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ENTREPRENEURIAL CHALLENGES AND THE 4 P's IN AUSTRALIA (A POSITION PAPER CONTRASTING AUSTRALIAN AND AMERICAN SME BUSINESS SYSTEMS) Leo Simpson Eastern Washington University ABSTRACT Differences in social and economic orientation between Australia and the United States affect the basic approach to doing business in the two countries. This paper analyzes the impact of a more socialistic view by government, labor unions, and by employees on the operation of small/medium sized enterprise in Australia. The "Four P's" are analyzed for small/medium firms in Australia in the context of regulations and social values of society. Significant differences exist between how businesses in Australia and in the United States deal with pricing, product availability, promotional strategy, and wages and benefits for employees. OVERVIEW AND INTRODUCTION When observing business operations in countries having strong common ties to British heritage, a casual observer might assume businesses operate similarly in England, Canada, the United States, New Zealand, Australia, and other such countries. As a visitor in each of these countries, extended observations are needed to identify the subtle but substantial differences in strategy and business methods. This is a position paper which contrasts some of these methods and strategies used in small/medium sized enterprises (SME's) in Australia and the United States. Aside from dialectical differences, when stepping off the plane in Sydney or Brisbane, one could just as easily be stepping off in Boston or Seattle as far as, the eye can tell. Familiar "Golden Arches", "KFC" signs, and small shops and malls are immediately apparent. What is not immediately apparent, however, is a cultural and social difference pervasive enough to permeate its way throughout business and political operations across the two countries. These cultural differences affect the way businesses operate and the role business plays in society. Australia remains part of still loyal to the Queen. England is to have a more Australia than the United parties in Australia (the other parties such as the
the British Commonwealth today and is The impact of this direct tie to socialistic system of governance in States. Though there are two primary Labor Party and the Liberal Party), Green Party are influential and often
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needed by the majority party to carry a majority of votes. The importance of the political structure in understanding how businesses operate is that the Labor Party (which is more socialistic than the Liberal Party) has been in control of national and state governments for the past fourteen years. Under this government, controls and regulations have been enacted which affect SME's methods of operation. These effects can be identified throughout the Australian business system and contrasted with the relatively more "free market system" of the relatively more "capitalistic" United States. As a result of the Labor Party being in control of government for the past fourteen years (the Liberal Party took over in March, 1996), labor unions are very strong in Australia. Unlike the United States there are no exclusions for small businesses from governmental regulations of labor practices. These effects of government control on labor are pervasive In business and affect business operations on a daily basis including "The Four P's of Marketing." The following section looks at each of the "Four P's" and contrasts how that "PI" differs in the Australian and United States business operations. PRODUCT Product choice (including the service sector) is much more limited in Australia than the United States. When lifestyle and quality of life in the two nations are comparable, product availability in Australia is limited by the lack of a major manufacturing sector in Australia, distance from available offshore manufacturers, and import restrictions imposed by government and labor. Imported products which are also produced inland in Australia (such as cars) face an enormous tariff before they can enter the country. In the case of cars, jewelry, and products of this type, import tariffs range from 50% to 200% and are paid to the government. Luxury cars and other luxury products often face a higher import tariff due to the socialistic view that this is frivolous and the rich can afford to pay more. Products shipped through the tightly controlled (by unions) unloading docks are notoriously damaged or disappear. When there is labor unrest, delays of months are common in product leaving the docks in both directions. While Australian industry is limited in what they can and are willing to produce, the public is increasingly being exposed to products made in the United States or elsewhere through newly installed Cable Network Systems and the Internet (just now making it into businesses and a few homes). Ford Taurus's, Oreo Cookies, California-Navel Oranges, and many other U.S. products have just begun arriving in Australia. Shipping, cows are also very expensive to Australia from major manufacturing nations further restricting product availability and adding to the price of Imported products.
