This paper seeks to find out the relevant policy, standards, and guidelines that affect business and marketing opportunities in Australia and abroad. It looks at the legislation affecting marketing and how trade agreements have enhanced global trade. Lastly, the paper looks at key Asia Pacific markets and explores ways in which a business can take advantage of the market opportunities available.
Australian |
Example |
Description |
Environmental matters |
The Environmental Sustainability Policy |
This policy guides on efficient energy utilization, waste management, pollution control, efficient water use, and minimization of greenhouse gas emissions (Australian Department of Human Services 2018). |
Human rights |
Australia’s Anti-discrimination Law |
The law states that it is illegal to discriminate workers based on sex, race, their disability, or religious affiliation (Australian Government. Attorney-General’s Department 2018). |
Labour relations |
Industrial Relations Policy |
The policy protects the employees by advocating for fair work, safe and modern workplaces that enhance productivity (Australian Department of Jobs and Small Business 2018). |
Packaging |
The Australian Packaging Covenant |
The covenant encourages business members to use recyclable materials that prevent environmental pollution (Australian Department of Environment and Energy (2017). |
Risk management |
The Australia and New Zealand Risk Management Standard |
This policy establishes that businesses face risks in every opportunity pursue and should, therefore, develop mechanisms to address those risks (Australian Council for the Arts [ACA] 2014). |
International |
Example |
Description |
Environmental matters |
The ISO 14000 Environmental Management Standards |
These are series of environmental management guidelines developed to standardize all environmental activities in organizations across the world (Rouse 2012). |
Human rights |
The United Nations Guiding Principles on Business and Human Rights |
Established in 2011, these principles underpin three activities; the state to protect, to respect and lastly, to ensure a remedy for those working in businesses (United Nations Commission on Human Rights 2011). |
Labour relations |
International Labour Standards |
These are labour agreements developed by the international labour organization to safeguard the rights of workers and enhance their job security internationally (Heintz, 2011). |
Packaging |
International Standard Organization Global Packaging Standards |
These are internationally harmonized procedures to ensure packaging material is recyclable, minimal, reusable, and environmentally friendly (Timm 2013). |
Risk management |
The ISO 31000 Series |
These are global standards developed by the International standard organization detailing procedures for identifying risks in businesses and ways of mitigating those risks (ACA 2014). |
E-commerce is short for electronic commerce. It entails transactions carried out electronically particularly the internet. Transactions involve credit cards, money transfer and email order requests (Rouse 2012).
B2B or business to business involves businesses transacting with each other for instance a manufacturer selling to a wholesaler. On the other hand, B2C or a business to the consumer means a business conducting transactions directly with a consumer, for example, a retailer selling goods to a customer.
C2C or Consumer to Consumer business implies customers transacting business with each other mainly through an enabling environment like online auctioning sites. C2B or Consumer to Business means customers trading with companies. An example is where a client posts an order online with a tentative budget and companies review the order and bid. The customer picks the most suitable offer. Lastly, B2G or Business to Government is where private companies do business with governments for instance when the government tenders for a project and private companies bid for that tender (Watson 2008).
