. Coffee. Web.
Kristina, C. (2006).The political system of Australia. Web.
Tong Siak Henn. (2009). Per capita income. Web.
Trading Economics. (2009).Australia unemployment rate. Global Economics Research. Web.
U.S Department of State. (2009). Background note: Australia. Bureau of East Asian and Pacific Affairs. Web.
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