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Essay: Analysis of expansion into foreign country (Bongousse Bap Burgers – Australia)

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  • Analysis of expansion into foreign country (Bongousse Bap Burgers - Australia)
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Executive summary

With key global marketing theories and practises, this market entry presents Australia as a prime candidate for expansion. Specifically looking at what information South Korean company Bongousse Bap Burgers, (translation: tasty bites rice burger) will need to know prior to expanding into a foreign country (Haemil, n.d). In assessing the various environments within Australia, specific focus was made on understanding the historical economic impact of Australia and the future of the economy to consider how this would affect expansion.
In furthering this exploration into sociocultural, political and legal environments of Australia, any possibilities or concerns within a business context are made obvious, highlighting what the pros and cons are of expanding into Australia.

Introduction

Australia has been described as a dynamic country filled “in every way” with unique multiculturalism and multiracialism (Australian Government n.d.; other sources there). This can be seen reflected within the country through the various “food, lifestyle and cultural practices” that are shared across the nation (Australian Government n.d).

As an island based continent Australia is the sixth largest country in the world situated between the Indian and Pacific oceans, approximately “4,000km from east to west” (Australian Government n.d.). With mostly temperate weather year round in Australia, the population situates itself around the coastal regions of the country (Australian Government n.d.).

With a current population at 25 million people, Australia has 19 world heritage listed properties and is well known for landmark buildings (Sydney Harbour Bridge), ancient geology (Uluru), and is filled with high country (Australian Government n.d.). Known as one of the happiest developed countries, Australia’s economy performs “exceptionally well in measures of wellbeing” (BBC News 2013; other sources there).

As a world leader in industrial sectors, Australia has numerous major industries including; agricultural, aviation, finance, information technology, insurance, manufacturing, mining, shipbuilding and telecommunication industries (Australia On Net 2007).

The main industry being assessed is the Fast Food and Takeaway Food Services Industry of Australia, which has seen major transformation due to increasing desires for health consciousness (FSANZ 2018; Ibis World 2017). Operators within the industry have responded to consumers by implementing “healthier” ranges of food, including some operators leaning towards “higher quality” of food options (Ibis World 2017.)

With a current annual revenue of $20 billion dollars, there is an expected decline of 0.4 per cent (Ibis World 2017). This could be due to stiff competition driving up rental costs, a maturing market, and strict regulations from Food Standards Australia and New Zealand (Ibis World 2017; Browne and Han 2015; FSANZ 2018).

Specific care has been taken to address Australia’s economic, sociocultural, and political legal environments to present benefits and highlight the disadvantages of expanding Bongousse into Australia. Finally, by using Porter’s diamond and force theories, a competitive analysis was created to present Australia as an innovative nation, perfect for Bongousse to expand into the market.

Economic Environment Analysis

Australia has been radically transformed since the 1980s, and one of the best performing Organisation for Economic Cooperation and Development (OECD) countries since 1990 (Cahill and Toner, 2018; Enright and Petty, 2013). With annual Gross Domestic Product (GDP) growth between 3 to 4 per cent since 1991, the economy of Australia has proven to be resilient. This resilience is owed to Australia’s acts of privatisation, deregulation and marketisation (Cahill and Toner 2018).

Like most countries of the time, Australia chose privatisation to further “develop their share markets” directly affecting “financial services, electricity and gas, transport and communications” (Kerr, Qui and Rose 2008). Interestingly, deregulation in Australia began as a series of reforms on “industrial relations, trade and public ownership” (Berg 2016) due to pressures on the economy like stagflation (Reid 1976).
Of the major reform suggestions included macroeconomic management changes, such as a “floating exchange rate” and “monetary targeting”, while secondary reforms focused on the price controls of financial products such as; “interest rate controls, maturity controls, and absolute and relative lending controls” (Berg 2016). Thanks to the structural reforms, and strong macroeconomic policies within Australia, currently the country has continued to enjoy considerable success over recent decades (OECD 2017).

