International Marketing Environment in Australia - Assignment Example

? PESTEL Analysis of Australia and Executive Summary Australia’s economy is one of the best in the world in terms of GDP, per capita income and the rate of unemployment. This has made investing and marketing in Australia a mouthwatering prospect for many international marketers. The Australian economy has experienced a steady growth rate averaging 3.4% annually. It has been on the boom since the 1980s and is barely affected by the world’s economic downturn. Along with this economy, Australia also has some strong sectors including the mining, agricultural, services and the tourism sectors that offer huge potential markets to international marketers. The serene political environments, diverse cultures and a techno-savvy population only make the business environment better. The aforementioned political, economical, environmental, cultural and legal environments have made Australia one of the best markets in the world. This paper tries to identify the unique characteristics of Australia that enables it to have an excellent international marketing environment. It goes ahead to list the strengths, weaknesses, threats and opportunities for the various environments that influence international marketing in Australia. Table of Contents 1.0 Introduction 4 2.0 International Marketing Environment in Australia 5 2.1 The Economic and Financial Environment 5 2.2 The Political and Legal Environment 8 2.3 The Social and Cultural Environment 9 2.4 Technological Environment 9 2.5 Challenges and Opportunities 10 3.0 Conclusion 11 4.0 References 12 PESTEL Analysis of Australia 1.0 Introduction Australia boasts one of the most efficient capitalist economies in the world. In 2012 the Australian economy was ranked the 13th largest in terms of GDP, contributing over 1.7% of the world’s GDP for that period. Presently, the economy’s GDP stands at US $1.58 trillion with a total wealth of over US $6.4 trillion (DFAT, 2013). One of the main reasons for this startling performance is because of the freedom in the market. The Australian governments that have been in power since early 1980s have continuously liberalized the market. This has attracted more investors and as a result the Australian economy has largely been growing even when other countries were experiencing recession. In 2011 the Australian economy was found to be the third freest economy in the world with an index of 82.6. Due to this freedom the economy is favorable for entrepreneurs’ development. It boasts the largest number of entrepreneurs in the world, both internal and external (Jacka and Scott, 2013). The Australian economy is built on exports. According to the survey conducted by the International Monetary Fund (IMF), Australia is the 19th largest exporter and importer. Most of what is exported is from the mining sector followed by the agricultural sector. Mining has been the major contributor to the Australian GDP, nearly 10% of the GDP (DFAT, 2013). Australia mining sector produces exports natural gas, iron ore, petroleum and gold. The agricultural sector on the other hand produces mainly foodstuffs and wool and cotton. Apart from these the economy also exports service especially technology-based expertise and skills. The Australian economy is ranked the second in terms of the average wealth of individual adults. A study conducted in 2011 by Credit Suisse Research Institute placed Australia behind Switzerland and established that the average Australian has a wealth of US $397,000. It also placed Australia second in terms of the highest per capita income The economy also has an average GDP growth of 3.4% annually with 3.2% in 2011 and 3.8% in 2012 (Richardson, 2013). However, during the same period the poverty level increased by 1.6% from 10.2% to 11.8%. This has made the economy to be termed as a ‘two-speed’ economy. The inflation rate averaged at 2.5% since the turn of the millennium and the unemployment rate stood at 5.8%, the fourth lowest unemployment rate in the world according to the Australian Bureau of Statistics (ABS). The immense personal wealth coupled by the high per capita income has made Australia a good hunting ground for markets for some businesses. This is because the Australian market possesses a higher purchasing power than most countries in the world. Furthermore, the market is one of the freest in the world and promotes entrepreneurship making it apt for external investors; these factors form the key attractions of this economy (Pike and Mason, 2011). 2.0 International Marketing Environment in Australia The following text presents the analysis of the Australian economy in terms of the political, economical, social, technological, environmental and legal environments with regards to international marketing in Australia. Each environment presents unique opportunities and strengths, weaknesses and threats; they will be discussed in their corresponding sections where there are any. 2.1 The Economic and Financial Environment The economic and financial environments of a country are the most important factors to consider when deciding whether to market and operate in an economy or not. This is because most firms are in business so as to make profits and theses environments provide the information about the economy’s purchasing power and performance (Doole and Lowe, 2008). The Australian economy presents a one of the most powerful markets to international marketers in terms of purchasing power. This has seen it targeted by most multinational companies especially the sports affiliated ones because Australians have a strong sporting culture. Companies like Nike, Reebok and Adidas have flourished in Australia unlike in some other continents where their products are deemed as expensive (Leonidou, Karamides and Panayides, 2007). Australia has a population of around 22.7 million people; this too presents a considerable market