Business in Australia - Case Study Example

Business in Australia Introduction Fast food industry in Australia is growing at a high rate because the environment in Australia favors this business. In 2009 it was estimated that 1.64 billions foods was sold by this industry. So as to succeed, the industry has developed new marketing strategies such as using the seven fast food chains, an initiative which was adopted by McDonald’s and KFC for the first time. This strategy which targets the under-14s will dictate the standard of the food to be offered by the industry. This has given the industry a good image and a positive perception in the public because it is regarded as a safe industry (Barton 2008, pp. 41-44). The fast food industry in Australia has grown at higher rates and continues to provide better services in terms of employees’ rights, salary brackets and the nature of working environment. The primary success of the fast food industry has greatly depended on the limited menus and the high quality of the meals being offered in this industry. The industry has also benefited on cheap labor because that the employees give to the industry especially those who are employees regarded with low skills (Barton 2008, pp 46-49). Findings The fast food industry in Australia has seen a need to carry out the analysis of the environmental factors which include technological, international, social-cultural, legal-political and economical factors so as to determine its future expectations and success. It is also important to analyze these factors because it has enabled the industry to improve in areas of their weakness and maximize their strengths. These environmental elements are the major determinants of the success of this industry. Besides, the environmental factors have the following importance to the industry; the first is that fast food industry is part of a system in the community they serves well in the region. Secondly, the fast food industry relates and responds to the immediate surrounding environment in Australia and lastly, the fast food industry is affected by these environment elements in a great way. These environmental factors will be dealt with effectively if the management in the fast food industry takes the correct measures. They can do this by ensuring that they carry out research in the market they target so as to identify the customers’ complaints, ensure that they are conforming to the laws when offering the services and ensure that they hire qualified managers to run the management (Dow and Parker 2001, pp. 77-81). The obvious strategy for success in this industry is to research on the environmental factors so as to discover their strengths and weaknesses. These environmental elements will cover both the internal and the external situations of the industry. The following literature review analyses the effects of environment to the fast food industry, how can it can be dealt with and its challenges to the industry. Political and social factors Researchers such as Castles came up with various issues affecting the fast food industry in Australia. The commission notes that the business environment in Australia is challenging because of several reasons. For example, the political ideologies on issues of taxation, total ban, and restriction on transfer of cash across the borders have also affected the fast food industry. Operation of the industry in the Australia has been affected by political policies which change from time to time in the efforts of protecting infant industries in the country. This normally reduces the revenue of the fast food industry especially when the government introduces the restriction on exportation of the food products in the country (Gow, 1997, pp. 101-118). Australian government has emphasized on economic incentive policies that are often characterized by low interest rates and government support on the business establishments. Although the company has not benefited directly from this support, the economic turn around would enhance its business. On the other hand, some decisions by the government affect the industry negatively. For instance, the creation of Australian Fair Pay Commission by the government had its effect on the conditions and wages human resource support functions. The commission is responsible for the regulation of the minimum wages in Australia, and it recently set the minimum weekly wage at $543.78, an action that has a direct effect on the operating cost of the company (Harley, 2006, pp. 98-102). In addition to this, there are also existing regulations in Australia that govern franchises, multinational industries, the rights of workers, and restaurants or business dealing with food. Fast food industry has been affected greatly by this regulation; it has affected the annual sales for this industry. Besides the cost of securing certifications on these areas, the companies in this industry are under the risk of violating these regulations. The right of employees’ involvement in trade unions also affects the company’s decision making process within the industry. This is because unpopular move might attract opposition and even lead to industrial action (Woodward 2005, pp. 145-147). The political background of Australia has been reflected in the table below, according to a research carried out by the World Bank development report. Australia has a