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PLACE The Australian continent is a large land mass approximately the size of the continental United States. The primary population of Australia lives around the edges of the country near the shore with concentrations of people in a few metropolitan areas. With an overall population of just over 17 million; 10 million live in the seven largest cities with over 4 million in Sydney alone. The location of the primary cities near the shore and the geographic distance between the cities creates Internal distribution difficulties within the country. Compounding this problem the highway system connecting cities is typically two lane (one each way) with the exception at areas near the cities. Even though freight trucks are larger than in the United States, the cost of fuel, underdeveloped road systems, and great distances cause difficulties in supply Internationally. This makes distribution of manufactured products produced inside the countries to all parts of the country expensive and difficult. Locally within each metropolitan area growth is significant with few geographical limits on expansion in any direction. As new housing districts are created, a shopping mall is built nearby to satisfy shopping and entertainment needs, even though overhead costs are high in the mall, most small businesses located in the malls due to the strong customer preference for mail shopping. Outside mail areas, road access and limited parking make shopping awkward for consumers. Population characteristics differ widely from metropolitan area to metropolitan area. Southeastern cities have a strong British influence; western cities are remote and serve huge geographic areas; and Sydney is an international city of over 4 million with significant immigrant populations. Many of these immigrants are allowed into Australia as long a they invest $500,000 in a business. Once inside the country, they can then bring In family members. A common practice is for immigrant families to pool resources to got into the country and then that Individual "sponsors" other family members to help operate the business. This loophole in Australian Immigration Policy creates substantial competition for resident Australians who must pay their-employees very high wages and cannot compete with a large family having no employees. This type of competitiveness is more prevalent in the large metropolitan areas at this time. PRICING Pricing of products and services in most of Australia exceeds the cost of the same products and services in the United States. The standard of living, however, is not significantly different because wages are higher in Australia than in the United States in comparable jobs. Due to the strong union influence and Labor Party control of government, SME's in Australia are required to
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match or pay more than "target wages" for each employee. The effect is to have a minimum wage for each type of job (e.g. jewelry shop clerks minimum or "target" is $8.40 whereas a server at a restaurant would be different). Tipping is discouraged because each employee is well paid and that is reflected in the price of the food. Tipping defeats the purpose of valuing "target wages" based on the contribution made and demand on the particular occupation. In addition, workers in Australia are entitled to four weeks of paid vacation per year and can take any or all of the vacation any time with one week notice. When on vacation, workers are paid an 18% bonus because It is assumed workers need the additional money to help with the additional cost of vacationing. Further, workers earn "long term leave" as they work with a company and each year accumulate roughly one month of long term leave up to 10 months total. The cost of all these target salaries, vacation premiums, and long term leaves are passed on to the consumer through increased prices. Imported products are taxed by the government to "level the playing field" with domestic products in industries where domestic products are available. Tariffs and taxes are set high on imported products unavailable in domestic markets in Australia to discourage imports and to encourage domestic producers to start a business which supplies the desired product or service. Even though wages are inflated, businesses must still be careful to offer value in product at services sold because Australian consumers are discerning as to quality and durability. An automobile must last the typical buyer of a new car a minimum of 200,000 miles relatively maintenance fee because the cost is at least double the cost of the same product in the United States. Comparable clothing is twice the price as in the United States, housing is slightly more, entertainment is more expensive and gasoline is 50% higher. As a result of the major elements of the cost of living being more expensive in Australia than in the United States, wages have to be higher in order to provide citizens with a comparable standard of living. Further, markets have to be protected by import taxes and tariffs to prevent low cost labor in nearby oriental countries as well as Japan and the United States from entering Australia and competing with domestic businesses. One of the problems with this strategy is that Australians are increasingly traveling to other countries, watching cable television with multiple U.S. stations and using the internet to discover product availability. Buying behavior suggests consumers limit their expenses to basic necessities, but stretch to the limits of their capability to insure as much durability and quality as possible. While income taxes are high, medical and dental benefits are covered by the state. Disposable income is
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typically used to cover basic necessities with some left for entertainment or extravagance on a small scale. PROMOTION Significant differences exist between promotional methods used in Australia and the United States. Unlike the United States, advertising of professional services is still regarded as inappropriate in Australia. Retail and service firms rarely use billboards, brochures, and flyers, but often use coupons, networking, and media commercials. Promotional materials presented on television are very frank and bluntly point out the weaknesses of competitive products. "Women Networking methods not only include traditional organizations such as in business" networks, entire business sections of a community sometimes close off the streets, create a carnival or entertainment environment, and work together to have a happening which encourages the community to come out and do business with the businesses involved. Word of mouth is a major promotional method used in Australia since the population density is low and there are not as many businesses as in the United States to choose for business activity. SUMMARY The differences in economic orientation between Australia and the United States affect the basic approach to doing business in the two countries. While wages and benefits (including health cards) are higher in Australia, the standard of living is comparable due to the increased prices throughout most products and services. Product selection is more limited in Australia due to a smaller manufacturing base and heavy taxes and tariffs an imported products. Significant differences exist between Australia and the United States relative to the "Four P's of Marketing." A detailed analysis of these "Four P's," was presented pointing out some of the differences that exist and the many similarities between the two nations. The mutual respect we share for one another make us compatible business partners with many future joint venture possibilities.
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