Competitiveness of the country is important in the current time due to the reason that it will help in attracting more foreign investments in the country. Moreover, in the current business state of affairs, countries are getting more depended on the inflow of the foreign direct investments for growth of the national economy. The more will be the inflow of the foreign investments in the country, the more will be the growth of economy (Penrose 2017). Majorly, the external business factors should be made effective enough in order to have favorable business environment for the foreign firms. In addition, the effectiveness of the trade policies of the countries along with the probable risks is also having major influence on the country’s competitiveness (Salacuse 2017).
This report will discuss about the country competitiveness of Australia due to the fact that in the recent time, Australia is one of the rapidly developing and stable countries in the world. In addition, this report will also discuss about the relevant external business factors to be faced by the business organizations in doing business in Australia. PEST analysis will be used to identify these factors. Australia is having access to different natural resources, which are further contributing in gaining competitive advantages for the country. These resources will also be identified in this report. Existing trade policies of Australia along with the potential barriers will be identified and a few recommended steps will be discussed accordingly.
It is reported that currently, Australia is having stable political scenario in the country with the moderate ranking for the political stability. This is beneficial for the foreign companies investing in the countries. However, on the other hand, it is also identified that the trend of political stability is decreasing in Australia (Blom-Hansen, Houlberg and Serritzlew 2014). This may pose challenge for the foreign companies in the long term. It is also identified that Australia is having moderate level of government effectiveness, which will also have favorable impact on the business organizations. Australia is also having good ranking in terms of transparency index and it denotes that foreign business organizations will have less impact of corruption in their operation. It should also be noted that Australia is having democratic type of government and market based economy (Acemoglu and Robinson 2013). Thus, the business organizations operating in the country will have less impact of government interference and regulations.
Currently, annual economy growth of Australia is standing at 0.6 percent as of 2017 and they are the 10th country in the world in terms of GDP per capita. This shows the stability of Australia in terms of economy and the business opportunities for the firms will get increased with time. Australia is also having good score in terms of the business freedom index (McCombie and Thirlwall 2016). Thus, the business organizations doing business in Australia will have larger extent of freedom in their operation and activities. This will also increase the attractiveness of Australia to the foreign investors. However, it is also identified that Australia is witnessing decreasing trend in terms of economic globalization index. It is reported that they have witnessed a huge fall between 2014 and 2015 (Bhattacharya et al. 2016). Thus, the business organizations will face more barriers in their economic activities in doing business in Australia.
Australia is having diverse social approaches in the country mainly due to the presence of different social and cultural groups in the country. This will have both positive as well as negative impacts on the operating business organizations. They will have the opportunities to offer different products and services to the customers and diverse business sectors can thrive (Luke 2018). However, on the other hand, it will also pose challenges for the organizations due to the reason that and business organizations will have difficulty in catering to different sets of customers and each of the offerings will find limited market opportunities. It is also being identified that Australian society is more globalized in nature and global trend is having is having much influence on the market trends. Thus, the foreign business organizations are having more market opportunities in doing business in Australia (Beattie 2013).
Being a developed country, Australia is one of the most technologically advanced countries in the world. It is identified that Australia is rapidly improving in terms of innovation and from 2011 till 2015; they have witnessed huge increase in the innovation index. This is having favorable impact on the business organizations due to the reason that they will be able to have the access to the latest technology and innovation in the country. In addition, it is also being identified that Australia is witnessing increase in expenditure in research and development, which will also motivate the investing firms in the country to have more access to technological development process (Yigitcanlar and Dur 2013). However, it should also be noted that even though, Australia is improving in terms of technology and innovation, but countries such as India and China are way ahead of them and posing huge threat.