relatively stable political background as compared to other countries; as is shown in the table below. Tax receipts % GDP Current general government expenditure % GDP Social security transfers % GDP Military expenditure % GNP1 1995 Defense expenditure % GDP Early 90s2 Australia 31.6 35.0 8.4 2.5 5.9 France 43.4 53.8 17.9 3.1 6.3 Germany 35.5 46.7 19.2 - 4.2 Japan 25.3 37.3 11.3 1.0 2.8 Sweden 50.6 59.4 17.4 2.8 3.8 UK 35.6 41.9 13.4 3.0 8.3 USA 25.6 31.7 12.0 3.8 14.1 Source: Castles (1998) Comparative Public Policy, Edward Elgar, p.103. Economic factors Researchers such as Quiggin, (2004, pp 76-81) have researched on the existence of several key economic factors that have affected the fast food industry operations throughout Australia. For example the occurrence of global recession has affected the sales of the fast food industry in Australia because the citizens or the customers have reduced their spending power especially in restaurants. Although other researching bodies such as the Brennan and Pincus, (2002, pp. 60-71) had found that Australia had not suffered an economic recession, the economic down experienced had to a large extent contributed to the rise in unemployment, the same statistical data was arrived by the Ryan, Parker, and Brown (2003, pp 16-20). That subsequently reduced the buying power that the population had most likely been translated to reduced customer base for industries such as McDonald’s and KFC. In a slugging economy, people tend to be conservative with their spending and with a lower level of disposable income consumers are less likely to purchase non-essentials such as fast foods. The fast food industry had also a problem with the rates of the sales since the monitory authorities had increased taxes in an attempt to reduce the level of inflation in the country, and this had affected the sales of the fast food industry. The circulation of money had reduced leading to low spending within the public. This had also affected the economy of Australia, and as result there were poor performance in industries in general. Fast food industry is one of the industries which are affected by such economic policies. Apart from the above challenges which had faced fast food industry, there are also other economic challenges facing this industry such as competition in the market. Some foreign restaurants have specialized on offering certain food that is not served by the local restaurants within Australia. These are likely to divert some customers from the Australian’s restaurants including the biggest food companies such as Yum! Restaurants Australia and Competitive Foods Australia The reports from the above researchers indicated a positive economic situation in Australia. The industry had benefited from low taxes and interests rates that were implemented to boost the country’s economy (Fenna 2010, pp 29-34). This means that organizations within fast food industry in Australia can acquire cheaper loans so as to implement its expansion and development plans. However, in the present time, such benefits may not be celebrated citing the increased cost of productions and tax fees, especially by the local councils. These increased expenses drive the net returns of the industry downwards. Note that low performance of the industry in terms of profits may initiate structural changes to the industry leading to loss of employment staff. Such actions are likely to attract more social-political problems due to possible lay offs and employee redundancy. The importance of the industry in Australia as compared to other countries is reflected in the table below. PPP GNI per capita 2007 Sectoral contribution to gross value added 2007 Agriculture Industry Services Australia 33 340 3 28 69 France 33 470 2 21 77 Germany 33 820 1 30 69 Japan 2 30 69 Sweden 35 840 1 29 70 UK 34 370 1 24 75 USA 45 850 1 23 76 China 5 370 12 48 40 India 2 740 18 29 53 Source: World Bank (2009) World Development Report, Selected Indicators, pp. 331-368 Social The social issues affecting fast food industry are widespread throughout the country of Australia. The success of the fast food industry has attracted criticisms and attacks from community groups and consumers alike. The industry’s jobs have commonly been referred to as ‘foodJobs’ to describe a scenario of labor-intensive but low-paying employment, all these is reflected in the research carried out by Bacchi (2009, pp 133-137). Such criticisms that have even come from professionals create a bad image for the fast food industry. Furthermore, a research done by Human Rights and Equal Opportunity Commission (2009, p 150) on the satisfaction of workers working at fast food industry reveals that employees were generally disgruntled by the “industrial relations and work organization aspects” of their work. This dissatisfaction is likely to impact negatively on the company performance, and together with the bad image may drive customers away. Furthermore, employee’s lay-offs that are necessitated by poor industry performance may result to law-suits that are often very expensive for the industry. Fast food industry has also suffered from criticisms of providing unhealthy food to its customers that have led to time-consuming and expensive court battles. The industry has, however, attempted to change its negative image through some HR and public relations strategies along with its