Another reason is due to the long commodity boom, effectively changing the current economic environment (OECD 2017). This is due to the economy going through a ‘rebalancing’ process, whereby macroeconomic policies and currency depreciation is affecting the wealth of the country (OECD 2017). Having previously enjoyed the exports of the mining boom, the focus for Australians is on non mining sectors forecasting a growth of “3 per cent in 2018” (OECD 2017).

Gross Domestic Product.

The Australian GDP is often high and ranks well against other OECD countries (see Figure 1 in Appendix), and as such Australia has enjoyed “25 years of consecutive output growth” (OECD 2017). Yet a global risk of “low growth trap” directly impacts Australia and their “economic shares”, due to “widespread deceleration in productivity” (OECD 2017). Despite this, the Australian economy continues to perform well against other OECD countries (OECD 2017). In 2017, the GDP measured at USD 1.2 billion dollars, showing a 2.7 per cent growth over the last 5 years (OECD 2017). While the GDP using purchasing power parity, the per capita income is measured at roughly USD 46.7 thousand dollars, an alltime high for the Australian economy (OECD 2017; Trading Economics 2018).

Inflation.

Currently, at its highest point the consumer inflation price as of the second quarter of 2018, is measured at “2.1 per cent year on year” (Trading Economics 2018). The main reason for this jump is due to obdurate transportation costs, yet this is still lower than the expectations the market set out at an estimated “2.2 per cent”, (Trading Economics 2018).

Trading Blocs.

Australia has ten Free Trade Agreements (FTA) currently in action, further allowing the flow of goods and investments for Australia (DAWR 2016; Cole and Zeller 2014). The main FTA which will be focused on is the KoreaAustralia Free Trade Agreement (KAFTA) which was brought into effect in 2014 (DFAT 2016). The idea behind this agreement is to ensure both counties get the “maximum benefit” from the FTA, and as such government bodies meet regularly to discuss the agreement (DFAT 2016). It is important to note that with this kind of agreement the Department of Foreign Affairs and Trade (DFAT) ensure updates are given to Australian “importers, exporters and producers” ensuring the people are making the most out of KAFTA (DFAT 2016).

Currency.

According to journalist Moore (2017), the Australian dollar (AUD) has fallen around 3.7 per cent against the US dollar, the main reason being that the US outperformed the Australian stock market. Yet in 2018, the AUD fell to its weakest since 2016, with predictions the losses could continue (Cole and Pandey 2018). This is not wholly a bad thing as “a depreciating currency has a huge force multiplier on Australia”, and because exports are priced in US dollars Australian products become cheaper to buy internationally (Cole and Pandey 2018).

Attractiveness.

Overall Australia presents as a robust economy, performing better year on year than most OECD countries (OECD 2017; Trading Economics). With multiple trade agreements already in use, and seven more currently being discussed, Australia is openly engaging in trade to further improve on tariffs and policies (DAWR 2016). This means that with progressive trade there are improvements in the economy, agriculture, and technology (DAWR 2016). However, the inflation rate is high, and the Australian currency is seeing major losses with predictions of even more (Trading Economics 2018; Moore 2017; Cole and Pandey 2018).

With this being said, it should be important to note that the depreciation of the Australian dollar will assist in exports, reduce housing prices, as focus shifts from commodity focused products (Cole and Pandey 2018; Hammond 2012). With a current population of 25 million people, the growth of Australia has been “faster and larger” than the forecasted amount (Fell 2018). More importantly is how the population has grown so rapidly, and while there was a strong “natural increase”, the Net Overseas Migration (NOM) makes up more than half of the population growth at 58 per cent of Australians having migrated to Australia (Fell, 2018). This goes to show how the strength of the Australian economy has held up, and that there is room to grow.

Socio Cultural Environment of the Selected Country

Hofstede’s Cultural Dimensions.

