Australian Company Into a European and Asian Market - Case Study Example

Introduction This paper aims to present a detailed strategic report to management that analyses the risks, possible methods of entry, and attractiveness of entry for Austar, a nominated Australian company, into a European and Asian market. Austar is a telecommunications company whose focus of business is subscription television. It only commenced operations in 1995, which means the company is still young in the telecommunications industry if to take other older established ones in comparison. The company stands as the largest subscription television operator in rural and regional Australia and has reaped as many as 713,000 subscriptions. Digital satellite technology is the domain that Austar utilises in its subscription television services to one third of Australia’s total homes (Austar United, 2008). Austar is owned and operated by Austar United Communications Limited whereby 54 percent is owned by Liberty Global, whilst 46 percent is by public shareholders. Austar is also engaged in a 50-50 joint venture with Foxtel, wherein it owns 50 percent of XYZnetworks, a pay television provider. The extent of operation of Austar is seen in subscription television of 2.4 million homes in both regional and rural areas of all of Australia’s mainland states, with the exception of Western Australia. The company utilises a delivery method that uses Optus C-Class Satellite Optus C1 and a Darwin digital cable network ((Austar United, 2008). Recently, Austar has contemplated about making a major marketing push in the current year to launch more than 20 new channels, a high-definition version of Mystar set-top box, and more interactive services. The company reported a net profit after tax of $35.5 million, which is a $7.6-million loss compared to the previous period, as well as a 13-percent increase in earnings before interest, tax, depreciation, and amortisation. These results are attributed to positive impacts of the economic inducement programs of the Federal government, an internal focus m new customer acquisition, and a turnabout in consumer sentiments (Sinclair, 2009). Analysis of Risks for Austar’s Entry into the British and Philippine Markets South Asia shows resilience on the telecom business, specifically in terms of revenue generated by operators and their spending capacity. Investments in developing markets welcome the telecommunication sector, particularly India, Sri Lanka, and Bangladesh (FRSU, 2009). These markets are positive areas of expansion for Austar. In Sri Lanka, two big operators lead the spending in the telecommunication sector, covering a relatively small population of 20 million people. It is recorded that the total telecom spending in the Sri Lankan market has reached $589.4 million in 2008, which is expected to grow by around $592.68 million by 2015 (FRSU, 2009). Austar faces some risks upon its planned entry into both the British and Philippine markets. One of these is the already established telecommunications companies focusing on the same venture of subscription television as Austar. This would mean penetrating the condensed market and entering the competition, which does not always spell success especially if no abundant capital is allocated. This would mean necessity for financial outgoings for marketing and adverts in order to be chosen as television subscriber by clients. It must however be noted that if Austar attempts to enter the Philippine market, it has to consider the myriad economic issues plaguing the country, whereby growth in the sector is adversely affected by alleged graft and corruption, which might consequently affect the spending capacity of the people. Another risk that Austar might potentially consider is the repercussions of the heat of recession, which global companies themselves witness as they turn to dust in no time from merely growing rapidly. This can however turn into a challenge, which may result in enhancing the services and systems delivery process of the company. This risk is however not a significant one for Austar since practice has it that during trying times relating to assailment of global crises, it is only the telecommunication sector which has remained unscathed (FRSU, 2009). This is a good sign for Austar in overcoming the challenges posed by the global crises. In its attempt to enter the British market, a foreseen risk is the difficulty to compete with a number of already established and sturdy telecommunication companies recognised as delivering world-class services. Austar’s Possible Methods of Entry into the British and Philippine Markets When undertaking an evaluation of entry and the possible methods of entry, it is important to consider the economic operations in the Asian and European regions, which the target markets – UK and Philippines– are situated. The Asian region populates more than half of the world’s population and accounts for a significant part in world trade. Asia-Pacific is considered one of the most dynamic regions despite the recent economic and financial problems it faces. Moreover, the region accounts for a rough one-third of world value of import-export (Suder, 2007, p. 254). Potential revenue streams, which the telecommunications sector can provide, have been realised by utility companies across the globe. There are several firms of various nature entering the European and Asian markets and it is essential that they have an informed market strategy in order to operate successfully in these regions (Business Insights, 1999). The same method may be taken by Austar in its own entry. The European region, on the other hand, had been in the process of financial and economic unification led by the European Union. Trade liberalisation and opening of global markets are spearheaded by the region, particularly lead by Britain. Further, European