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Appropriate entry mode to foreign market

Appropriate entry mode to foreign market (Australia)

Investing in a select service and mid-scale hotel in Australia in a wholly owned subsidiary i.e.
going it alone is one is one way of maintaining full control of the business. It’s also one way of
retaining in-house expertise and avoiding the problems of integrations in cases of mergers and
joint ventures. In the year 2007, the total number of hotels offering accommodation services in
Australia numbered 5981 which had a total of 95931 employees in the same sector. The total
income generated for the period was $9876.2 million with an average per establishment getting
$1.7 million. The total expenses for the whole sector were $8843.9 million for the same period.
The industry value added extras businesses generated $4774.9 million for the year ended 2007,
this was equivalent to 0.5% of the GDP for Australia for the same period. These figures resulted
in a gross profit margin of 11% for the sector. Accommodation accounted for 66% of the total
income obtained in the sector, followed by meals at 14.1%. Out of the total number of employees
working in the sector, 28% worked as room attendants, 18% as food and beverage staff , 17% as
clerical and administrative staff, 15% worked as managers and supervisors while the chefs,

Research Proposal 2
cooks and the entire kitchen staff accounted for 12%. Casual employees were 44%, permanent
full time 37% while permanent part time were 12%.
According to the STR Global annual statistics, Australian market has the best occupancy
performers worldwide but with lower rates of room charges compared with other foreign
countries. The rate of growth and available opportunities are expected to grow while the profit
margins are also expected to increase in future. Due to the location of the Australian continent,
its market is mostly from the local population.
An environmental analysis is an integral step towards understanding the local or international
external forces that may grossly affect your investment or business. Most of these factors are
beyond your direct control but you can adopt in the business strategic business plans to take
advantage of the existing opportunities and taking provisions to the likely threats likely to be
encountered. A PESTEL analysis is the best way to analyze the situation.
The PESTEL analysis denotes the words Political, Economical, Social, and technological,
Environmental and Legal. These factors cannot be controlled by any company but their effects
and impact to any organization cannot be ignored as such they have to be analyzed and evaluated
to weigh their effects on the company and its marketing strategies. Pestel analysis is crucial to
the success of any product before it’s launched in a new market or country. This enables a clear
and realistic understanding about the targeted market. Concepts that were applicable and were
highly successful in certain markets may fail totally in other markets and this may be because of
the differences in PESTEL factors.

Research Proposal 3
Political factors include the Australian’s government’s policies that may impact negatively on
the ability of the business to trade freely. For instance restrictions on exports to certain countries
or imposition of certain unfavorable terms to certain imports. Politically Australian is a very
stable country whose democracy in the political domain serves as an example of good
governance. Australia is a very peacefully country and is ranked number 16 by the Global Peace
Index. www.visionof humanity.org 2012
The economic conditions prevailing in Australia make it a world class investing destination for
any business venture. The economic trends in Australia are very favorable for any kind of
investment as the living standards are very high and the consumer spending habits are favorable
to the hotel and tourism investment opportunities whose internal market can also be subsidized
by foreign tourists who travel to the country mostly because of its exotic beaches and the surfing
sports. Other economic factors that may affect the business include the imposition of taxes and
duties as well as the existing fiscal decisions on interest rates and the exchange rate volatility.
This analysis will assist the business in financial planning and in its subsequent strategic
financial planning.
The Australians GPI (Global Peace Index) is relatively peaceful and the social life is also
favorable to investment opportunities. The major aspects that should be taken into account are
the religious beliefs i.e. if there are religious fundamentalist or fanatics and if their actions may
interfere with the hotel business, the lifestyle expectations and the population demographics for
instance gender or ethnic backgrounds. The cultural background of the Australian citizens is
basically friendly to foreigners.

Research Proposal 4
Understanding the rate of technological changes could add a comparative advantage over the
existing competitors and they also may present opportunities that could be exploited.
Communication systems are evolving at a very fast rate and they should be fully exploited to
make the business more efficient both in its production departments and its communication
All business activities operate within the given frameworks of the host countries legal system.
These laws should be studied and any law that may adversely affect the nature of the potential
business should be quickly identified and addressed lawfully. These may include environmental
restrictions. The companies’ Act in Australia protects and ensures fairness in all trading activities
and dispute resolutions. The court system is functional and all decisions are respected and
implemented fully.
All the economies worldwide are well aware of the environmental conditions and factors
surrounding all business operations. All business activities are regularly evaluated in relation to
set international standards in relation to the impact on global warming and the changing weather
conditions globally. These led to the growth of the green led initiative which calls for more
actions to save the planet earth. The Australian government is a member of the UN assembly
whose Environmental departments ensure the protection of the environment. The efficient
operations are the bases through which the National Australian Built Environment Rating System
(NABERS) rates the existing buildings including hotels. The Green Building Council of
Australia rates and issues hotel rating systems as part of the existing corporate policies and
demands minimum environmental standards as part of the contract review process. Investing in

Research Proposal 5
the natural energy efficient systems and technology is increasingly becoming profitable in the
Australian hotel industry.
Finally the PESTEL analysis also provides a very useful tool for establishing and determining
the overall opportunities and threats facing the organization. When an internal review of the
business strengths and weakness are also taken into consideration when analyzing the PESTLE
standards then a strong strategic plan may be developed.
To conclude, there’s no doubt whatsoever that these is the best time to invest in the hotel
industry in Australia. The previous year’s new lifestyle brands have entered the Australian hotel
industry and have become very popular. International brands like the holiday, Hyatt place, Aloft
have found their way into foreign markets like the US but they are yet to invest in Australia.
(Deloitte, 2012)Some local Australians have also picked up and joined the trends and have also
gained a share in the market like the Eight hotels and other new establishments for instance
Emporium in Brisbane.

Research Proposal 6


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