Brick and mortar are businesses which only maintain traditional physical stores where customers have to visit to conduct a transaction whereas click and mortar businesses combine both the traditional physical store and also an e-commerce option for online transactions (Rouse 2012)
According to Nielsen (2015) among the global e-commerce companies that provide services to Australia include:
Legislation |
Explanation |
1. Country of Origin Food Labelling Law |
Stricter labelling requirement means that businesses will incur more packaging cost for verification and adherence to requirements. |
2. Anti-discrimination legislation |
Businesses will be forced to realign their products to meet requirements of anti-discrimination which will also affect market segmentation. |
3. Australian Consumer Law |
Penalties from unfair trade practices, unlawful contracts, and agreements imply that businesses will incur more costs than before to operate legally. |
4. The Competition Laws |
Businesses will benefit from better protection against unfair trade practices such false advertisement as well as consumer protection from the state. |
5. Migration Laws |
Stringent immigration laws imply that fewer people will be getting into the country which will lead to a reduced market in the future. |
6. National Privacy Legislation |
Updates to the National Privacy Act means that businesses will have lesser freedom with information for market intelligence lest they breach data privacy laws. |
7. Environmental Legislation |
The ban on plastics will lead to increased expenses for alternative packaging materials. Companies manufacturing plastic packages will lose business. |
8. Product Liability Regulation |
Requirements to provide full information to consumers on product safety and the stringent regulation by the state will benefit consumers but may lead to high Marketing costs to comply. |
9. Legal aspects of bilateral and multilateral trade agreements |
The Free Trade Agreement which seeks to level the field of international trade may disadvantage Australian businesses dealing with large United States Multinationals marketing of biotechnology products. |
10.Employment Laws; Fair Work Act |
Labour costs are most likely to go up which means that the cost of production will lead to higher cost of marketing and commodity prices. |
The primary role of OECD is to ensure that there is a level playing field for all organizations doing business globally. With this regard, OECD provides information on global trade which not only indicates opportunities but also highlights trade deficits. To the member countries, OECD is committed to highlighting global trading opportunities to increase their economy and the standards of living. Moreover, the organization highlights on global indices such as market performance, cost of doing businesses and, ease of doing business across the world which serves to ensure equity in the conduct of global business (Organisation for Economic Co-operation and Development [OECD] 2018).
Trade patterns that may have a major impact on A & A’s market expansion
To begin with, the market for instant coffee has grown remarkably whereby in Vietnam and China the market has grown by 15.1% and15% respectively while in India and Indonesia, it grew by 19.6% compared to marginal global growth of 2% globally (Forsyth 2017).
Following market liberalization, there has been a shift of inflow of Foreign Direct Investments from manufacturing to the service sector. This has seen the growth of opportunities in the food service industry (WTO 2011).
Growth in the coffee market in Asia has in part been as a result of innovation of coffee products. New product launches for instance between the year 2011 and 2016 grew by 95% (Forsyth 2017).
An increase in bilateral trade agreements between governments in Asia particularly the Free trade agreement has seen an expanded market where the private sector has ventured to fulfill the demand for goods and services (WTO 2011).
Lastly, there has been an evolution of tariff policies whereby in Asia for instance, there have been low applied tariffs and from the market trends those tariffs and barriers are decreasing considerably (OECD 2018).
Five international business and electronic commerce factors that affect e-commerce diffusion in the Asia-Pacific market
An expansion strategy by multinationals in the Asia-Pacific region brings a culture of e-commerce with them which has then filtrated the region. This has led to the adoption of e-commerce practices (Desjardins 2014).
Firms in the transport sector aided by rapid infrastructure growth in the Asia-Pacific region are getting exposed particularly in the United States of America and Australia where e-commerce has been successful and they want to adopt the system (Sato 2009).
The growth of trade and bilateral relations such as Free trade agreement has seen businesses in Asia-Pacific partnering with multinationals that already use e-commerce encourage adoption of the same to foster similar standards in business operations(Watson 2008).
The growth of international money transfer systems such as PayPal, Master Card, UnionPay has increased an appetite for conducting online transactions which in turn has created a market for e-commerce (Parnham 2017).
Availability of high skilled personnel due to increased movement of people and outsourcing of services particularly in India, China and Malaysia has seen transfer people with IT skills who establish the e-commerce system in the region (WTO 2011).
Three Asia-Pacific countries that Australia has free trade or protectionist agreement with
The ranking of the countries according to ease of doing business would be;
The justification for the ranking is because Australia has a long working relationship with Singapore as the first choice. This relationship goes beyond the year 2003. Both countries have hence been trading for close to two decades especially in e-commerce, education the service sector which A & A has interest in.
On the other hand, Australia also has a free trade agreement with Thailand dating to over 20 years. However, because, Thailand has a stricter protectionist policy, it would be relatively difficult to establish a business there (Export Council of Australia [ECA] 2018).
Lastly, China comes last because their trading agreement came into force in 2010 along with a number of other ASEAN countries. Besides China would be a difficult market for A & A because the preference for tea as opposed to coffee (ASEAN 2018).