size. Furthermore, most of the population is employed as the unemployed percentage is 5.8 and the per capita income is one of the highest in the world. The Australian market’s therefore has some strength in size, purchasing power and disposable income (Farabi, 2012). The two sectors that attract international marketing the most are the mining and the agricultural sector. These two sectors make up more than a fifth of the country’s GDP. Apart from these two sectors, the Australian economy also has other performing sectors that are major contributors to the GDP and targeted internationally by marketers. They include the manufacturing industry, the tourism industry and the services industry. In 2013, the manufacturing industry contributed 12% of the GDP. However, most of the manufacturing is done by foreigners; most of these companies are from China. Australia is currently trading mostly with Japan, China and other Asian counties and is slowly cutting the trading ties with North America and European markets (Ying and Davidson, 2010). The current opportunities to international marketers lie in the potential held by these five industries. Mining coal is one of the main economic activities in Australia, however most f this is later exported and just a small percentage utilized in the country. In 2012, it mined 487 tonnes, out of these 281 were exported making Australia the largest exporter of oil. Shipping companies therefore have a business opportunity and the same applies for those companies that may wish to establish manufacturing industries that utilize coal as a source of power. This brings the manufacturing sector into focus. Manufacturing has never been Australia’s strength even though the sector contributes around 12% of the GDP. The norm has always been to export while raw and then re-buy after processing elsewhere. International companies that manufacture goods have a great opportunity of expanding this untapped potential of the sector. Tourism represents 2.5% of the GDP; however, 70% of this is from domestic tourism. Australians, evidently, like to visit places and if afforded the chance to go abroad and visit other interesting markets then this contribution will grow. Presently, Australia receives around 5.9 million visitors annually while the tourism sector employs nearly 600,000 people. These large figures present a unique blend of market for international marketers; one that not only comprises of locals but also a substantive number of visitors (DFAT, 2013). The strengths of the Australian economy to international marketers is that it is relatively stable with a relative and predictable economic growth, it is booming even in times of recession in the other parts of the world, it has a high purchasing power and has industries that have deep untapped potential. Some of the challenges to marketers include the cultural and the social factors considered in marketing. The Australian market has been found to be particularly choosy mainly relying on the products produced internally. A lot of multinational companies have pulled out of Australia or forced to scale down their operations because the market could not sustain them anymore. The other thing is the balance of payment of the country; it is a deficit (McKenna, 2013). Most of the money and wealth in circulation is funded by debt and this makes it risky for international investors who may see an opportunity where there is none. This means that the high purchasing power that is portrayed by many studies may actually not be the case. 2.2 Political and Legal Environments The political and legal environments of a country definitely affect the business climate of that country. For instance, the climate dictates the role of government in the economy; does it have policies that promote business especially for outsiders? The other factor is the economic and the political ideology of the government in power alongside its international relations. These too affect whether the economy promotes or stifle investment from abroad. However, the most definite indicator of the state of political and legal environment are the taxation policy, regulations, bans and other punitive measures undertaken by the government in power (O’cass, 2001). The Australia political environment has been dominated by the Labour and the Liberal governments since the 1980s. These governments have both emphasized on liberalizing the economy making it suitable for international marketers. The political environment offers stability that is vital for business growth. Most investors will like to invest in a country or a place where safety is guaranteed and their businesses can operate for the unforeseeable future. Furthermore, Australia has one of the most transparent legal systems in the world. Foreign and domestic marketers receive equal treatment. The market is free and the government rarely tries to influence the economy except by moderating the inflation levels through the Reserve Bank of Australia. The tax burden stands at 26% of the GDP and the government uses 7% of that to stimulate the economy for further growth. These environments provide perfect opportunities for international marketers. 