Market Entry – ANZ2

NEED TO EXPAND/ EXPLORE?

  • Has the business shown substantial growth in the region where it was established?
  • Is there a potential for the products and services of your organisation to assist overseas customers?
  • Does your business plan include an expansion strategy?
  • Do you have substantial funding/ investment resources to explore a new marketplace?

WHY AUSTRALIA?

  • Key question relates to “Why should you pursue commercial entry into Australia / launch a start-up in Australia?”
  • Key Aspects to consider:
    • What are your reasons to Enter the market?
      • Market Development: Growth from entering a new market & derive efficiency bonuses from operating overseas.
      • Resource Access: Access potentially more advanced resources
      • Learning: Understand more advanced technologies / compete in a developed, sophisticated and difficult market.
    • Why to not enter the market?
      • Liability of the unknown (for overseas firms only)
        • 1) Differences in legislation/ corporate bodies between countries
        • 2) Discrimination (Active or passive) by customers
    • Entry Readiness
      • Is your source of competitive advantage sustainable?
      • Do you understand & are you prepared for the increased complexity of operating in another country / a new market?
      • Do you have a strategy?

 

Action: Upon consideration of these factors, are you ready for entry into another market, and do the motives for this entry outweigh the challenges of the unknown you would have for making an entry in this region? 

 

WHERE IN AUSTRALIA?

  • Key question relates to “Where should you pursue your international entry?”
  • This not only relates towards a macro level of “Which country?”, but also “Where in Australia”.
  • Key Aspects of Consideration
    • Macro Context
      • Regulatory / Economic Factors
        • Industrial Policies
        • FDI policies
        • Special Economic Zones / Areas with more favourable incentives
    • Micro Context
      • Cost & Tax Factors
        • Transportation + Construction Costs
        • Labour Costs / Costs of Raw Materials / Land
        • Financing + Tax Costs
      • Demand Factors
        • Market Size + Growth
        • Extent of Customer Presence
        • Local Competition
      • Strategic Factors
        • Infrastructure
        • Concentration of industries
        • Workforce Productivity
      • Socio-political Factors
        • Political Landscape
        • Cultural Barriers
          • What is the cultural difference between the countries?
        • Institutional Factors
          • How do institutions differ between home and host country?
        • Local Business Practices (i.e., how foreign / distant are they from established practices)
        • Government Efficiency / Corruption level
        • Government attitude towards foreign businesses
        • Attitudes towards foreign business
        • Sustainable Development Requirements (i.e. pollution, recycling etc)

 

Action: Upon consideration of these factors, is Australia the correct market for your business, and if so, where specifically in Australia should you target? 

 

WHEN TO MAKE AN ENTRY IN AUSTRALIA?

  • Key Question relates to “When should my business pursue launching/ expansion within Australia?”
  • Key Factors to Consider are: Are you an early or late mover?
    • Early Mover Advantages
      • Establish Market Power
        • Establish barriers to entry.
        • Utilise technological leadership.
        • Develop customer loyalty.
        • Establish product positioning.
      • Pre-emptive opportunities
        • Pre-empt marketing & resource base.
        • Brand Recognition
      • Strategic Options
        • Location selection
        • Access to priority infrastructure
        • Low competition
    • Early Mover Disadvantages
      • Environmental Uncertainty
        • Underdeveloped regulations / lack of government experience
        • Embryonic industry
      • Operational Risks
        • Lack of supply and inputs
        • Lack of supporting service.
        • Poor infrastructure
        • Unsuitable market structure
      • Extra – Operational costs
        • Learning / adaptation costs
        • Local training costs
        • Anti – imitation costs
    • Late Mover Advantages:
      • Free ride on first mover investments
      • Resolution of technological and market uncertainties
      • First mover inability to adapt to changes.
    • Late Mover Disadvantages
      • Barriers to entry by incumbents
      • Lack of established brand recognition
      • Competing with products potentially late in their product lifecycle
  • Further key factors to consider:
    • When is timing most optimum for your firm?
      • Consider Business Readiness
        • Will delaying market entry enable better achievement of goals?

 

Action: Upon consideration of these factors, is your company an early or late mover, and will the benefits / costs associated with this affect the timing of your market entry? 

 

WHAT BUSINESS MODEL TO WORK ON IN AUSTRALIA?

  • Key Question relates to “What should my business pursue expansion / launching within Australia?”
    • Key factors to consider are: Which business functions should I look towards to internationalise within Australia & Why.
      • Primary Activities
        • Operations
        • Marketing & Sales
        • Service
        • R&D
      • Support Activities
        • HR management
        • Tech Development
        • Procurement
        • Infrastructure
        • Inbound and Outbound Logistics
    • Connect these factors to motives for internationalisation.
      • i.e., will you receive natural resource seeking, market, efficiency or innovation related benefits to locating these activities within Australia?

 

Action: Upon consideration of these factors, what business activities should your company locate within Australia and why? 

 

AND HOW TO GO ABOUT MAKING AN ENTRY IN AUSTRALIA?

  • Key Question relates to “What entry mode should my business consider and why?”

  • Consideration 1: Decide on the scale of entry.
    • Risk & Return V/s the level of Organisational Commitment and Control: Trade off related to the rate of return and the degree of organisational commitment.
      • Ie the more you commit to the expansion within Australia.
  • Consideration 2: Decide on Specific Entry Mode
    • Entry Mode Options
      • Equity:
        • JV
          • Various JV Types (Minority, Majority, Split)
            • Advantages
              • Share costs, risks and profits
              • Access to partners knowledge and assets
              • More politically viable
            • Disadvantages
              • Diverging goals and interests of partners
              • Limited equity and operational control
              • Difficult to coordinate globally.
  • Non-Equity
    • Exports
      • Direct
        • Advantages
        • Concentrate economies of scale in home country production.
        • Control distribution
        • Disadvantages
          • Transportation Costs
          • Marketing distance from customers (cognitively separated)
          • Subject to trade barriers / protectionism
      • Non-Direct
        • Advantages
          • Concentrate economies of scale in home country production.
          • Reduced need to manage actual exports.
        • Disadvantages
          • Reduced distribution control.
          • Lack of development of overseas operate expertise.
          • Open to exploitation by 3rdparty distributor
  • Contractual Agreements
    • Licensing / Franchising
      • Advantages
        • Low development costs
        • Low risk in for expansion
      • Disadvantages
        • Reduced control of technology.
        • Risk taking competitors.
        • Cannot coordinate globally.

Action: Upon consideration of these factors, what degree is your business willing to commit, and which corresponding entry mode will you utilise? 

 

For more information and if you need any further assistance in your endeavours, please reach out to us at info@akiko.com.au

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