Business Environment Analysis - Boral Limited - Case Study Example

Business Environment Analysis Name Institution Course Date Business Environment Analysis Executive summary Boral Limited has operations in Asia and the United States. However, Australia has maintained its attractiveness as a potential market for construction and building industry. A number of developmental factors in Australia over the years have influenced the Australian business environment. Such factors include: economic growth, social and cultural environment, financial environment, technological advancement and political environment. All these factors have the potential to influence and affect Boral Limited which has its operation in Australia. The company will be affected in terms of profit generation and costs of production. The analysis of Australian business environment has established some higher opportunity scenarios that have the potential to affect Boral Limited operations in Australia. These opportunity factors include: technological changes, Foreign Direct investment, social and cultural positive changes among others. The report makes some recommendations including the entry into international market which will boost the company’s competitive advantage and increase in its exports in order to overcome the risk factors in Australia. Introduction This report details out the business environment in Australia where Boral Company operates in. Boral Limited is considered a multinational company that is specialised in building and construction materials. Boral Limited is founded in Australia. Australia is said to be the sixth largest country globally and it is also one of the richest continent in the world with high standard of living (Clayton, 2004). Australia has blessed natural resources and has improved with regard to exports and technology. Nevertheless, in terms of risk, Australia relies on commodities from China in order to sustain its growth rate. Australia is said to be a mature democracy having a highly educated workforce and stable party system (Clayton, 2004). This paper will highlight the changes in Australian environment that affects the growth and profitability of Boral Limited. It will analyse business environment in Australia in terms of social and cultural environment, economic growth, political environment and technological environment among others. It will then provide and overall assessment and recommendations with regard to the future operation of Boral Limited in Australia which will be aimed at maximizing the opportunities while minimizing the threats and risks. Analysis of Business Environment The construction and building industry is a fundamental enabler of economic growth in Australia. It is established as the third biggest industry in the country and generates approximately 8% of the Gross Domestic Product. The demand for construction and building activities is propelled by factors such as the population growth, technological changes, interest rates and inflation, taxation, government policies to name a few. Social and Cultural changes The social and cultural environment in Australia encompasses people, lifestyle and culture. Australia’s original habitats are the Aboriginal and Torres Strait Islanders who have been living for more than 60, 000 years (Clayton, 2004). The rest of the population is made up of migrants. Australian population in the 1940s was about 7 million people. Since then, more and more migrants have settled in Australia thereby broadening its social and cultural profile. In the current years, Australia has increased in population to more than 23 million people (Clayton, 2004). Over the years, unemployment rate in the country has decreased significantly and the gross per capita income has increased constantly. In 2007, the per capita income was estimated to be around $39 000. The increasing longevity of life and the birth rate in Australia have had a positive impact on the level of public investment in issues related to construction and building with higher needs for more aged care facilities in addition to the lower needs for schools (Clayton, 2004). The increased population in Australia over the years has increased the infrastructure activities in the country. In addition, development and growth of new suburbs has created a need for distribution for schools and public facilities, roads and reticulated water. Also, in Australia, there is changing preferences especially with regard to cleaner environment that has placed pressure on companies operating in the country. For example, there is a growing demand for quality products with low carbon emission and better water quality. Political and Legal Environment The political and legal environment of Australia is very important with regard to global marketing (Invest Australia, 2003). Australia is well known for its stable judiciary which is transparent and independent and is recorded to have an overall low level of corruption. The Australia state has a code that insures cases of bribery imposed on both the foreign as well as domestic public administrators. Each Australian state has its own anti-corruption provisions. In addition, bribery and corruption related to both public and private sectors are seriously addressed and either an individual or an independent company can be targeted when it comes to such cases. For