Attractiveness of Australia for Manufacturing and Service Operations Competitiveness - Case Study Example

Attractiveness of Australia Customer’s Name: Customer’s Course: Tutor’s Name: Executive summary This report sets out to inform on the attractiveness of Australia for manufacturing and service operations competiveness. In advising we will take into considerations the attractiveness of the country based on a number of scopes of competiveness. The report will also offer Austrade with a rational assessment of competiveness of Australia so that Austrade can provide advice to Australian and international firms on what to expect when setting up operations in Australia. The report will also provide data so to make a sensible assessment of the business environment in Australia and the attractiveness of this country for foreign and local investors. Executive summary 2 1.0 Background information 4 2.0 Introduction 5 3.0 Australian attractiveness 5 3.3 Political stability 8 References 13 Kotabe, M (2000). Global Marketing Management. New York: John Wiley & sons 14 International business times (2011). Australia's manufacturing sector rebounds in June. Retrieved from http://au.ibtimes.com/articles/173645/20110704/australia-manufacturing-industry-heather-ridout-australian-industry-group-dollar.htm 14 Richard, C (1974). "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 176-93. 14 Appendices 17 1.0 Background information Austrade which is also termed as Australian trade commission is a cooperative union between the Australian government trade and investment development agency. It was founded in the year 1986 subsequent to a major evaluation by the then government of the assets accessible to the trade assortment. It has global systems which play a main role in supporting Australian companies to perform well in worldwide business arena, attract industrious foreign direct savings into Australia and encourage Australian education sector globally. The major role of the organization is to move forward Australian international deals and investment interests by offering information, guidance and services (Austrade website, 2011). Generally the association aids Australian enterprises to incarcerate augmented export and overseas investment chances through administration of the export market development grants scheme. The organization also draws up productive foreign direct investment into the country, assist global buyers to position and recognize the right Australian providers, provide guidance to the Australian government on deals and investment strategy agenda and distribute Australian consular, passport and other administration services in chosen overseas localities (International business times, 2011). Most outstandingly, Austrade services to worldwide investors are free of charge and private and are personalized to the individual needs of the investor and the type of business. Australia encourages both foreign and local investment. It identifies the significant role played by foreign investment in increasing economic growth for the country, increasing competitive in the industries, generation of jobs and escalating exports for the country(Austrade website, 2011).. 2.0 Introduction A nation’s success in the global arena largely relies on its competiveness in the market, which is based on the efficiency with which it generates goods and services to provide to the customers of those products. Sound macroeconomic procedures and steady political and lawful organizations are essential but not adequate in ensuring a thriving economy for the country (Brash, 1966). Competiveness of a country is strongly based on a country’s microeconomic basics and the superiority of the micro economic business setting in which companies operates in. A clear consideration of the micro economic basics of competiveness is essential to nationwide and global economic strategy. The effectual rates of support to the manufacturing sector in Australia have decreased from 35 per cent to almost 5 per cent currently (international business times, 2011). This competitive and inventive culture in Australia has led to a greater number of people around the globe using Australian skills, expertise and manufactured products in their every day lives. 3.0 Australian attractiveness Modern knowledge is thought of as the most vital rationale why countries wish to attract and retain foreign investment in the country. By inviting multinational corporations, host countries may get access to technologies that they cannot produce themselves. Foreign and local investment can also lead to tortuous efficiency gains for the host country organizations through the awareness of exterior markets (Wilkins, 1990). The host country is also likely to gain further in relative to job prospects which are formed by the investment in their countries. Thus the advantages associated with foreign and local investment greatly out ways the disadvantages thus for a country to gain much they should focus on foreign and local investment. Australia & Australian companies can be an investor’s perfect business partner to access the most recent products & services in the market; best in class knowledge; cutting edge skills and joint ventures. Australian products, services and expertise are prominent internationally because of high quality and innovation ideas which have been implemented in their production. Most business partnership with Australian companies has been noted to add worth to their dealing and provide their business the competitive periphery. Australian know-how is accessible in a range of sectors ranging from the food and beverage industry, green building agri-business, financial services, education, media and entertainment, ICT, building and construction, automotive, tourism sports, wines, clean energy, aviation, biotechnology, mining and resources, health, franchising and across a wide variety of sectors. Australia has been in the recent past had an accelerated amount of investment. This is clearly shown in figure 1 in the appendix In determining the attractiveness of a country for foreign and Australian investment various factors are generally considered by Austrade. Austrade will consider the following factors when advising local and foreign investors on the attractiveness of Australia as an investment destination. The factors include: the level of economic growth, political stability, market size, and dependence on foreign assistance, external debt, and convertibility, power of the currency, level of domestic savings, regulatory procedures and the level of infrastructure development. 