outstanding marketing and promotional campaigns. These include communication strategies aimed at changing the negative attitudes of it employees and the general public. Fast food industry Australia has used film commercials to dispute how it has been represented in films Esping-Andersen, (1990, pp 84-86), especially on issues regarding obesity and poor treatment of its employees. The company has also used ad campaigns to promote healthy living by insisting on getting active, and designed healthy meals specifically for children. And after recent trends towards the importance healthy eating have begun to include nutritional information both in store and on all of their food products packaging. They also offer a wealth of information online at their website relating to recommended dietary intake and healthy eating guidelines (Fenna, 2004 pp 94-98) Fast food industry has also affiliated itself with the heart foundation and now offers customers a range of menu meals with the heart foundations tick of approval which includes products such as their salad range, deli choices and grilled chicken burgers. This is one of way of improving the health of the citizens in Australia. The table below shows the health expenditure by the government: Socio-Cultural – Health table 2004 Health expenditure % GDP Public expenditure % GDP Australia 9.2 67.5 France 10.5 78.4 Germany 10.9 78.2 Japan 8.0 81.5 Sweden 9.1 84.9 UK 8.3 85.5 USA 15.3 44.7 Source: OECD in Figures (2006-7) p. 8 Technological Technology advancement may cause some changes in the industry’s success, only those industries which adopt the technological system of managing business are the ones to remain in business. The following are the ways in which technology has improved the productivity of fast food industry: first, when the fast food industry adopts the use of computers, it increases the number of customers being served per day. This is because there is accuracy in recording, giving records, and calculating of the accounting transaction such as the Trading, profit and loss account. The use of technology has also boosted the performances of fast food industry, because it necessitates faster communication within the industry, enabling faster decision making in various department in different stations. With the use of computers, it will be possible for the whole industry to network their computers for every department, so that they can be able to share important information without the need of holding meetings which are normally time consuming. In addition to this the fast food industry has benefited through the use of internet in making advertisement. Advertisements through internet are very effective because most of the people nowadays can access internet without difficulty (Boreham, Parker, Thompson and Hall 2008, pp 57-61) The table below analyses the percentage of people who are able to access the internet without any difficulty in Australia and other parts of the world. There are internet services such as eBay which has facilitated the cross-border purchase which was rare in early 1990s; the fast food industry has benefited a lot in this kind of the systems. The industry has been able to trade with the international customers without the needs to meet with the customers physically. On the other hand, the customers are able to place orders through the internet and pay for them in advance. Technology has made the management of the industry to be easier because the communication in this system is not only faster but also easier. The top managers are able to communicate to other braches which are within the country and out side the country. Furthermore the technology has been very essential in enhancing efficiencies in the operations of an industry, and on this note fast food industry in Australia faces the challenge of keeping abreast of its competitors in terms of using technological innovation. According to the article in Cebon, (2008, pp 49-52) it is noteworthy that industries should implement a powerful e-HR system that allows the company to recruit and manage talented employees with the most efficient use of company time. These reflect the fast food industry and its management. Fast food industry in Australia has widely embraced technology in almost all levels. It is worth to note that this factor is influenced by other macro-environmental factors including economic, social, and political and legal factors. Fast food industry constantly monitors the environment for Technological upgrades with an emphasis on their production processes in order to deliver more quality in a shorter and more convenient time period. Australia is among the leading nations in technological advancement in the world, this has facilitated the fast food industry to perform well both in Australia and in the international market. The table below shows the level of technological advancement Technological advancement has greatly increased in Australia, the table below shows the rate of house hold who can access to the computers. However, the introduction of technology to fast food industry has created various problems, such as the life spans of the products. The industry’s products are becoming obsolete in a very short time because of the quick technological development. Technology has led to competitive advantage. The success of the fast food industry has been reliant on its innovation