Business organisations are adopting different strategies to expand their business in foreign markets. Businesses are opting for various methods to attract new customers. In order to expand their pool of customers, business managers conduct proper market research to find the most suitable ways to do the same (Teberga, Oliva & Kotabe, 2018). Tru Blu Beverages is a popular soft drink producer of Australia. The company is responsible for producing 1 in every 6 beverages sold in Australia. Tru Blu Beverages in 100% Australian owned and is currently having approximately 400 employees. Presently Tru Blu Beverages is focusing on expanding their business to gain more foreign customers. The company is planning to grow their business in China and Brazil to be specific. With the help of N&N Marketing PTY. LTD the company is aiming to distribute their products in these two countries. The below mentioned information is extracted from the website of Tru Blu Beverages-
“Tru Blu Beverages is well positioned to take advantage of export opportunities in Asia and beyond; many of our brands are perfect for the overseas market while we can also help you export your contract-packed beverages. Talk to us if you want to explore selling and distribution opportunities in Asia or other destinations.”
Tru Blu Beverages are looking forward to enter new markets, specifically China and Brazil. But there are certain reasons, for which the company should avoid distributing their product in Brazil, such as:
Developing nation: Brazil is undoubtedly a developing nation and most part of the country is still underdeveloped. This results in lower base of customers, scope of investment and regulatory environment. Despite of the assumption that Brazil has higher growth level than its neighbouring countries, it cannot be denied that the underdevelopment of the country would work as a major challenge for the new businesses entering Brazil (Top challenges of doing business in Brazil, 2018).
Corruption: Corrupt system is the primary obstacle for the new businesses in Brazil. Having a well-structured business environment, the country is having higher level of bribery and corruption. Bribes from public officials are common problem, which is being tackled by the Government for a long time now. Although there is no effective development has been found in this front. As establishment of a new business requires extra cost for bribes, the businesses are likely to skip expanding their business in the country.
Bureaucracy: Starting a business requires a number of formalities to done ranging from construction permits to property registration. The complex bureaucracy of Brazil makes it difficult for a foreign company to seamlessly expand their business in the country (Evans, 2018).
Taxes: Brazil is having an ample amount of various taxes imposed on different types of products and services. The web of federal taxes, municipal taxes and state taxes costs way too much for the businesses entering Brazilian market.
Financial: Brazil is experiencing growing credit risks; with tightening of financial condition of market, insolvencies in this sector might increase. The payment behaviour trends would be affected by this with changes in methods adopted by businesses to safeguard themselves against the market risks. Brazil, therefore, is not having a proper financial base as well for businesses.
Technology: Being a developing nation, Brazil is not a technologically advanced country. Hence, there will be lack of advanced technological support for the new businesses entering the market (Gouvea, Kapelianis & Montoya, 2018). In the meantime, big companies are investing in Brazil to make it technologically advanced in future.
Local labour force: As unemployment rate is going downwards in the country, the wages of labours are rising. Brazil is having complex set of labour laws with almost 900 articles that are tough to navigate (Bianchi, Carneiro & Wickramasekera, 2018). Businesses must not fall prey to it as it can cause serious organisational problems in future.
Infrastructure: Brazil is in grave need of developed infrastructure. The quality of roads, transport systems must improve so that more businesses can enter Brazilian market and function efficiently as these are important aspects for successful business operations.
Corporate transparency: The companies entering Brazilian market mostly chose to partner with a domestic business which helps the company to gain sufficient insights regarding local economy. Therefore, transition becomes less disruptive for the customers.
Export and import barriers: At recent times, the export and import of the country is facing complications. Most imported goods are required to be kept on hold in port for a certain time until the procedure is over. This costs big for the companies and affects their profit margin as well.
Tru Blu Beverages can enter the Asian market by targeting the Chinese market. China is having a vast amount of population; hence it would be beneficial for any businesses as there will be easy availability of labour and also the range of target market will be bigger. Chinese market is having more number of potential customers. Also, with easy availability of local labour, there will be no need to pay extra costs for labours. It is considered the vast population of China would play a pivotal role in flourishing a particular business. China and Australia share a free trade agreement which is referred as the China-Australia Free Trade Agreement (chAFTA). Since December 2015 this agreement came into force. Before entering Chinese market, the concerned company needs to analyse certain factors such as politics, culture, business etiquette etc. This helps the company to assess the present situation in order to deploy the best market strategies to enable more effective outcome. Being developing nation, there is high demand of new innovative products. Also, the countries in developing nations are likely to have fewer competitors while compared to developed nations. China is technologically advanced and is also considered as one of the most developed countries of Asia. For developing nations most of the products are unknown and unexplored; therefore, it will be easier for the company to launch their product in Chinese market and gain ample attention from the potential customers.
