The Australian economy was opened to the world from the early 1980’s with the reduction in tariffs and the deregulation of the financial sector. Modern methods of travel and communication have brought the countries of the world closer together and businesses now fine themselves operating in an increasingly global marketplace.
Thanks to the opening up of the Australian economy by governments from Prime Minister Hawke to Prime Minister Howard, Australia is well placed to take advantage of the impact of technology, global free markets and regulatory changes. But while technology coupled with our high levels of education, intellectual capital and entrepreneurship, provides us with tools and applications to help improve the historical disadvantages of distance and population, the problem for Australia will be the capacity to keep up amid rising opposition to the new world order. Those who can’t may be marginalised by their competitors and fall by the wayside. If Australia can maintain the pace of reform and sustain recent economic growth, we will, over time, slip to a status more reflecting our true size, nullifying the advantage of our present technological and structural lead. Future generations of Australians will not thank us for squandering our present leadership. Today we are witnessing globally, major mergers and acquisitions designed, at least in part, to improve cost-income ratios, to lower the fixed costs associated with new technology, as a percentage of total costs and, to provide access to cheaper capital. These mergers and acquisitions are not confined to financial services. They include airlines, auto manufacturers, pharmaceutical companies, oil companies, and miners. No industry seems immune. Yet, each time there is a significant addition to critical mass, wherever it occurs, we are being marginalised unless we can maintain relativity. Of course, instinctively, the notion that more is better for competition strikes an interested chord with consumers and voters. In 1975, when governments provided industry protection, and before the latest advances in technology, perhaps the argument had substance. But not today. Today, in some form, competition is applying pressure to virtually all Australian companies. Instead of being able to take advantage of economies of scale and an increased market share, margins for newly merged entities continue to be squeezed.
Companies should always keep in mind that customers have choices these days, and the Internet makes choices very easy. Even global giants now accept their control over prices is illusory in the longer term and may expose them to new competitors. The only way they can maintain profitability is by ruthlessly cutting costs. Merging provides this opportunity. So it is, that in an increasingly borderless world, while speed is more important than size, relative size is critically important. It is vital for a country like Australia, with a relatively small domestic market, to achieve a critical mass that will enable it to compete on a world stage. Otherwise we will be reduced to trying to hold on to small niches in markets dominated, in the main, by global organisations of concentrated, competent and efficient economic power. We Australians, have a choice. We can accept domestic mergers, which may create local market dominance, in the interests of greater global competitiveness, or we can stifle them. We can embrace global markets or we can reject them. In reality though, fighting the global market is as useful as fighting old age. It will catch up with you in the end, but, if you capitalise on it, there are benefits to be had.
Small and medium-sized Australian businesses are well placed to take advantage of e-commerce and gain a global advantage, but many are limiting their prospects by only thinking locally, according to an APEC report. Australia is well placed because we are an English speaking, have a good communication infrastructure that is the best in our region, and have one of the highest online populations in the world. However most Australian businesses are not looking to the Internet as a means to expand globally. Nevertheless, some small companies are experiencing variable achievement in their dealings with the rest of the world.
By expanding overseas Australia companies can encounter various problems. In the area of finance the ever-changing exchange rate can cause major issues with payments. Many traders engage in forward contracting, in which the exchange rate is agreed to in advance. This can help Australian business to secure a finalised payment from their overseas markets. Financial management is crucial to success in global business. Countries obviously have different currencies and exchange rates and for a business to be secure in the overseas markets, quality management practices are needed. Marketing and labour are also other areas where problems can occur. If Australian businesses wish to globalise they will need to take into account the various political, social and economic factors of the country they are expanding into. They should conduct research into the level of economic activity, buying patterns, income levels, stability of government and government planning etc. By doing this it will enable them to market their business more competitively. By globalising their markets Australian businesses also have to be aware of labour requirements overseas. It is well known that many businesses expand overseas to exploit the cheap working labour that is prominent in developing countries, however this may place a negative image upon the business in Australia and management needs to be aware of this if they are to succeed globally.
It is clear that the term globalisation serves as a meaningful guide to the world we experience. As John Howard stated “the difficult fact that has to be faced is that the correct response to globalisation is more liberalisation, not less. More change, not less. More willingness to embrace new ideas, not less.” In ending Australia does hold a limited market for it’s businesses, so therefore they seek to embrace what the overseas market has to offer them. Global remedies can help to catapult not only Australia but also its businesses into the world market; therefore globalisation is seen as a positive choice for businesses today.