International trade policies and agreements
Singapore and Australia have a cohesive bilateral agreement dubbed Singapore-Australia Free Trade Agreement (SAFTA) which was established in 2003. Singapore is also the largest South East Asia trading partner to Australia. Moreover, according to this agreement, Australia has access to professional services market, education services, customs procedures, and business travel market which would benefit A&A (DFAT 2018).
Thailand-Australia Free trade Agreement (TAFTA) was established in 2005 significantly reducing the tariffs Thailand had placed to Australia. The agreement gave rise to business opportunities in food processing, beverages, mining, automotive and agricultural trade (Bane 2018).
The China Australia Free Trade Agreement (ChAFTA) is a bilateral agreement between the 2 countries. Australia has access to a huge market of over 1.4 billion people for marketing professional services, food and beverages, goods and services and FDI (WTO 2011).
The most promising Market
From the analysis, the most promising market is China for the following reasons. Firstly, it offers a market of over 1.4 billion customers which by all accounts is huge. The Gross Domestic Product is 11.2 Trillion US dollars. Moreover, the market tariffs for food and beverages have been decreased considerably (Sherwood 2018).
In comparison, Singapore has a population of only 5.6 million people and GDP of 52.9 Billion US Dollars. Though this is impressive for a country with such a low population it simply cannot compare to China. The same case applies to Thailand which has a potential market of 68.9 million and a GDPA of 58.9 billion US Dollars. From the analysis, China is the most promising market by far (WTO 2015).
China’s economic, political, social and cultural situation
Economic Factors
China has grown tremendously from the year 2000 with a foreign direct investment of 3.2 trillion to 7.3 trillion US Dollars in 2015 (WTO 2015). The country has a GDP of 11.2 trillion US dollars and an income per capita of 15, 500 USD which denotes a moderate to high purchasing parity of goods and services.
Political factors
Although China offers a huge market for goods and services, its’ governance system, though stabilizing lately, places huge political risks to the business. China’s history of human rights abuses is well documented. The national government under the leading party Communist Party of China CPC is often jostling with the provincial administration. The government has of late supported e-commerce operations and cross-border business (Desjardins 2014).
Social Factors
China’s demography makes it an interesting market for international trade. The population is currently at 1.4 Billion people. For this reason cost of labour is cheap and production costs low. The literacy levels are over 90% and internet users are over 430 million. The leading e-commerce sites are Taobao and Alibaba group companies. The population has high purchasing parity (WTO 2015).
Cultural Factors
The Chinese like to make collective decisions as a group which affects the speed decisions are made. The language barrier is also a minor drawback. To overcome this, it’s essential to have a translator and build relationships as the Chinese prefer close contact. The banking system faces challenges as people still prefer traditional ways of handling money. The Chinese love to take beverages and prefer to present gifts to their loved ones (Sherwood 2018).
How each of these factors can affect the potential opportunities identified in 1.4
The growing economy of China will lead to an increase in purchasing parity which in turn will lead to growth prospects for investments, food and beverages, business travel and education and professional services. The political factors are stabilizing and will allow more cross-border businesses as well as reduce trade tariffs hence leading to better business prospects for food and beverage business. This will also increase the prospect for foreign investments.
The social factors like growth in population will increase the market for the food and beverages, education and professional services whereas the political factors will pose threat to foreign investments. Cultural aspects of gifting should increase business for beverages, products, and services as well as grow education prospects (Bane 2018).
An increase in the market for the instant coffee band ready to drink coffee by over 29 % implies that the people’s tastes and preferences in other beverages such as tea and cocoa are changing. As a result, this is a market gap that requires full exploitation by A&A. On the other hand, there is a huge market potential for innovated coffee products. This implies that people may prefer the convenience of taking their coffee without necessarily visiting any coffee houses. Lastly, a reduction in agricultural tariffs in China means that the cost of production will go down and the profit margins will rise.