It is necessary to mention that China is considered as the ideal market for Australia. Compared to Brazil’s complex government systems, diverse economic condition, China offers a favourable environment for conducting business in an effective manner. It is important to state that there is a bilateral relationship between China and Australia, based on trade complementarities and strong economic relations. 2014 has observed “comprehensive strategic partnership” between the two countries (DiMatteo & Lei, 2017). Bilateral engagement is considered extensive in nature. However, both countries have acknowledged diverse cultural, political systems with separate historical importance. The company of Tru Blu needs to consider certain factors crucial for conducting business in China.
It is relevant to state to that the amount of business performed in China and Australia has increased to a significant extent. Investment of China in Australia has increased as much as $64.5 billion, on the other aspect, Australia has invested as much as $58 billion in China in 2014. Australia has gained the second largest recipient nation of China’s aggregated business. China was the sixth leading investment nation for Australia. It is interesting to mention that several M&A or mergers and acquisitions have occurred. For Tru Blu, China holds good business prospects. Australia can acquire various business benefits if it succeeds in conducting business in China. However, there are certain factors which require consideration for the purpose such as contract law, employment law, torts, agency law, law of intellectual property and so on.
For conducting business in China, the Australian company has to consider the contract law of the China government. As per the particular law, the Australian company can form the contract on the basis of its native law. However, the company has to show points of relevance of the foreign contract to Chinese court of law. As per the Chinese Contract Act of 1999, the company needs to consider and follow certain rules and regulations to ensure proper formation of the contract. For instance, as per article 9, the involved parties should possess the capacity to make a civil contract. In other words, the company needs to have proper resources and power to form and execute the contract in a proper manner. It is important to mention that involved parties can appoint agent(s) in favour of a particular party. The Chinese legal system asserts that both oral and written forms of contract are acceptable. However, China usually prefers written contract than oral as the latter often fails to provide sufficient evidence during conflicting situations. Article 12 of the Chinese contract law asserts that a valid contract needs to have certain points of importance (Chen, 2017). For instance, Tru Blu needs to mention the target content of the contract in detail, ensuring quality, price, time, venue, fulfilment criteria, criteria for dispute settlement. The contract needs to have clear addresses of involved parties. The parties can make contracts with relevant contract forms. It is necessary to mention that the parties need to form the legal relationship essential to form a valid contract. Article 14 asserts that the parties need to consider acceptance and offer. Article of the contract law 1999 upholds the ‘intent’ (Cheng, Smyth & Guo, 2015). It shows the desire of both parties to enter into the contract. It is important to mention that Tru Blu needs to provide definite and concrete contract content. In other words, the company needs to mention its business operation, purpose, motive, future motive of the company in expanding in the Chinese market. Considering the fact that China follows socialism in conducting business, the government possesses a singular system throughout different regions of the country. The practice is convenient for Australia to conduct business in the foreign market (Penrose, 2017). Compared to the Brazil governmental system which possesses different governmental systems, China holds a stable administration. Hence, Australia’s company would be able to conduct business in the particular market in an effective manner.
On the other aspect, the Australian contract law is formed on the basis of English law. The common law governs the contract law. As per the law, a contract should have an offeror and offeree with valid content for contract formation which include property, services and money. Certain capacities of both sides should be present. Common intention is crucial for contract formation. Contract terms should be clear and certain. It can be observed that Australia and China holds certain similarities in terms of contract formation. However, Tru Blu needs to conduct business in good faith with systematic legal procedure to ensure contract validity. Considering the fact, it is relevant to state that Tru Blu would not face major issue to expand its business in China.
It is necessary to mention that in the Chinese legal system, there is not separate Agent law. Instead, the Civil Juristic Acts and Agency, chapter 4, section 2 governs the law (Tushnet, 2017). The law is compulsory and both principals and agency need to consider the law. Considering the point, it can be said that the Tru Blu company need to observe the law with careful consideration. The company can consider involvement of any agent for the company. However, following successful entrance of the agent, the company cannot dissolve the agent’s participation. As per Chinese legal system, the company need to observe the part of agent and take actions accordingly.