It is pivotal for global businesses to try understanding different “cultural dimensions” can be taken to address any problems, which may arise, due to cultural differences in demographics (Belyh 2015; Sordo 2015). Results in Hofstede scores between host nation South Korea and chosen nation Australia can be found in the appendix at the end of this document.

There are differences in the power of institutions between Australia and South Korea whereby Australia focuses on a hierarchy that is entrenched in “convenience” for workers (Hofstede Insights n.d.). In Australia, the information between manager and employee is “shared frequently” with communication more casual, or informal, to inspire team participation (Hofstede Insights n.d.). In comparison South Korea more hierarchical society, which can be seen in organisations where there are “inherent inequalities” with managers having the final say (Hofstede Insights n.d.).

This is due to Korean companies’ main priority is to serve their society for future generations, as can be seen in chaebol companies (Hofstede Insights, n.d.; Tedjada 2017). Australia, on the other hand, tends to be a more individualistic culture, as the expectation for Australians is to care for “themselves and their immediate families” (Hofstede Insights n.d.). Seen heavily in the workforce where organisations hire with the desired characteristics of independence and forward thinking (Hofstede Insights n.d.).

More than this as a masculine culture, Australians often strive for excellence in all behaviours, throughout all aspects, making sure to celebrate any of their wins of “achievements” (Hofstede Insights n.d.). With respect for traditions passed through generations, Australia focuses on the moment rather than the future, conforming to normative culture by “achieving quick results” (Hofstede Insights, n.d.).

Specifically, Australians tend to have a more optimistic disposition with the idea of having a good time and “enjoying life” (Hofstede Insights, n.d.). Therefore, the Australian people tend to “act as they please”, which contrasts the Korean people where indulgence of the self is “somewhat wrong” as it does not serve the generations to come (Hofstede Insights, n.d.).

Language.

The Australian language is as diverse as the cultures residing in Australia, with an estimated 300 different languages spoken in Australian homes (McCrindle 2018; ABS 2016). Specifically, English remains as the most spoken language in Australia, with at least 21% of the population speak another language (ABS 2016). It is important to note that Australians have their own style of English, with changes in “language, vocabulary, pronunciation and accent” (Finney 2001). Australian language is considered low context as the people of the country is less “homogeneous” with more diverse separation between cultures (Finney 2001).

Communications.

The general communication style of Australians is generally very open, with verbal communication holding the most weight in comparison to nonverbal styles of speaking (Finney 2001). Specifically, managers in Australia make themselves available to their staff members, as the idea of “sportsmanship” or “teamwork” is strong within the workforce, and to be a team player is important to businesses (Hofstede Insights, n.d.).

Consumption Patterns.

Australia can be defined as a materialistic nature, as reflected in the Hofstede analysis, the Australian people tend to place more importance on material possessions and on acquiring more as a way to reach happiness (Davis, Moschis and Weaver 2011). There are two main viewpoints, one is that the social perspective for this materialistic outlook is because of general consumerism created by mass media on certain products (Davis, Moschis and Weaver 2011).

The second is the psychological perspective whereby the reason for accumulating material perspectives, is due to the Australian people forming an emotional bond for those possessions to own is to remember historical events (Davis, Moschis and Weaver 2011; Herrier and Ponnor 2010).

Dress in Australia is the same as in the Western world, whereby in corporate Australia dark suits and ties are normal, with special consideration taken to “lightweight” fabric to assist in the hotter temperature (Warburton 2017). Within the food industry, it is not uncommon to see a uniform of a basic business shirt and black slacks, this is due to strict policies for Safe Food in Australia which is elaborated on further in the next portion of this report (ANZFA 2001).

Gender.

Overall Australia aims at a more egalitarian style of interaction with its genders, in that major policy changes have made it easier for women to work whilst married, divorced, pregnant, or with a busy family (Baxter 2010). Meaning that open communication between genders is normal, with no specific gender being more important than the other. With this being said, it appears as if major feminist movements in the wider world are having an impact on gender interaction and equality due to a “backlash in public opinion” which is stagnating the trend (Baxter 2010).