Table1: Australia’s exports of coffee and substitutes to China
AUSTRALIA’S MERCHANDISE EXPORTS AND IMPORTS |
||||||||||
Trade type |
Total exports |
|||||||||
Sector |
(All) |
|||||||||
Country |
China |
|||||||||
Sum of A$’000 |
Column Labels |
|
|
|
|
|
|
|
|
|
Row Labels |
FY2006 |
FY2007 |
FY2008 |
FY2009 |
FY2010 |
FY2011 |
FY2012 |
FY2013 |
FY2014 |
FY2015 |
071 Coffee & substitutes |
705 |
457 |
582 |
393 |
971 |
798 |
1,107 |
858 |
753 |
1,278 |
Grand Total |
705 |
457 |
582 |
393 |
971 |
798 |
1,107 |
858 |
753 |
1,278 |
Interpretation
The coffee and substitute exports from Australia to China are on an upward growth trajectory beginning with 705 metric tonnes in 2006 and ending with 1278 metric tonnes in 2015. From the year 2010 when the ChAFTA took full effect, there was a very sharp increase in coffee export compared to other preceding years. The table shows there is potential to grow the market further particularly given China’s growing economy (DFAT 2018).
New and emerging business and electronic commerce markets
The Innovation of new products in the coffee industry for, instance, is accounting for over 26% of new coffee products and the market resonates with this new business. A&A should consider this new business before the market is crowded and they are pushed out completely.
Automation of business processes is another emerging opportunity. This not only enables seamless delivery of products to customers, it keeps them loyal to the business by cultivating a rewarding business relationship. This business is expensive to put up and returns on investment uncertain in the short term. A&A may want to consider opting out of this.
Two emerging E-commerce markets
India has a population of 1.32 billion people and a GDP of 2.264 trillion USD. It is one of the fastest growing countries in terms of outsourcing businesses. The country continues to see an increase of e-commerce as businesses move online (Desjardins 2014).
Singapore has a population of only 5.6 million and a GDP of297 billion USD. It is experiencing unprecedented growth terms of e-commerce and A&A should consider moving to Singapore and Benefit from the Opportunities before the Market Saturates (Watson 2008).
Political Stability and Corruption
Political stability in China is guaranteed. There may, however, be some upheaval is the opposition responds to internet restrictions. The biggest hardship facing the businesses is restrictions on internet use which may lead to communication and e-commerce challenges and profit taxes imposed on foreign companies. Corruption though low is threatening 3% of the Economy (ASEAN 2018).
Financial Stability
The Chinese market continues to grow steadily at 7%. The foreign direct investments have grown from 3.2 trillion US Dollars to 7.3 US Dollars between 2002 and 2015. The Income per capita is at 15,500 dollars which signify potential purchasing parity. However global shocks from trade restrictions and tariffs particularly in the USA on steel and other export products may affect the economic growth trajectory (WTO 2015).
Available ICT and telecommunications infrastructure for the e-commerce market
ICT and enabling e-commerce technology is present in China. The biggest e-commerce companies, Taobao and Alibaba have benefited from this infrastructure. The ChAFTA trade agreement facilitated for e-commerce opportunities in China which present enormous business potential. However internet restrictions and strict regulation may jeopardize e-commerce (DFAT 2018).
Legal risks in selling goods and services online to the international market
In the past, the legal statutes applying to e-commerce were unclear and non-invasive. However, as of 2017, China introduced an e-commerce legislation to promote growth inside the country. Over one-third of China bought goods outside the country through e-commerce. The internet regulation will definitely restrict the space e-commerce had before.
Legal and regulatory requirements
As opposed to other Countries in the west, Chinese Government owns over 76% of the country assets and controls over 21% of GDP through trade. The major challenge of establishing a business in China is, therefore, negotiating with the government. Trade tariffs exist for foreign companies exporting agricultural products such as those for A&A.
Trade barriers including logistics
Since China joined WTO in 2001, it has significantly reduced trade barriers and opened the business to the World. However, there exist tariff and nontariff barriers on exports from other countries. Logistics differ from province to province and have not been harmonized outside the economic zones.
Cultural factors including language barriers
Companies willing to work in China have to build links with existing networks. This is because language barrier is a big problem. The language spoken is Chinese and Mandarin with few English speakers. Cultural events like Chinese New year restrict business growth as people retreat to celebrate.