Australia is one of the rare countries with having different sources of natural resources. This includes bauxite, lead, lithium and iron ore. It is reported that Australia is the third largest producer of iron ore, uranium and zinc. On the other hand, it is also identified that Australia is also the fourth largest producer of coal and gold (Aleksynska and Havrylchyk 2013). Thus, it can be concluded that access to large varieties of natural resources will help the business organizations in having the seamless supply of raw materials. Another major competing factor for Australia is huge export of uranium due to the fact that in the current time, uranium is being used as an ingredient for the nuclear reactors. Thus, firms operating in this sector will have huge opportunities in operating in Australia. Strategic geographical location of Australia is also a major competing factor of doing business in Australia. This is due to the reason that Australia is having the equal access to the emerging economies such as China and India along with to the western countries such as the United States (Busse and Groning 2013). Thus, the business organizations operating in Australia will have the advantage of gaining the access to different regions around the world. Another competing force in doing business in Australia is huge shipping network, which will further help the businesses indulged in import and export to have huge business opportunities.
Currently, exchange rate of Australian dollar with that of the American dollar is 1.39:1. This denotes that Australian currency is slightly devalued compared to the American currency. This will have positive impact on the importing firms due to the reason that they will have more valuation for their offerings in the domestic market (Hodrick 2014). On the other hand, it will have negative impact on the exporters and they will gain less value by exporting. In addition, it should also be noted that frequent fluctuations in the currency valuation will affect the business organizations mainly the foreign entities. This is due to the reason that the more will be the fluctuations in the international valuation of the currency, the more will be the variances in the profitability of the organizations (Cenedese, Sarno and Tsiakas 2014).
Australia is having different authoritative bodies for approval of the documents for the foreign investments. They are having dedicated foreign investment policy, which covers all the elements related to the foreign investments in Australia. It is reported that proposals for the investment in Australia should have to be made to the Australian Foreign Investment Review Board for the primary approval process (Rolfe and Kinnear 2013). It is also being reported that majority of the Australian business sectors are opened for the foreign investments. In addition, in the recent time, Australian government is offering incentives for investing in certain business sectors such as agribusiness and food sector, infrastructure, tourism, energy and manufacturing process. Foreign investments in this sector are being subsidized by the government. It is also being stated that foreign investments are being given tax incentives and benefits in the doing business in the country.
However, on the other hand, a few barriers are also being identified in the current trade policies of Australia such as the absence of single window system for the approval process. This denotes to the fact that foreign investors have to face high intensity of bureaucracy in the approval process. This is one of the major challenges for doing business in Australia. In addition, it is also identified that the level of tax benefits and incentives offered by the Australian government is not at par to the level being offered by some of the developing countries such as China (Von Wallis and Klein 2015). Thus, Australia is losing away the major chunk of foreign investments to these countries. Australia is having different states and based on these states, the rules and regulations are also different. Thus, the business organizations operating in one Australian state will have to face different sets of rules and regulations by opting to enter different states and this is further increasing the complexities for the investors.
It is reported that Australia is having fluctuating trend of foreign investments in the last few years. This is due to the reason that Australia received only AUD 25926 million of foreign investments in 2015, which further increased to AUD 64825 million in the next year. However, in 2017, this figure again reduced to AUD 60499 million. This shows the fluctuating nature of the inflow of foreign investments in the country. This is also a major discouraging factor for the foreign investors in investing in the country (Gitman et al. 2015). However, on the other hand, it is also estimated by different reports that inflow of foreign investments will increased in the following years and may touch the AUD 65000 million marks. Thus, it can be concluded that future trend of foreign investments in the country is positive.
Conclusion
This can be concluded that Australia as a country is having good potentiality of attracting foreign investments in the country. In this report, different negative and positive factors of doing business in Australia are being identified and evaluated. It is also identified that huge access to the different natural resources is one of the major competing factors for doing business in the country. In addition, the impact of the foreign currency changes on the business is also being discussed in this report along with the existing trade policies of the country. It is identified that Australia is witnessing fluctuating trend of inflow of foreign investments in the country. A few recommendations are being discussed, which may help in enhancing the growth process of foreign investment in Australia.
Reference
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