3.1 Risk factor It is an extensively conventional belief that risk is a significant factor when making investment decisions. Austrade ought to offer a list of available list of risks to the foreign and local investors. The kind of risks includes political risk, lawful risk, graft and bribery, financing risk and quarantine conformity (Richard, 1974). After having the full knowledge about the available risks the investor should put in place a risk management plan that recognize the investor disclosure and address each element of the transaction where the investor is exposed to risk and also one should talk with experienced advisors on how to go about it. Thus Austrade should try to minimize the risk levels so that Australia can be an attractive place for investment by both local and foreign investors. 3.2 Level of economic growth Economic growth is termed as the amplification in value of the supplies created by a country. It is predictably calculated as the percent rate of boost in real gross domestic product, or GDP. Increase in terms of economic growth is usually calculated in actual terms, in order to net out the consequence of price increases on the price of the goods and services produced in the country (Peter & Sheathe, 2000). An accelerated economic growth is a sign for the impending investor’s state of the economy, in which one could potentially invest their capital. Since the year 1992, Australia has recorded a consecutive 17 years economic growth which when calculated as an average it amounts to a 3.3 percent economic growth each year. This era has been one of the most steady and industrious period of Australian contemporary history and it places Australia in the top rank of industrialized countries in terms of continuous growth rate. According to IMD world competiveness yearbook, 2009 Australia is also positioned as the first in the Asia pacific state for work, agriculture and industrial yield per individual who are working. A survey in 2006 which was demeanored by OECD noted that the living standards of the populace of Australia exceeded almost all group eight countries apart from the United States (OECD, 2006). The economic growth has been sustained by many factors among them its well-built fiscal position. Australian lengthy and broad period of economic growth has extended its infrastructure capability to the full potential. With the sustained and hastened economic growth Australia appears to be a progressively stronger focal point for international and local business thus Australia is a secure, steady and affluent place to invest. Figure 1 in the appendix clearly shows the growth arte of the Australian economy. 3.3 Political stability This is a very vital factor in determining the attractiveness of a country for foreign and internal investments in a nation. As it is known from a variety of political drills most investments depends much on the economy, so when there are cruel and impulsive changes in the political life of its market the level of investment in one way tend to decrease (Nieuwenhuysen & Lloyd,2001). Political stability in a country mainly acts as a medium for expansion. Australia has experienced political stability for a long time. This has been accredited to an organization which makes sure that no one individual has too much authority consequently giving a guarantee for a diplomatic and steady government. In relation to Australia, it appears to be a good place for foreign and local investors to invest this is because of the political stability in the country. Thus political stability is major factor to put into consideration when one wants to investing in a country. 3.4 Market size This factor decides on the size of potential demand for a product, so it plays a major role in determining the attractiveness of a country for investment. Market size is determined, based on many aspects and indicator such as the number of likely customers, marketplace environment, demand; the size of demand and estimated product demand. The manufacturing and serve operations of Australia is estimated to be worth billions. Australia has been ranked 54th in the world by populace and thus it seems to have a high population (Australian Bureau of Statistics, 2008).It is evident that the investor in the country will have a large market size to sell its commodities to. Thus it is a safe place to invest in since market for the product is assured. 3.5 Dependence on foreign aid A Quite reasonable investor will have interest in knowing a country dependence on foreign aid, depending on the dependence on foreign aid an investor may decide to invest or not invest in a particular country. Much reliance on other countries signifies a constrained economy, incapability to self-reform, expansion, reticence on the road to affluence. Thus deep reliance on the other countries hinders free capital and accordingly to the growth of domestic economy. Australia seems to be a country which do not receive foreign aid but which gives out foreign aid to the needy countries. This is because of its strong and abundant economy. Thus when an investor in considering a place to invest, one should consider Australia as the better option since the country has little or no dependence on foreign aid from other countries and it is a provider of foreign aid (Australian Bureau of Statistics, 2002). 3.6 External debt External debt of a country is a vital indicator for any large investor. The large size of external debt together with pathetic economies and reliance on other countries are not likely to attract large and most outstandingly any investment in the country. Too high risk momentary collapse of the economy of a country will only make short term, point injections at certain lucrative sectors economy, but for the development of large, powerful industries will undertake not each. Australia has external debt amounting to 1,169,000,000,000 as of 31 December 2010. An augmented reduction in external debt service could also offer a tortuous boost to expansion through their effects on public ventures. Despite having the stated external debt Australia is a viable place to invest as compared to other countries which have a higher external debt. 3.7 Convertibility This factor also shows the concrete level of progress a country is making. Freely convertible currency is an obviously of great benefit in choosing a place to invest. The reason is mainly the liberty of external convertibility currency, as well the likelihood of repatriation of the profits gained. The analysis behind capital account convertibility was so that investors could invest exclusive of the obstacles since aforementioned to capital account convertibility investment in other countries was slowed down by irregular exchange rates which were prevalent in various countries. The Australian currency is more flexible when it comes to issues related to convertibility. In reference to that Australia seems to be an ideal place to invest in since no barriers to convertibility exist. 