and research on the market segment they served. The fast food industry has achieved through the introduction of the research and development department within the industry. Thus, the fast food industry must examine the advancement in environmental factors such as technology and adapt as fast as possible the current technology to remain competitive in the market. Households with access to a home computer As a percentage of all households Source: OECD Factbook 2009 International Element Fast food industry in Australia has benefited a lot in the international environment because they depend on importation of raw materials which are being used in the industry. Though this might be disadvantage to the industry incase of the recession in overseas countries or when those countries introduce the rules which restrict the movement of goods across the border, especially when the industry is much dependent on the importation. It is still important to the industry because they get enough supply of the inputs they require (Conley, 2007, pp 68) Fast food has also benefited on this international environment because they are able to serve different customers with different buying behaviors, they take advantage of the availability of communication devices such as internet which are faster in providing there services and receiving orders which is being placed by the foreign customers (Conley, 2007, pp 69) Fast food industry has expanded their business to international market; they have established various braches across the world. The industry has been in a position to export their products to overseas countries. This has enabled the industry to secure a market segment in those countries which has widened a number of customers to be served by the industry. However, according to a research which was carried out by ProQuest Information and teaching Company (2009), the international market has been more challenging to the industry due to the different laws which operate in those countries. It has been challenging for the industry to conform to those laws and procedural requirement before the company could be allowed to trade in those foreign countries. The other problem which has faced the company is the high taxes which are taxed by foreign market. A reports from Conley, (2007, pp 70-71) shows the level of Australian involvement to international market, though the trade is -1 has indicate in the table below, the country increase its involvement in the international market, it has been represented in the table with a rate of 42%; this shows the Gross Domestic Product of Australia. From this analysis it shows that the fast food industry has benefited a lot from the international market, which the country has entered into a trade contract with. However, the international environment may expose the fast food industry to dangers such as the risk of foreign currency exchange. The industry may run at a loss if the exchange rates move against the Australian dollar, this will greatly affects the sales of the industry. In addition, the country can face some risk of international terrorism from the foreign countries where they run their business. Other dangers may include the cultural exchange, globalization and the global financial crisis. Trade as % GDP Trade balance as % GDP Australia 1 42.1 -1 France 55.1 -1 Germany 84.7 5 Japan 27.3 1 Sweden 94.5 8 United Kingdom 61.6 -4 United States 26.8 -6 China 72.4 8 India 48.8 -3 Source: World Bank (2009) World Development Report, pp.340-342; 356-358 Conclusion In conclusion, the fast food industry in Australia has been the leading industry in employment especially for young people, though many complain that the wage rates in this industry is low, they are still leading industry in employment in the region. The industry has emulated other industries in various parts of the world by applying cost minimization strategies. They apply this strategy by employing juniors who are less skilled. The industry claims that they adhere to laws governing the minimum wage and award (Dow and Parker 2001, pp 81). The industry also uses various marketing strategies to maintain their market position in the market, they uses strategies such as the porters five forces, especially when they are dealing with foreign competitors in the market. The management in this industry have done there best in ensuring that they make there employees more competitive by training them and arranging for the refresher courses to seniors and managers. Reference Bacchi, C. (2009). Analyzing Policy: What's the problem represented to be? Sydney: Pearson, pp 133-137 Bartol, K. et. al. (2008) Management Foundations: A Pacfic Rim Focus Sydney: McGraw Hill, pp. 38-54 Boreham, P., R. Parker, P. Thompson, R. and Hall (2008) New Technology @ Work London: Routledge, pp 57-61 Brennan, G and Pincus, J. (2002). Australia's Economic Institutions in Brennan, Geoffrey and Castles, Francisd (eds), Australia reshaped: 200 years of institutional transformation, Cambridge: Cambridge University Press, pp.53-85. 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(2003) Government, Business and Society in Australia Sydney: Prentice Hall, pp 16-18 Woodward, D. (2005) Australia Unsettled: The legacy of neo-liberalism, Pearson: Sydney, pp 145-147 World Bank (2009) World Development Report, New York: World Bank Publications: pp. 331- 368 Read More