Agricultural Machinery in Australia: A Strategic Reference, 2007
ICON Group International, July 2007, Pages: 234
How to Strategically Evaluate Australia
Perhaps the most efficient way of evaluating Australia is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to agricultural machinery are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries
Demand/Market Potential Driven Firm
Relative Accessibility
Accessibility/Supply Averse Firm
In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).
Latent Demand and Accessibility in Australia
This report provides a detailed overview of factors driving latent demand and accessibility for agricultural machinery in Australia. Latent demand is largely driven by economic fundamentals specific to agricultural machinery. This topic is discussed in Chapter 2 using work carried out in Australia on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for agricultural machinery in Australia. I use the term “micro” since the discussion is focused specifically on agricultural machinery.
Chapter 3 is also a stand-alone report that I have authored. It covers proxy pro-forma financial indicators of firms operating in Australia. I use the word “proxy” because the provided figures only cover a “what if” scenario, based on actual operating results for firms in Australia. The numbers are only indicative of an average firm whose primary activity is in Australia. It covers a vertical analysis of the maximum likelihood balance sheet, income statement, and financial ratios of firms operating in Australia. It does so for a particular Standard Industrial Classification (SIC) code. That code covers “farm machinery and equipment”, as defined in Chapter 3. Again, while “farm machinery and equipment” does not exactly equate to “agricultural machinery”, it nevertheless gives an indicator of how Australia compares to other countries for a proxy adjacent category along various dimensions.
Chapter 4 deals with macro-accessibility and covers factors that go beyond agricultural machinery. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Australia:
Openness to Trade in Australia
Openness to Direct Investment in Australia
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks
Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in the Chapter 4, which is a general overview of investment and business conditions in Australia. Chapter 4 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Australia. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier.
1 INTRODUCTION & METHODOLOGY 1
1.1 What Does This Report Cover? 1
1.2 How to Strategically Evaluate Australia 1
1.3 Latent Demand and Accessibility in Australia 3
2 AGRICULTURAL MACHINERY IN AUSTRALIA 5
2.1 Latent Demand and Accessibility: Background 5
2.2 Latent Demand: Market Composition 5
2.3 Latent Demand: Dynamics 7
2.4 Accessibility: Trade Barriers 9
2.5 Accessibility: The Structure of Competition 9
2.6 Latent Demand: Target Buyers 11
2.7 Accessibility: Key Factors 11
2.8 Accessibility: Market Entry 11
2.9 Accessibility: Trade Events 12
2.10 Key Contacts 12
3 FINANCIAL INDICATORS: FARM MACHINERY AND EQUIPMENT 13
3.1 Overview 13
3.1.1 Financial Returns and Gaps in Australia 14
3.1.2 Labor Productivity Gaps in Australia 17
3.1.3 Limitations and Extensions 17
3.2 Financial Returns in Australia: Asset Structure Ratios 18
3.2.1 Overview 18
3.2.2 Assets - Definitions of Terms 18
3.2.3 Asset Structure: Outlook 21
3.2.4 Large Variances: Assets 22
3.2.5 Key Percentiles and Rankings 25
3.3 Financial Returns in Australia: Liability Structure Ratios 40
3.3.1 Overview 40
3.3.2 Liabilities and Equity - Definitions of Terms 40
3.3.3 Liability Structure: Outlook 42
3.3.4 Large Variances: Liabilities 43
3.3.5 Key Percentiles and Rankings 46
3.4 Financial Returns in Australia: Income Structure Ratios 59
3.4.1 Overview 59
3.4.2 Income Statements - Definitions of Terms 59
3.4.3 Income Structure: Outlook 61
3.4.4 Large Variances: Income 62
3.4.5 Key Percentiles and Rankings 65
3.5 Financial Returns in Australia: Profitability Ratios 80
3.5.1 Overview 80
3.5.2 Ratios - Definitions of Terms 80
3.5.3 Ratio Structure: Outlook 82
3.5.4 Large Variances: Ratios 83
3.5.5 Key Percentiles and Rankings 86
3.6 Productivity in Australia: Asset-Labor Ratios 101
3.6.1 Overview 101
3.6.2 Asset to Labor: Outlook 102