3.8 Power of currencies As just as the previous factors, this is a gauge of economic development alone. Weak currency requires continuous monitoring and is also the strongest risk factors. The Australian currencies are strong as compared to other currencies and do not need constant monitoring thus it reduces the risk of an investor in the country. Thus Australia seems to be the ideal place where one an investor should invest his capital. 3.9 Level of domestic savings Domestic savings show the impulsiveness of the GDP. The higher the domestic savings of a country the less it is likely to depend on foreign aid. Thus a country with a higher level of domestic savings will be an ideal place to invest in. Thus when local and foreign investors are considering a place to invest they should invest in Australia since it has a high level of domestic savings (Shan & Sun 1998). 3.10 Regulatory procedures Regulatory procedure in a country play a major role in determining whether invest can be done be done in that country. Australian approach to regulatory policy replicates acknowledgment of the significance of upholding and intensifying the openness of its market to global competition. Thus with the flexible a transparent nature of Australian regulatory policies the country seems to be the ideal place for investors to invest their capital in. (IMD World Competitiveness Yearbook 2009). 3.11 Level of infrastructure development This is the last of the considered factors in more realistic value, but it is also well thought-out and analytically examined during the beginning of investor judgment. This includes: the echelon of security of transportation channels (such as roads, railways, and airlines), power, way of communication and other essential channels of communication. Infrastructures in a country play a major role in determining the viability of a country to investment (Kotabe, 2000). Most investors tend to invest in countries with excellent and up-to-date infrastructures which will assist them in achieving the expected returns. In Australia the level infrastructure is high but still more need to be done to cater for the future. A good example of the excellent infrastructures is the national broadband network in the country this will assist the investors in timely relying of information. Currently, Australia’s infrastructure is broad and of world class, providing individuals and businesses with well-organized and dependable domestic and international transportation services; communications and information equipment; utilities and power allocation systems; and monetary services. Australia goes on to construct on the twin foundations of domestic structural improvement and augmented international market contact, this has been through a spirited and inventive export base and a strong obligation to world trade liberalization. The infrastructure which is currently available can cater for the investors who are able and willing to invest in the country. Thus with the excellent infrastructure Australia seems to be the better option for local and foreign investors. 4.0 Conclusion Australian attractiveness as a place for investors and selling operators is largely as a consequence of the country venerable, strong and resilient economy, its complicated and steady business and political situation and its exceedingly accomplished and multilingual workforce. The Australian legal system has also contributed to the attractiveness of Australia as an invest location. Australia has a mature and pleasant to business maneuvers both from the local and foreign investors (Australian government, 2007). Australia also has a business welcoming regulatory surroundings. According top the World Bank Australia is the greatest place in the world in which to set up a business, since the regulatory procedures just take a few days to be processed (The World Bank Doing Business, 2009). The OECD has also identified Australia as having less limitations on product marketplace as compared to all its members states, the lowest of public rights of business an the slightest restrictive impact of business instruction on economic behavior(OECD, 2006). All the above factors should be put into consideration Austrade will be able to provide information to both the local and foreign investors on the attractiveness of Australia as a viable investment destination. References Brash, D (1966). American investment in Australian industry. USA: Harvard university press. Nieuwenhuysen, J & Lloyd, P (2001). Reshaping Australia's economy: growth with equity and sustainability. United Kingdom: Cambridge university press. Austrade website. Retrieved on 19th October 2011 from http://www.austrade.gov.au/ OECD Factbook 2006 (Gini coeffcients) OECD Fact book 2006 pdf. Australian Bureau of Statistics, 2008. Australian Bureau of Statistics (2002). Year Book Australia. World Bank (2010)"Doing Business in Australia 2010". Nicholson, M (2000). The Little Aussie Fact Book. Melbourne: Penguin. Peter, G & Sheathe, S (2000). The Australian Economy in the 1990s. Canberra: Economic Group, Reserve Bank of Australia. Kriesler, Peter, editor. The Australian Economy: The Essential Guide. Sydney: Allen and Unwin, 1995. IMD World Competitiveness Yearbook 2009 Australian government (2007), Best practice regulation handbook, Canberra. Shan, J & Sun, F (1998). International Economic Journal, vol. 12, issue 4, pages 79-87.(domestic saving) Wilkins, M (1990). The emergence of multinational enterprise: USA: Harvard University press. Kotabe, M (2000). Global Marketing Management. New York: John Wiley & sons International business times (2011). Australia's manufacturing sector rebounds in June. Retrieved from http://au.ibtimes.com/articles/173645/20110704/australia-manufacturing-industry-heather-ridout-australian-industry-group-dollar.htm Richard, C (1974). "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 176-93. Figure 1 Appendices Retrieved from http://www.tradingeconomics.com/australia/gdp-growth Figure 2 Read More