markets can be described as being characteristic of harmonisation of rules that aim to maximise the benefits gained from trade and financial integration (Suder, 2007, p. 163). There are a number of legal regulations that Austar should consider upon entering the Philippine market, which includes key legal rules that a foreign company must take into account whilst making a decision for market entry. These rules allow Austar to be aware of the FDI permitted, industrial license required, and other applicable terms and conditions needed for entry (Jeyaseeli and Levi, 2006, p. 189). The Philippine market however poses favourable stances since its government has carried out a five-year tax exemption program, tax holidays, and no-union-no-strike policies in industrial and economic zones, contractualisation lawn and minimum wage law. Moreover, method of entry that the company may undertake is coordinating with the host government for potential investment leeway, tax holidays, and regulations, which may serve beneficial for Austar. As for the British market, the sturdy economy exhibited by the country can serve as a likewise favourable situation for Austar’s expansion. The British market can serve as Austar’s trajectory point in gaining and maintaining competitive advantage in the European Union. The company must take a more diverse stance in the British market than the Philippine market since the former is populated with several world-class communication companies, which should pose as a challenge for Austar. Attractiveness of Entry Austar has some provisions for its attractiveness of entry. First, the telecommunications industry in which it is positioned has been recently engaged in rapid international expansion. This is viewed as a positive sign for Austar’s similar outlook to enter the British and Philippine markets. It must be noted that there have been more than 300 related and unrelated diversification ventures spread across 60 countries in the periods between 1986 and 1991, indicating the already established entries of telecommunication companies in various markets. Moreover, a profound global reorganisation of these telecommunication companies is noted, taking into account their former characteristics as national firms operating as regulated monopolies (Sarkar, et al., 1999). Attractiveness of entry for Austar considers the current investment trends governing the operations of firms, and this points out to globalisation. The concept allows Austar to expand its horizons and extent of operations as worldwide social relations intensify and link distant localities in such manner as events occurring several miles away shape local occurrences and vice versa. Contextually, there are several modes of connections linking different regions and contexts in this process of relations (Askew and Wilk, 2002, p. 338). Furthermore, the European market is marked by changing national regulatory environment towards positive directions, which is seen as potential for Austar’s entry. The regulatory environment is characterised by more relaxed barriers to inward FDIs, which Austar is a potential entrant. The notion of a race for FDI results in the use of a range of incentives and investment promotion agencies to attract and retain mobile investments (Rafferty and Ham, 2004), which is the case of the Philippines. Austar’s entry into the Philippine market is without difficulty since various impetus programs in the region have been spearheaded to attract foreign investments. This is a gainful stance for the company since this would mean ease of entry. One of these is the Asian Portfolio Investment Advisory service, which was established to assist international financial advisory and planning organisations whose aim is to produce dedicated investment portfolios for Asian clients. This would help Austar evaluate its financial capacity as well as assess how this complements with a particular market in the Asian region, such as the Philippines, which it intends to enter. The degree of competition is also an important consideration, and a particular distinction is posed for both the British and Philippine markets on this matter. In developing countries in Asia, competition is not as intense as it is in Europe since the telecommunication sector is populated by only a few number of investors (Jacobs, 2000). Entering the European market would be a challenging posture, which includes consideration for a more intense competition considering the presence of several companies in the telecommunication sector. This would mean heightening Austar’s competitive advantage and enhancing its research and development strategies in order to stand as a leader in the competition. Conclusion Austar is the chosen Australian company for the purpose of analysing the risks, possible methods of entry, and attractiveness of entry to the British and Philippine markets. The global crises currently plaguing various countries in these regions pose as a risk for Austar in its plan to expand its operations in these areas. However, the telecommunication sector is indicated as among those that are able to overcome the difficulties posed by the crises. The Philippines serves as a favourable market for putting up a telecommunication business, considering its favourable investment laws, not to mention the limited number of investments on the sector. Britain is characterised as a more stringent area for competition, which can be remedied by improving Austar’s competitive advantage and enhancing its research and development strategies to deliver up-to-date technology. References Askew, K. M. and Wilk, R. R. (2002) The anthropology of media: a reader, Blackwell Publishing Ltd. Austar United (2008) Austar, http://www.austarunited.com.au/aboutus/ownership.asp, Date Accessed 25/08/09. 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