Table 2: Risk acceptability scale
Rating |
Criteria |
1. |
Remote likelihood of risk (Very Acceptable) |
2. |
Risk unlikely to happen (Acceptable) |
3. |
Average Likelihood of risk (Mildly acceptable) |
4. |
Risk Likely to Happen (Mildly unacceptable) |
5. |
Risk extremely likely to happen(Highly Unacceptable) |
Risk Factor |
Rating |
Explanation |
Political Stability and Corruption |
1 |
China is politically stable and instances of corruption are very few. The CPC ruling party has the support of the majority. For this reason, this risk is remotely likely to happen. |
Financial Stability |
4 |
China’s growing debt is a major concern which means that the accelerated growth will be hard to sustain without readily available credit. There is therefore, a good chance that this risk is likely to happen and is mildly unacceptable. |
Available ICT and telecommunications infrastructure for the e-commerce market |
2 |
Availability of ICT and Telecommunication infrastructure is guaranteed particularly in the economic zones. The infrastructure is, however, a bit limited in the provinces. E-commerce is vibrant with China ranked number 3. This risk is unlikely to happen. |
Legal risks in selling goods and services online to the international market |
2 |
Over a third of China buy goods and services internationally through e-commerce. Legal cases involving online buying of goods and services are rare. This may, however, change in future with the internet restrictions but for now, the risk is unlikely to happen. |
Legal and regulatory requirements |
4 |
China is very strict on legal and regulatory requirement though it has relaxed these after joining the WTO. Many multinationals still complain of tedious legal and regulatory requirements hence this risk is likely to happen. |
Trade barriers including logistics |
3 |
There are moderate trade barriers involving tariffs on imports and restrictions on select trade items. Tariffs are high on agricultural products and low on industrial products. The government controls 76percent of the country assets hence excessive negotiations. This risk is average and therefore mildly acceptable. |
Cultural factors including language barriers |
4 |
Cultural events such as the moon festival and the Chinese new year festival impact on businesses. Also most Chinese speak mandarin making this risk likely to happen and therefore mildly unacceptable. |
The economy of China which has been growing at a steady 7% is expected to decline in coming years owing to among other factors, high debt to GDP ratio and currency fluctuations which will affect the Yuan now that it is not being undervalued in China at the expense of other currencies (WTO 2015).
In effect, the current trade tariffs being sanctioned by the United States, China’s biggest trading partner particularly in steel products and non-food products. The economic stagnation of major European states such as Greece and market maturity in these countries for food products which has stagnated at 2% means that China will experience lesser demand for her products.
Marketing Opportunity |
How it fits with A & A strategic direction |
· Nontariffs on Trade in food and beverage products |
· A & A is seeking to expand outside the country and sell coffee directly to customers in the Asia-Pacific region and this is a viable market. |
· Trade in Professionals is part of ChAFTA agreement |
· A&A Can leverage their highly trained coffee professionals to fully exploit the Chinese Market |
· Warehousing and Foreign Direct Investments |
· A&A can take advantage of this marketing opportunity to stock their coffee in their warehouse when prices are low to overcome price fluctuations in the market and have a ready supply in the market |
Marketing Opportunity |
Impact on Current Business Customer base |
· Trade in food and beverage products (Coffee) |
· This will expand A&A current business and customer base since their market in Australia solely depends on coffee vending machines and coffee makers. Direct trade in coffee products will definitely lock in more customers as they will also be dependent on their coffee when they buy their machines. |
· Trade in Professionals is part of ChAFTA agreement(Human Resource) |
· The current business will most likely suffer as A&A Trains and moves their human resource professionals to China to cater to a new market. However, their customers will not be affected as A&A will maintain a presence in Australia undertaking their present business. |
· Warehousing and Foreign Direct Investments (Storage and Manufacturing) |
· Once A&A move their products from their current warehouse to China, there will be fewer products in their Australia Holding facility. This may lead to loss of business. If the current customer base keeps demanding for products they are not supplied with, they may switch to another supplier. |