3.6.3 Asset to Labor: International Gaps 103
3.6.4 Key Percentiles and Rankings 106
3.7 Productivity in Australia: Liability-Labor Ratios 121
3.7.1 Overview 121
3.7.2 Liability to Labor: Outlook 122
3.7.3 Liability and Equity to Labor: International Gaps 123
3.7.4 Key Percentiles and Rankings 126
3.8 Productivity in Australia: Income-Labor Ratios 139
3.8.1 Overview 139
3.8.2 Income to Labor: Outlook 139
3.8.3 Income to Labor: Gaps 140
3.8.4 Key Percentiles and Rankings 143
4 MACRO-ACCESSIBILITY IN AUSTRALIA 158
4.1 Executive Summary 158
4.2 Economic Fundamentals and Dynamics 158
4.2.1 Government Intervention Risks 158
4.2.2 Balance of Payments Issues 159
4.2.3 Infrastructure Development 159
4.3 State Summaries 165
4.3.1 New South Wales (NSW) 165
4.3.2 Victoria (VIC) 165
4.3.3 Queensland (QLD) 166
4.3.4 Western Australia (WA) 166
4.3.5 South Australia (SA) 166
4.3.6 Northern Territory (NT) 167
4.3.7 Tasmania (TAS) 167
4.3.8 Australian Capital Territory (ACT) 167
4.4 Political Risks 168
4.4.1 Economic Relationship with the United States 168
4.4.2 Major Political Issues Affecting the Business Climate 169
4.4.3 The Australian Political System 169
4.5 Marketing Strategies 170
4.5.1 Establishing a Local Office 170
4.5.2 Creating a Joint Venture 171
4.5.3 Use of Agents and Distributors 172
4.5.4 Hiring Local Counsel 173
4.5.5 Checking the Bona Fides 175
4.5.6 Distribution Channel Options 175
4.5.7 Franchising Activities 175
4.5.8 Direct Marketing 176
4.5.9 Selling Strategies 177
4.5.10 Product Pricing 177
4.5.11 Licensing 178
4.5.12 Advertising and Trade Promotion 179
4.5.13 Sales Service and Customer Support 180
4.5.14 Government Procurement 180
4.6 Significant Investment Opportunities 180
4.6.1 U.S. Outward Foreign Direct Investment 181
4.7 Trade Regulations 182
4.7.1 Tariffs 182
4.7.2 Non-Tariff Barriers 182
4.7.3 Import Taxes and Sales Taxes 183
4.7.4 Customs Valuation 183
4.7.5 Import Licenses 184
4.7.6 Export Controls 184
4.8 Import/Export Documentation 185
4.8.1 Imports 185
4.8.2 Exports 185
4.8.3 Temporary Entry 185
4.8.4 Food Standards Code 185
4.8.5 Restrictions on Imports 186
4.8.6 Trade Standards 187
4.8.7 Free Trade Zones and Warehouses 187
4.8.8 Special Import Provisions 188
4.8.9 Membership in Free Trade Arrangements 188
4.8.10 Openness to Foreign Investment 188
4.9 Australian Investment Policies 189
4.9.1 The Foreign Investment Review Board 189
4.9.2 Sector-Specific Regulation 190
4.9.3 Incentives for Investment 191
4.9.4 Conversion and Transfer Policies 191
4.9.5 Expropriation and Compensation 192
4.9.6 Dispute Settlement 192
4.9.7 Selling to the Government 192
4.10 Right to Private Ownership and Establishment 193
4.10.1 Protection of Property Rights 194
4.11 Transparency of the Regulatory System 195
4.11.1 Political Violence affecting Investment 196
4.11.2 Corruption 196
4.11.3 Bilateral Investment Agreements 196
4.11.4 OPIC and Other Investment Insurance 196
4.11.5 Labor 197
4.11.6 Free Trade Zones (FTZ) and Free Ports 198
4.12 Trade and Project Financing 198
4.12.1 The Banking System 198
4.12.2 Foreign Exchange Control Risks 199
4.12.3 Financing Export Strategies 199
4.12.4 How to Finance Exports and Methods of Payment 200
4.12.5 Financing Exports 200
4.12.6 Project Financing Available 201
4.12.7 Banks with Correspondent U.S. Banking Arrangements 202
4.13 Travel Issues 202
4.13.1 Local Business Practices 202
4.13.2 Time Zones 203
4.13.3 Visas 203
4.13.4 Infrastructure for Conducting Business 204
4.13.5 Requirements for Temporary Entry of Personal Goods 206
4.13.6 Country-Specific Travel Information Web Sites 206
4.13.7 Commercial Service/U.S. Embassy Contacts 207
4.13.8 U.S. Government Web Sites in Australia 207
4.13.9 Australian Country Data 207
4.14 Key Contacts 208
4.14.1 U.S. Government Organizations 208
4.14.2 AmCham and Bilateral Business Councils 211
4.14.3 Australian Chambers of Commerce (By State) 211
4.14.4 Australian Government Agencies 212
4.14.5 Sources of Market Research and Business Facilitation Services 218
4.14.6 Commercial Banks in Australia 218
4.14.7 Australian Publications and Databases 221
5 DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS 225
5.1 Disclaimers & Safe Harbor 225
5.2 Icon Group International, Inc. User Agreement Provisions 226
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