instance, businesses receive up to a penalty of about $1.1 million as fine when convicted of corruption. This practice has immensely reduced the cases of corruption within the country facilitating fair conducts of practice (Regulation Taskforce, 2006). In addition, Australia is known to be the world’s leading travel destination for foreign direct investment (FDI). The country has a large economy, strong global trade as well as a strategic position. These factors have encouraged strong investments within the country because it has had a total FDI growing exponentially over the years. For instance, in 2011, the country had a stock growing FDI of about 6.6% which was aiming at making its record of $507 billion. The total stock of FDI rose to about $2.5 trillion in the year 2013 showing an increase of about 11.3% from the previous year (NSW Trade & Investment, 2010). This has therefore ranked Australia as the 14th largest destination nation for foreign direct investment in the year 2013 as well as the 18th largest source nation for foreign direct investment. Economic Growth The economic status of Australia expanded significantly from 2.2% in 2010 to about 2.3% in 2011. The International Monetary Fund predicted that the economy would grow to about 3.3% in 2013 (Bishop and Rayner, 2013). The Australian economic freedom is at its high at about 81.4 which rates its economy as one of the top five freest in the 2015 Index. It also has an overall score of 0.6 points lower than the previous years’ points. This has been brought about by both its monetary freedom and its labour freedom which have been outweighed by the drop in investments freedom, control of government spending as well as freedom from corruption in the country. This has given Australia its 4th position out of the total 42 countries within the Asia-Pacific area (Downes, Hanslow and Tulip, 2014). Australia as a nation has had a strong commitment to its economic freedom which has ensured that a policy framework has been followed keenly which has in turn encouraged economic dynamism and flexibility (Plumb, Kent and Bishop, 2013). Although it’s overall economic freedom has plummeted over the previous years, it has been able to maintain and perform well in most of the 10 available economic freedoms. In addition, monetary stability in Australia has been well maintained having its inflationary pressures put under control. This has been supported by the sensible banking principles as well as the available lending practices. The existence of a well-functioning judiciary has kept corruption cases at a minimal and has also ensured a solid protection of property rights. The economy of Australia is not as smooth as it looks. The employment cost incurred in transferring manufacturing to Asia has been very high (Plumb, Kent and Bishop, 2013). Since some domestically produced goods are more valuable and significant to other countries, it may lead to the increase in price in Australia. And since domestics investors in Australia can invest in other countries, many of them are doing so since it is very profitable. This however lowers the investment in Australia thus negatively affecting the economy of the country. Infrastructure Current Australian Infrastructure policy varies largely as compared to the ones that were in existence a decade ago. Although, with the current continuous opening and expansion of the Australian economy, the damaging effects of any inefficiency is now apparent. There has been an increased access to both reliable and reasonable economic infrastructure (BCA, 2007). This has increased both productivity as well as economic growth. For instance, there has been a rise in the accessibility to various transport services due to the improvement of road, railway and telecommunication networks. This has enabled general public function effectively within the modern society. Australia also has a sound infrastructure investment as well as usage policies with regards to areas like water therefore having the potential to bring about major environmental benefits (Eddington, 2006). The infrastructure reforms in Australia bring about a transformation in performance which has given rise to an increase in productivity in various essential infrastructure sectors. It has also produced a quality service which has been maintained over the years. In addition, the infrastructure reforms also have put up service provisions which prioritize business as its beneficiary via the related unwinding of cross subsidization. Moreover, the productivity and price benefits in the infrastructure sector which has been targeted by the National Competition Policy reforms has been able to boost the Gross Domestic Product (GDP) by about 2.5%. Australia has currently experienced an extensive time of sustained growth in her economy; therefore there is a primary need for her exports from nations such as China which put so much pressure to Australia’s fundamental infrastructure (Eddington, 2006). This has pushed Australia, as a nation, forward owing to the continued focus in the infrastructure policy which is constantly achieving new investments that can be able to handle incoming pressures as well as changing needs. Technological environment Australia has many laws and regulations that govern technological implementation. Examples of such laws include ambient air