Marketing Opportunity |
Cost Details |
Estimated Cost in First Year $ |
· Trade in food and beverage products (Coffee) |
· Total profits from 2010-2014= 5.5$M AUD · Plough back the Profit becomes initial cost=5.5$m AUD |
· From the A&A reports estimated cost average 80% of the initial cost(5.5m$ AUD) · Estimated Cost will be 4.4$m AUD |
· Trade in Professionals is part of ChAFTA agreement(Human Resource) |
· Cost of HR will be Approximately 0.045$m AUD |
· HR Cost per Year will be approximately 0.50$m AUD |
· Warehousing and Foreign Direct Investments (Storage and Manufacturing) |
Cost of hiring a warehouse facility will be 0.05$m AUD |
Cost per Year will be approximately 0.60$m AUD |
Total |
5.5$m AUD |
Marketing Opportunity |
Benefit details |
Estimated Benefit within 12 Months $ |
Trade in food and beverage products (Coffee) |
· 25% increase in the annual sale of coffee |
· 25/100 *4.4 · Estimated annual profits will be 1.1$m AUD |
Trade in Professionals is part of ChAFTA agreement(Human Resource) |
Human resource will make savings worth 0.25$m Per Year |
· Cost savings of 0.25$m annually |
Warehousing and Foreign Direct Investments (Storage and Manufacturing) |
Rental income from warehouse 0.75$m |
· Rental income of 0.75$m |
Total |
– |
· 2.1$m AUD |
Payback period = Initial Outlay/Returns |
= 5.5/2.1=2.6 Years
Year |
Estimated Costs |
Cumulative Costs |
Estimated Benefits |
Cumulative Benefits |
0 |
4.4 $m AUD |
4.4$m AUD |
2.1$m AUD |
2.1$m AUD |
1 |
1.0$m AUD |
1.0$m AUD |
2.1$M AUD |
2.1$M AUD |
2 |
1.0$m AUD |
1.0$m AUD |
2.1$M AUD |
2.1$M AUD |
3 |
1.0$m AUD |
1.0$m AUD |
2.1$M AUD |
2.1$M AUD |
|
Total: |
7.4$m AUD |
8.4$M AUD |
Competitor |
Established Date and Size |
Market Share (%) |
Value to Customers |
Strengths |
Weaknesses |
· Starbucks
|
1999 |
31.5% |
Offers quality coffee in upscale locations |
· International presence · Famous brand · Strong financial backing |
· Relatively new to the market · Lacks Cultural integration · Covers only urban areas. Source: (Parnham 2017) |
· UBC Coffee |
1997 |
22.5% |
Charges lower price than competition |
· Wide coverage in China · Low-cost strategy · Well integrated into the Chinese culture |
· Only operates in China · Deals in only one product · Lacks strong financial backing. Source: (Parnham 2017) |
· Straits Cafe |
1997 |
7.7% |
Offers a variety of coffee products |
· Dedicated human resources · Quick delivery services · Well connected |
· Lacks financial might of competition · Lacks exposure outside China · Operates few stores Source: (Parnham 2017) |
· Costa Cafe |
1978 |
5.5% |
Long History with customers |
· Strong marketing team · Strong online presence · Strong brand presence |
· Smallest compared to the competition · Only operates on the fringes of cities · Weak financial backing Source: (Parnham 2017) |
· Macdonald |
1992 |
6.5% |
Diversity of products |
· Popular among tourist · Strong international presence · A Dedicated website for taking orders |
· Product diversity leads to poor quality services · Orders take long to be served · Lack of cultural integration in the market Source: (Parnham 2017) |
Conclusion
In conclusion, this study observes that trade in food and beverage product (coffee) is the highest ranked marketing opportunity. This is because it commands the lowest risk factors that may threaten the trade. The Chinese market for coffee is growing at 15% with over 1.4 billion customers. Trading in coffee also offers far better benefits than the cost incurred. It is observed that one can recoup investments in just over two years. The return on investments is also very promising at 11.9%.
Investment in warehousing comes in the second place. The ChAFTA bilateral trade agreement encourages foreign direct investments. The risk factors are considerably low and acceptable. There are numerous opportunities for growth in FDI since China Joined the WTO in 2015. Warehousing investment can offset the initial cost by providing rental income and other benefits like easy access to raw materials stored. It also has good prospects for return on investments.
Lastly, professional human resource services come at the third place. It is crucial to note that companies can benefit immensely from trained human resources who can lower the cost of production and attract new customers. There has been an increase in cross-border movement into China from just under 150 million people in 2000 to over 350million in the year 2014(WTO 2015). This marketing opportunity also provides attractive cost-benefits and a good return on investments.
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