Specifically, the fast food industry is a place of equal opportunity employment, with more than 153,000 workers the industry contributes around $19 billion to the Australian economy each year (HR Assured 2017). It is important to note that in the food industry there are currently more women working in, or learning to join, the food industry (Chung 2018). There do appear to be some issues in “workplace flexibility” after childbirth, and although equal in employment opportunities, it is difficult for women to retain their workplace in the food industry (Chung 2018).

Religion.

In Australia, “no religion” is the highest response from the Australian people with a 29 per cent growth over a five year period (ABS Census 2011). Within the food industry of Australia, there are two main certifications restaurants may have due to religious beliefs; Kosher and Halal (Murphy 2016; Murphy 2017). The most noticeable in Australia are in regard to the Muslim based faith, specifically Halal certifications (Murphy 2016). As food packaging and restaurants which offer these products must be certified via “strict standards” by official organisations (Murphy 2016). With Judaism, a religion followed by 0.5 per cent (ABS Census 2011) Kosher refers to the prohibition of any pig meats, as well as prohibiting poultry based meats or dairy products not prepared in a particular manner (Murphy 2017).

Materialistic Value.

The current trend in materialistic value for Australia is that of materialism, as it is a major part of consumer behaviour (Muller and O’Cass 2015). One observation is that an attachment is made to objects, which Australian consumers purchase, and can then be a method in with to converse to others, as well as to identify themselves (Muller and O’Cass 2015). For example, purchasing a barista made coffee from a cafe rather than making instant coffee at work can show a sign of stature or “portray” an image (Muller and O’Cass 2015).

Quality of life.

Overall the quality of life for Australians is above average in comparison to the other OECD nations (Better Life Index n.d.). Specifically of note is the notion of community is strong for the general population as Australians feel they can rely on their neighbours in times of trouble, yet interestingly there are large pay gaps where the top 20 per cent of Australia’s richest can “earn more than five times as much as the bottom 20 per cent” (Better Life Index n.d.).

Political and Legal Environment of the Selected Country

Role of Government

As a parliamentary style of governance with bicameralism, the Australian Government ensure to consult the Australian people on matters related to national policy, however, the role of the government as regulator, participatory, and facilitator is an ongoing one (DPMC 2017; source). Specifically, Australia has gone through a series of deregulation within Australia, or “regulatory policy and governance agreements” which means the Government have placed a priority on advancing the “quality of its regulation” (DPMC 2017). More importantly, these regulation and policy changes are monitored to make sure these changes are appropriate fits for the 21st century (DPMC 2017).
Industry specific, the food industry of Australia works together with New Zealand to form an “a food regulation system” for both countries (Food Regulation 2016). The job of this regulation is to ensure a “strong system” using scientific models to make certain the “health and safety of consumers” (Food Regulation 2016).

Government Intervention.

Government changes to income law have meant changes in Sunday penalty rates within multiple industries, including the food industry have been affected due to the Fair Work Commission (ABC 2018). Specific government action on the food industry has grown due to the rise in obesity rates within Australia (Bobba 2014). In particular, we refer to government based regulations which have been designed to assist a reduction in overeating (Bobba 2014). These regulations refer to the restriction of fast food advertisements, cost measures, nutrition labelling, and physically limiting access to fast food (Bobba 2014). As an example, Australia has attempted to restrict any advertising by “resolving not to advertise fast foods in programs where at least 35% of the audience are children” (Bobba 2014).

Cost measures regarding a future “fat tax” would make items containing saturated fat more expensive (Bobba 2014). Already occurring in Australia is the requirement for nutrition based labelling and health star systems which are designed to better inform consumers of how “healthy” their purchases are (Bobba 2014). While limiting physical access to fast food is based off the concept of “zoning” areas, or designating areas to specific areas and by not including fast food could, therefore “denormalise” going to fast food first (Bobba 2014). Other changes include visa requirements which may affect workers (Grewal and Kainth 2018), and more recently, a plastic bag ban making Australia turn to more environmentally friendly methods (Rao 2018).