It is necessary to mention that China gives much importance to employees of companies. For instance, if an employee faces unlawful termination, he/she can take help of the government and take proper action against the company. Furthermore, employees can claim for suitable compensation (Zhou & Siems, 2014). On the other aspect, Australia law gives importance to health and welfare of employees. The employee can take action against the company. As per the Australian Fair Work Act 2009, Tru Blu should give importance to proper treatment of employees. National Employee Standards of Australian employment law asserts that the company need to give parental leave, annual and sick leave. In Public holidays, fair work should be observed. It can be stated that both the laws give importance to employee welfare and health.
Compared to other legal norms and regulations of China, the country is less strict with intellectual property law. It is necessary to mention that China possess various substitute products which are often hard to control. Considering the fact, the company of Tru Blu might find it difficult to protect its intellectual property while conducting business in the country. However, the country has amended and improved the law concerning the particular rights. The law has been amended in September 1992, giving more importance about the issue (Chen, 2015). It is important to mention that the company might find it difficult to protect its patent rights. Article 13 of the law asserts that the company has to pay a mentioned amount of royalties to ensure protection of its creative rights.
China gives much importance to the tort law, it is considered as part of civil action. It is important to state that the entire legal system of China gives much importance to the tort law. Hence, it can be stated that the company of Tru Blu needs to consider the relevance of tort law while conducting the business with the China market. As per the tort law Article 1, legal interests and rights hold much importance. It is necessary to mention that the law social harmony and stability of the China government. The law has come into existence in July 2010 as per Article 92.
Tru Blu possesses much scope and opportunity in expanding its business in China. However, the company can consider certain recommendations to ensure its smooth operation in the foreign market. For instance, the company should give importance to Chinese law. Administering language of the particular contract can be Chinese; the act would show goodwill of the Australian company to conduct business in the market.
Conclusion
Conclusively speaking, the Australian company Tru Blu needs to give importance to the foreign market of China. The report clearly shows, compared to the Brazilian market, China holds more prospects, scope and opportunities for conducting business and further expansion. Huge population of China would certainly increase business opportunities for the particular company. With proper effort, the company can certainly open new options for expanding its business in China market to a significant extent. It is important to mention that Tru Blu would not face any major business challenges in conducting business in the market of China if it observes rules and regulations with proper and careful legal regulations.
References
Bianchi, C., Carneiro, J., & Wickramasekera, R. (2018). Internationalisation commitment of emerging market firms: A comparative study of Chile and Brazil. Journal of Small Business and Enterprise Development, 25(2), 201-221.
Chen, J. (2015). Introduction to Chinese Law: Context & Transformation (Revised Expanded Edition).
Chen, L. (2017). Relaxations to Contractual Privity and the Need for Third Party Rights in Chinese Contract Law.
Cheng, Z., Smyth, R., & Guo, F. (2015). The impact of China’s new Labour Contract Law on socioeconomic outcomes for migrant and urban workers. human relations, 68(3), 329-352.
DiMatteo, L. A., & Lei, C. (Eds.). (2017). Chinese Contract Law: Civil and Common Law Perspectives. Cambridge University Press.
Evans, P. B. (2018). Dependent development: The alliance of multinational, state, and local capital in Brazil. Princeton University Press.
Gouvea, R., Kapelianis, D., & Montoya, M. (2018). Marketing challenges and opportunities in emerging economies: A Brazilian perspective. Thunderbird International Business Review, 60(2), 193-205.
Penrose, E. T. (2017). Foreign Investment and the Growth of the Firm 1. In International Business (pp. 33-48). Routledge.
Teberga, P. M. F., Oliva, F. L., & Kotabe, M. (2018). Risk analysis in introduction of new technologies by start-ups in the Brazilian market. Management Decision, 56(1), 64-86.
Top challenges of doing business in Brazil. (2018). Retrieved from https://www.tmf-group.com/en/news-insights/articles/top-challenges/doing-business-in-brazil/
Tushnet, M. (2017). Comparative constitutional law. In The Oxford handbook of comparative law.
Zhou, T., & Siems, M. (2014). Contentious modes of understanding Chinese commercial law. Geo. Mason J. Int’l Com. L., 6, 177.
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