2.3 The Social and Cultural Environment The social and cultural environment influence the market’s lifestyles, values, norms, beliefs, attitudes, aesthetics and personal space. These factors change from one country to another and make international marketers to make unique products for unique markets (Doole and Lowe, 2008). Australia is made up of a few Aborigins who are the natives and a large percentage who are immigrants. This population is however very united despite their vast cultural differences and share similar values. The Australian market is highly segregated; there is a part that is focused on quality rather than quantity while another does the exact opposite. A lot of Australians also embrace environmentalism and therefore prefer environment sensitive products. The men and women division is not pronounced and so there are very limited products whose advertising can be stereotyped on gender basis. The population is multiracial and therefore multicultural. The Australian market is also known for its impulsive buying, may be this can be attributed to the high purchasing power of the citizens (DFAT, 2013). To international marketers the segmentation represents both strength and weakness. It is strength because the market is already segregated and so the products can be tailored for the different markets with ease. It is a weakness because the segmentation may mean small markets for the products. Producing environment sensitive is almost a requirement for any multinational corporation marketing in Australia as the population is environment sensitive. 2.4 Technological Environment Technology state of a country either promotes or hinders doing business in a country. Ideally, the more techno-savvy a country is the better the ease of doing business. Australia is very innovative and the technological environment is the one that benefits the most. As for international marketers there is no better way to market using technology than through the internet. The Australian market is increasingly using the internet to shop for goods and services. In 2009, a survey showed that Australia has nearly 10.4 million active internet users with 8.2 million of those able to access it through their mobile phones (Jacka and Scott, 2013). This makes it easier for international marketers to market their products without having to incur transportation costs. Once a product is sold then it can be shipped to the customers. In 2011, 7.4 million Australians used retail and auction websites including Amazon, eBay, Webjet and Harvey Norman. The potential market that prefers to shop online is huge and this is an opportunity to international marketers utilizing the internet (Richardson, 2013). 2.5 Current Challenges and Opportunities for International marketers Challenges Debt financed spending power- The spending power possessed by the economy has mainly been funded by debt from other economies; they may pose a risk for international marketers as they may fail to achieve the targeted rate of returns if they decide to invest in Australian economy. This balance of payment deficit has elicited a debate with some advocating for more debt funding while others are suggesting the exact opposite. The segregated population makes it harder to market in the Australian economy because there is huge disparity in attitudes, consumer behaviors, values, norms etc. Opportunities and Strengths Stable and Steady economic growth- Makes it suitable for foreign investors and other international investors. High spending power due to high per capita income, high individual adult wealth and low rate of unemployment. Stable political, social and legal environments that treat domestic marketers and international marketers equally. This presents the perfect environment for entrepreneurs. 3.0 Conclusion The Australian market is one of the best markets for international marketers. This is because it offers a unique blend of factors that promote businesses for both domestic and international marketers. The economic environment is stable and on a steady growth making the risks entailed in the market predictable and easily quantifiable. The Australian economy also supports a great deal of people with high purchasing power owing to the low unemployment rate and high per capita income, this too serves as an attraction to foreign investors. If the investors come the market grows and then more investors come, a self-perpetuating development circle is formed (Jacka and Scott, 2013). The political environment is steady, the legal environment fair and predictable making it appealing to marketers. The sociological and the cultural aspects of the Australians are also favorable to the business environment. The population is diversified yet still grouped into market-oriented segments. Lastly, Australians have embraced technology, in particular the internet, making the Australian market easily accessible to international marketers. References Department of Foreign Affairs and Trade., 2013. People, Culture and Lifestyle. About Australia, Available at: < http://www.dfat.gov.au/ > [Accessed 27th November 2013] Doole, I., and Lowe, R., 2008. International Marketing Strategy: Analysis, Development and Implementation. London: Cengage Learning EMEA. Farabi, Y., 2012. Analysis of Marketing Environment of Virgin Australia. Sydney: GRIN Verlag. Jacka, J., and Scott, P., 2013. On Unfamiliar Ground. Internal Auditor, 70(1), pp. 60-64. Leonidou, L., Kaminarides, J., and Panayides, P., 2007. The International Marketing Environment: Textbook content versus education views. Journal of Teaching in International Business, 18(2), pp. 101-131. McKenna, G., 2013. Why Australia’s debt ceiling debate is stupid. Business Insider Australia, Available at: < : http://www.businessinsider.com.au/chart-of-the-day-why-australias-debt-ceiling-debate-is-stupid-2013-11 > [Accessed 27th November 2013] O’cass, A., 2001. The internal-external marketing environment orientation of a political party: Social implications of political parties marketing orientation. Journal of Public Affairs, 1(2), pp. 136. Pike, S., and Mason, R., 2011. Destination competitiveness through the lens of brand positioning: The case of Australian sunshine coast. Current Issues in Tourism, 14(2), pp.169-183. Richardson, T., 2013. The six environments that affect marketing, business, e-business and international business. Witiger.com, Available at: < http://www.witiger.com/internationalbusiness/6environments.htm > [Accessed 27th November 2013] Ying, W., and Davidson, M., 2010. Chinese holiday makers expenditure: Implications for Marketing and Management. Journal of Hospitality, Marketing and Management, 19(4), pp.373-395. Read More