Westfield Group - International Operations - Case Study Example

Westfield Group Name: Tutor: Course: Institution: Date: Australian Company Name: Westfield Group (Westfield) Countries you considered in which company has international operations: Brazil, New Zealand, United Kingdom and the United States The one country selected for this report: Australia Name and phone contact details of author of this report (ie you): Part 1: Summary of Report This comprehensive report of Westfield Group will provide an in-depth analysis of the political, regulatory, legal, economic, and Social (including cultural) environment. Specifically, the report will provide a clear and an impartial view of the international business environment in which Westfield operates. The effects of the enlargement of the European Union and the impact of the Australian competition law to business operations in the country have been explored. The report will also review the business environment in Australia and will particularly review the emerging opportunities for the company as well as the emerging threats. The economic conditions in Australia have also been reviewed, noting that the largest contributor to economic growth for the 2011 review was the services sector. This makes property development and shopping centre management fundamental industries in Australia, with numerous opportunities for Westfield. Significant threats in Australia were established as firstly, the volatile economic environment which could lead to reduced consumer spending and weaknesses in residential and non-residential building. Secondly, the threat of natural disasters is significant for Westfield, whose investments are located in Victoria, an area prone to flooding. Conclusions and appropriate recommendations have been provided. To increase its security, it was recommended that the company should consider its opportunity costs and venture into the international market, particularly in China. This will help Westfield maintain its lead over its competitors in Australia and will also help the organization curve a niche in the international market. Part ii: Introduction to Report The purpose of this report is to provide an authoritative review of the international business environment in which Westfield operates. This is fundamental for numerous business needs, among them strategic planning of the corporation's various operations. The research of this report was carried out using secondary methods. Relevant data and information was obtained from authoritative research sources. There are numerous reasons why Westfield has invested in Australia. Firstly, property development is the cultural alienation of Australians, whereby it is customary to have equitable access to housing, either by renting or buying. Home ownership is central to the Australian Dream, which raises numerous opportunities for Westfield in Australia. An additional reason why Westfield has invested in Australia is that compared to the United States, Australia has a similar land mass. However, the population in Australia is only ten percent, which leaves bulky areas of undeveloped land (worldbank.org, 2011). Part iii: Body of Report (a) POLITICAL ECONOMY ENVIRONMENT Political, Regulatory, Legal The enlargement of the European Union had tremendous effects to the new member states as well as on the European Union. One of the most significant effects was on the EU’s external policies. The enlargement saw the European Eastern Partnership added to the Mediterranean Union. This means that the Union’s relations to countries such as Russia have developed priorities as well as new warmth. Russia and China are now more confident a self-confident, making business operations in these countries easier to conduct (Avery, Faber, & Schmidt, 2009). The new, developed European Union therefore presents numerous business opportunities to Westfield Group. With regard to the regulatory environment it is worth noting that in Australia, there are efficient and transparent regulations that apply evenly (heritage.org, 2011). The major legal entity affecting operations of Westfield is the competition law. Known as the Australian competition law, it is presided over by the Trade Practices Act 1974 and managed by the Australian Competition and Consumer Commission (ACCC). Recently, Westfield has been involved with several cases with the ACCC. In 2004, for example, the ACCC accused the company for market and commercial power abuse with its tenants. The commission also forced the company to promise not to “bully” its tenants again, a decision that improved the company’s policies towards its tenants and communities overall (www.australiancompetitionlaw.org, 2011). Economic Leading financial analysts have stated that the economic growth of Australia is decreasing, amid reports that is one of the best performing economies; The Sydney Morning Herald recently described the Australian economy as one of the best performing economies in the world. It is worth noting that the largest contributor to economic growth for the 2011 review was the services sector, with specific services listed as professional services, scientific and technical services. Finance and insurance services were additional significant contributors of economic growth. This is good news to Westfield, particularly to the company’s local investment in shopping centers. On the other hand, economists have stated that the natural disasters of both Queensland and Victoria, because of the floods, could have an adverse effect to the country’s economy. The disasters could lead to both business and consumer caution, unemployment, increased savings rates and could weaken the building sector. This means that the company’s business operations could be adversely affected for the 2011 fiscal year. Social (including cultural) Australia