It is also important to understand that Australia has strict biosecurity measures for importing goods into the country, meaning that once FTAs are made, the Department of Foreign Affairs and Trade are responsible for leading “sanitary and phytosanitary provisions” (DAWR 2016) which can make importing certain produce difficult. Despite this, there are Australian insurance companies like AIG which assist with “property casualty and general insurance” (AIG n.d.).

Political Instability.

Overall in Australia, the main political instability stems from frequent changes in their Prime Minister over the last five years, which appears there may be uncertainty among the political leading parties in Australia (Perrigo 2018). Despite this, in a report by Professor Robert Holton (1997) the attitudes of Australians remain fairly relaxed. Specifically, Australian citizens share a “tolerance” for different cultures unique to Australia (Holton 1997), as can be seen in the Australian population becoming more “linguistically diverse” (AlAzzeh and Ouhaib 2017). However, there is some unrest culturally because of “social cohesion” (Holton 1997) which can be seen reflected in a limited cultural diversity among the Australian leaders. (The University of Sydney 2018).

Tax Systems and Rate.

Recently the federal government of Australia announced they were going to be “strengthening compliance” with the Goods Services Tax (GST) (Rao 2018). Specifically, the focus on this is on constructed properties with mention of “remitting the GST directly” to the Australian Taxation Office (ATO) due to some developers not already doing so and claiming “tax back” on those purchases (Rao 2018). Two main taxes that may be of importance to Bongousse opening in Australia would be the reduction in corporate taxes in 2017, and new adjustments ineligibility for further reduction based on “base entity rate” (see the Appendix for the corporate tax plan) (ATO 2018).

Sanctions.

Although Australia has a total of 21 sanctions, the main sanction which may affect company Bongousse would be the sanction against North Korea (DFAT n.d.). Specifically, the sanction stems from the uneasiness Australia feels about North Korea’s “nuclear, weapons of mass destruction and proliferation programs” (DFAT 2011). Directly this would not affect relationships as Bongousse is able to locally source their produce within Australia, although there are restrictions on imports and exports, good and services, sourced from North Korea (DFAT 2011). Should tensions rise between North and South Korea, and Australia it could cause internal problems should anything untoward occur (DFAT 2011).

Legal System and Structure.

The legal system in Australia follows an amalgamation of Statute law, where decisions are made through the parliament, and Common law, where decisions are made by court judges (Made 2007). Australia also relies on regulation and legislative bodies like the Australian competition and consumer commission or (ACC), Fair Work Ombudsman (FWO), and more industryspecific, the Food Standards Australia and New Zealand (FSANZ) (Rabbanee 2018; FWO n.d.; Food Standards 2015). These government bodies assist companies, employers, and employees in understanding what their responsibilities are, including the legal standards by which to operate successfully within Australia.

Intellectual Property Issues.

The Australian trade and Investment commission works closely with businesses to ensure protection for “original intellectual properties”, and as such have several subcategories of protection; patent, trademark, domain name registration, design, copyright protection (Austrade n.d.). It is the suggestion of this government body to hire a professional to ensure correct protection is taken for unique ideas (Austrade n.d.). Specifically, in Australia there are no burgers which are exactly the same, meaning there should be little difficulty in starting up Bongousse in Australia. However, Sydney and Queensland based Japanese fusion restaurants, Gojima and MOS Burger, have a sushi styled burger which is the most comparative: rice buns, meat filling, wrapped with a seaweed sheet (Gojima n.d.; MOS Burger n.d.).

Competitive Environment of the selected Country

Diamond Model.

Although Australia is not currently under threat of war, there is always the chance that could happen with the current sanctions on certain countries (DFAT n.d.). Other nationwide chance factors are things like natural disasters due to strong weather (Health Direct 2016), and the latest “needle” incident affecting fresh produce (Westcott 2018). While the strategy of Australia focuses on a hierarchy between managers and employees for the convenience of communication (Hofstede Insights n.d.).