quality law, laws related to patents placed on technology among other laws. The economic growth in Australia has been contributed by many factors including technological changes over the years (Invest Australia, 2003). The development and implementation of technology has brought about structural changes in Australia in many industries. Since the 1970s, the investment in technology in Australia has increased exponentially that reflects the rapid improvement in product and service delivery. Improved transportation technologies have led to the improvement of inventory management and have resulted to the reduction in terms of size of the distribution services. Advances in transport and communication in the country has brought about fundamental changes (Invest Australia, 2003). In 2014, international transactions have reduced compared to other years that have helped in improving the effectiveness of international markets and increase international competition. Generally, technology has changed the whole Australia. Development of technology has also brought about the advancement of services and mining activities (Downes, Hanslow and Tulip, 2014). This has then led to the increase in output, employment and exports. Foreign Direct Investment has enabled Australia to access the advanced technology and has further allowed businesses to increase their profitability and outputs. It has boosted exports thus providing a chance for Australian companies to access the international market channels. Overall Assessment Overall, the analysis carried out suggests that the business environment in Australia over the past years has been continuously improving as from the statistics provided from 2011 to 2015. The political and legal environment in Australia highly promotes business in the country since its judiciary system has been seen to be very transparent, independent and has shown low levels of corruption. Global companies like Boral Limited can benefit immensely from the political stability in the country as well as its stable judiciary system. Economic environment in Australia has been expanding significantly over the years since 2010 indicating a high level of economic and monetary freedom although in the long term, risks are greater since the fall of investments in Australia will pose the biggest difficulty in doing business as this affects the economy of the country. In addition, the infrastructure in Australia has increased both accessibility and reliability in the economy which has encouraged productivity and economic growth. The infrastructure reforms in Australia bring about a transformation in performance which has given rise to an increase in productivity in most of the fundamental infrastructure sectors. Therefore sound infrastructure and a stable and growing economy is very important to Boral Limited since it would increase the productivity of the company in terms of expansion by increasing various business channels all over the country. n low level of corruption.iness in the country since its judiciary system has been seehe E Recommendations Just like many large companies, Boral is facing a shrinking prospect in Australia. Increased intergration and globalisation has amplified some global economic conditions. The global economic slowdown has brought about threats and hurdles to many multinational companies like Boral. Therefore, Boral company can tackle such challenges by first adapting new approaches that are based on flexibility, speed and eccentric thinking. Operation across a fast-moving market need a focus on operational excellence. Boral should create a highly flexible and unconventional business model which will enable it respond to any theats or opportunities presented in countries like Australia. With essentric and flexible business model, Boral Company can then enter into international markets which presents many opportunities. Boral Company should expand to countries with good economy, political environment, technological advancement and good infrastructure. This information should be accessible to all stakeholders since it will highly benefit them especially in making important decisions that affects the company. References BCA (Business Council of Australia) 2007, Infrastructure Roadmap for Reform, Melbourne. Bishop, J and V Rayner 2013, ‘Industry Dimensions of the Resource Boom: An Input Output Analysis’, RBA Research Discussion Paper No 2013-02. Clayton Utz 2004, Doing Business in Australia, Australia, Clayton Utz. Downes, P., K Hanslow and P Tulip 2014, ‘The Effect of the Mining Boom on the Australian Economy’, RBA Research Discussion Paper 2014-08. Eddington, R 2006, Transport’s Role in Sustaining the UK’s Productivity and Competitiveness, HM Treasury, London. Invest Australia 2003, Australia: A Wealth of Opportunity, Canberra, ACT, Australia, Commonwealth of Australia. NSW Trade & Investment 2010, Foreign Direct Investment in Australia by Industry, Online http://www.business.nsw.gov.au/invest-in-nsw/about-nsw/trade-and-investment/foreign. Plumb, M., C Kent and J Bishop 2013, ‘Implications for the Australian Economy of Strong Growth in Asia’, RBA Research Discussion Paper No 2013-03. Regulation Taskforce 2006, Rethinking Regulation: Report on the Taskforce on Reducing Regulatory Burdens on Business, Report to the Prime Minister and the Treasurer, Canberra. Read More