is one of the most urbanized countries in the world, considering that 89 percent of its population lives in urban centers (worldbank.org, 2011). This is a very important factor for Westfield’s business opportunities; the company’s services are based in the country’s urban centers, where shopping centers and property development thrives. According to censuses carried out by the Australian Bureau of Statistics and the CIA World Factbook, the population growth rate of Australia was 1.15 percent for the year 2011. Previous growth rates were even higher, recorded at 1.17, 1.2 and 1.22 for the years 2010, 2009 and 2008, respectively (cia.gov, 2011). The increase in population in Australia means increased opportunities for the company’s operations. Cultural norms and expectations The continent of Australia has a unique geography that makes the country to host a great diversity of cultural pursuits and practices. The Australian Dream is one of the most popular customs in the country. The dream is based on home ownership and is essentially a belief that home ownership can lead to a better life. It is worth noting that such a standard of living is enjoyed by the majority of people in Australia. Part iii BUSINESS ENVIRONMENT Emerging opportunities for the company in this country In spite of the ongoing effects of the 2008 and 2009 financial crisis, there are numerous opportunities in emerging markets that Westfield should consider looking at. As aforementioned, only one tenth of the Australian land mass is populated, which presents numerous development opportunities for Westfield. Australia has also numerous unit development projects many of which are in planning stages. There are also single family homes and commercial properties in addition to rural and farm properties. Therefore, the property development industry presents numerous opportunities for Westfield. The shopping centre management industry is also ripe in Australia, following the birth of the GMP and the GEM (Kvint & Kvint, 2009). The Australian market is wide open for investment and offer numerous opportunities for growth considering that the political risk of investment in Australia is extremely low. The business environment in Australia is therefore stable and mature, which presents numerous opportunities for the company’s shopping centers in various corners of the country. Outside of Australia, Westfield serves Brazil, New Zealand, United Kingdom and the United States. This leaves numerous other areas that the company can invest in, one of which is the Chinese market. In a recent forum: Real Estate in Emerging Markets hosted by the Wharton University of Pennsylvania, it was revealed that in China there are numerous property development opportunities. This is because of the country’s huge demand, cash reserves and most importantly, the big willingness to invest in new infrastructure (Knowledge@Wharton, 2009). Emerging threats for the business in this country One of the most important emerging threats for Westfield in Australia is the volatile economic environment. The Westpac/Melbourne Institute Leading Index, a globally recognized financial analysis institute indicated that there is a high chance the Australian economic environment faces the weakest economic growth in the last two years. The institute stated that the pace of economic activity for the future period of between three to nine months was 1.6 per cent in June 2011, falling below the long-term drift of three per cent. Bill Evans, the Institute’s chief economist, asserted that the leading factors that would contribute to the weak growth were weak consumer spending levels, higher savings rates in addition to weaknesses in residential and non-residential building (smh.com.au, 2011). An additional emerging threat for the business in Australia is the threat of natural disasters. It is worth noting that in Australia, cases of flooding are prevalent. The recent flooding, for example, in Victoria and Queensland pose tremendous threats for business operations of Westfield. This is in consideration of the fact that among the largest Westfield shopping centres in Australia are located in Victoria. These include: the Westfield Doncaster, Westfield Fountain Gate and Westfield Southland (westfield.com, 2011). Part IV: Conclusions and Recommendations This report has identified incredible opportunities for Westfield in Australia as well as outside of the country. However, it is recommended that the organization should focus beyond each of the opportunities for the opportunity costs associated with each of the opportunities highlighted. Although the company operates one of the largest shopping centre portfolios in the world (westfield.com, 2011) complacency should not be tolerated; the company should heavily invest in making the Westfield brand an international brand much ahead of its competitors. References Australian Competition Law (2011) Retrieved August 26th, 2011 from Avery, G., Faber, A., & Schmidt, A. (2009). Enlarging the European Union: Effects on the new member states and the EU. Retrieved August 26th, 2011 from http://www.tepsa.be/Enlarging%20the%20European%20Union.pdf: TRANS EUROPEAN POLICY STUDIES ASSOCIATION. Cia.gov. (2011). The World Fact Book. Retrieved August 26th, 2011 from https://www.cia.gov/library/publications/the-world-factbook/geos/as.html#People. Knowledge@Wharton. (2009). Wuxi Iparks' Gilles Assouline: 'The Difference between China and the Rest of the World Is the Demand'. Retrieved August 26th, 2011 from Heritage Foundation Index of Economic Freedom Retrieved August 26th, 2011 from Kvint, V., & Kvint, V. L. (2009). The Global Emerging Market:Strategic Management and Economics. New york: Taylor & Francis,. Smh.com.au. (2011). Australia facing 'weak economic growth' . Retrieved August 26th, 2011 from Read More