There is direct competition in Australia between fast food brands like McDonald’s, or Grill’d, and food delivery services like Uber Eats and Menulog (Browne and Han 2015; Power 2018). Australia is also showing strain on natural resources within the “food insecurity” (Booth and Smith 2001), and on human resource hiring “skilled workers” within Australia and overseas (De Cieri, Holland, and Sheehan 2007). On the other hand, businesses in Australia are showing great self innovation, exploring the idea of innovation making a strong market (ABS 2018).
The domestic market within Australia is fairly strong and has grown to the 16th largest in the world showing a decline in “volatility” (DFAT 2018; Ashton and Gibbs 2018). There is a growing demand within the food industry for “healthy and quality options” affecting some supply chains, while supermarkets in Australia “dominate” the chains at each level (Ibis World 2017; Ibis World 2018). Due to the rise in obesity, the Australian government has placed several regulations on the food industry, as mentioned earlier (Bobba 2014).

Competitiveness (Porter’s)

Barriers to Entry.

The food sector is heavily regulated (Food Regulation 2016; Food Standards 2015), which means ensuring the restaurant is up to industry standard will cost more to initially establish. Fast food has gained a stronger position in the market which could mean competition in the future, despite the industry entering into its maturity (Euromonitor International 2018; Browne and Han 2015).

Threat of Substitution.

Due to outlet location disparity between MOS Burgers located in Queensland (MOS Burger n.d.), and Gojima in Sydney (Gojima n.d.), there is room to move in the market. These two outlets are the most similar in concept, although not the exact same thing as Bongousse (Haemil n.d.), allowing this service to have more bargaining power.

Buyer Bargaining Power.

As there are two other “rice burger” options available surrounded by seaweed, there would be a minor competition that could affect the overall prices of Bongousse (Gojima n.d.; MOS Burger n.d.). Another factor is tailoring the menu to “local tastes” which could be affected by produce availability effectively causing some menu items to be pricier or not available depending on seasons (Haemil; Ibis World 2018).

Supplier Bargaining Power.

Due to the many different wholesaler supply chains, and even local farmers finding fresh or unique produce is not necessarily difficult, meaning the bargaining power would not be with the suppliers (Ibis World 2017; Ibis World 2018).

Rivalry Among Competitors.

Within Australia, there are only two similar “rice burger” options surrounded by seaweed (Gojima n.d.; MOS Burger n.d.). The key difference for Bongousse would be the lack of seaweed, with quality fresh and healthy ingredients combined with the Korean flavour (Haemil n.d.), however, there is enough similarity in products which could mean some competition between companies. With this being said, location disparity could make this competition less prominent (Gojima n.d.; MOS Burger n.d.).

SWOT Profile

Strengths Threats

  • Robust economy
  • Consumer awareness
  • Social Acceptance
  • Uniqueness of Product
  • Consumer tastes aligning
  • Food industry is maturing
  • Easier market to enter
  • Strict food safety regulations
  • Increased produce scandals (“needles”)

Market Competitiveness

Opening a Bongousse Bap Burger as a franchise would be the best entrance method into the Australian market. The main reason for this would be down to local knowledge, and with limited “financial commitment” franchising would assist in growing foreign investments (Rabbanee 2018).

Due to Australia’s strict food regulations, consumers would be willing to try new foods (Food Regulation 2016; Food Standards 2015). Some disadvantages of franchising in Australia would be issues surrounding the maturing food industry, and the ease of entry into the market due to rising popularity (Browne and Han 2015; Ibis World 2017). Despite this, the disparity between existing competition is large within Australia (Gojima n.d.; MOS Burger n.d.) which gives Bongousse the upper hand in price competing, and bargaining power.

With rises in healthier lifestyles, supplier and buyer bargaining power, franchising Bongousse would be a fantastic way of entering the Australian market, with limited financial risk and a fresh market to profit from.

21.9.2018

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