Tuesday, December 27, 2011

GLOBALISATION and GOVERNMENT INCENTIVES (Australia)

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“Discuss why it is increasingly important for the Australian business to expand internationally. Discuss the role of government assistance and incentives in supporting business to expand internationally.”


There are many advantages expanding internationally.


A business could increase in sales and achieve new market by expanding overseas. A business making a particular product or service may find that its product has special international appeal. Ally Craft is a privately owned business on the Gold Coast involved in the production of a wide range of aluminium boats. Because of Australia’s climatic factor, there is a seasonal decline of sales from late February to April. This is a disadvantage in the profit of the business. However, Ally Craft decided to export towards the Pacific Island market where their product is in higher demand because of the tropical climate of this region to maintain cash flow. The business increased in sales due to the new markets gained in Papua New Guinea, New Caledonia and Fiji.


Expanding internationally enables a company to expand via diversification. The risks the business could encounter is reduced by relying solely on a limited market and starting new products or offering new services. Diversification was a step taken by CSR. CSR is a company originally incorporated in New South Wales. Its prime function was sugar refining. However, CSR became varied and diversified moving into building materials and later into resources. Establishing new activities and acquiring existing businesses in the US, New Zealand and other Asian countries achieved expansion which enabled diversification to take place.


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Some businesses expand to acquire resources and gain access to technology. Many resources are unavailable and difficult to obtain locally due to factors like the country’s climate, geological structure and history. This is why some businesses often need to relocate part of their operations in other countries. The Perth make-up artist Rebecca Williams decided to go global from day one. “Germany had the technology we were looking for. They also understood our quality requirements better than others.” (quoted from BRW May 1, 00 p.8). Her brand, Becca Cosmetics is manufactured in Germany, packaged in Italy, and assembled and distributed from Perth, where the company is based.





The government have traditionally accepted the role of addressing flaws in areas where the market fails to provide maximum outcomes, especially in the complex area of globalisation. The government support businesses to expand internationally by providing assistance and incentives. The Australian government have been involved in a process of eliminating tariffs and other trade barrier under the World Trade Organisation (WTO) agreements to foreign direct investment. Australia is increasingly becoming an open economy. If our firms are to rise to the challenge of international competition they need to be outwardly focused. Australian firms must adapt to changing market circumstances. The Government must create an environment where resources both capital and labour can flow to the most productive industries. Government assistance to firms to overcome the risks involved in entering foreign markets. As a result to these actions, international business activities have increased greatly.








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