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International Strategy

Contents

About the company.

Firm’s expansion plan.

Risk involved.

Suitability.

Recommendation.

References

About the Company

Bunnings Group was founded in 1994. It is a leading retailer of hardwares supplies in Australia and New Zealand. The company is owned by Wesfarmers. The company generated revenue of $13.1 billion in 2019. There are 374 stores currently operating, employing 44,000 peoples (Wesfarmers Annual Report, 2019). Some of the products this company offer are home improvement, outdoor living product, supplier of building materials to commercial projects and housing industries (Bunnings Online Store).

Firm’s Expansion Plan

Bunnings Group Limited is growing with each passing day. The company is adding new products every day. It has established a well-known reputation among Australian family. The firm expansion will be fruitful in such countries where the infrastructure development is happening at very rapid pace. India and Colombia seems befitting the purpose. From the data mentioned in the table below, it can be said that the trade policies between any of those nation would not be an obstacle. India is a massive country in terms of population with a humongous population of 1.3 billion peoples. Every year, thousands of new buildings and structures are constructed. People are also paying attention to decorate and improve their housing. It could be beneficial market for the company as the demand is growing higher and higher. Also, there is comparatively less competition in this sector in India. Trading in India is becoming easy day by day, discussed ahead. The local currency of India is much lower than AUD, which means investment from Australia will prove to be financially beneficial. With the ongoing diplomatic behaviour, it is hopeful that more facilities may be provided in near future for Australian investments. On the other hand Colombia, a Latin American country, where the basic infrastructure is still in development (ITC news, 2015). The country’s civil construction requirement is high. Also, the bi-lateral relationship is very healthy, which means ease of expanding in Colombia.

Selection of Office Location

India- Mumbai, which is the economical capital of India, could be the best choice for office location. All the major companies, throughout the globe, have their headquarters or branch office in Mumbai. Apart from Mumbai, Bengaluru could be a beneficial choice. Major architectural companies are in this city. It is a well-connected city with world class infrastructure. Another location can be New Delhi, the capital of India. The Australian embassy is situated here. This city is expanding at a rapid rate in terms of infrastructural development.

Colombia- Bogota is the first choice for office location. It holds fifth rank in top cities for foreign investment in Latin America. More than 1500 companies have their foreign investment here. Other location choice is Barranquilla. This city is a choice of foreign investors for years due to its attractive geographical location, well skilled work force and export. Another location can be Cali. This city have a diverse and dynamic economic region. It contributes 15% of the total industry of the country. More than 150 multinational companies have their operation running in this city (Latin American Post, 2018).

Risk Involved

India- Although India provide easiness in terms of doing business for international firms, the process of establishment and completing formality is still lengthy and complicated. India ranks 185 among 190 nations survey done by World Bank in 2017 (TMF group) to receive a construction permit after filing an application. Land acquisition process is complex and registering property can be time taking. India has the most complex tax system throughout the globe. The corporate tax rate is highest in India. It is often the case that the foreign company overpay or underpay due to lack of knowledge about law, rules and practices. India is having some service provider which provides hardware but there are no very prominent supply chain. It will take some extra efforts by Bunnings is establish its own identity in the Indian market.

Colombia- Amongst the Latin American nations, Colombia holds top positions. Despite this, doing international business in Colombia could be risky at some extent. There may arise cultural difference as the Colombian do not have much proficiency in English language. The infrastructure is underdevelopment. The issue of power cut is prevalent in rural areas, although not in urban areas. The corruption is very high here. Political challenges may arise due to instable politics of the country (Centre du commerce international, 2015).

The risk pattern is somewhat similar in both countries. The Bunnings Group Limited may lose money if caught in unnecessary formalities or corruption as both countries is dealing with worst scenes of corruption. 

Suitability

India:

Item of research

Findings

Status of the trade agreement with Australia

Two way trade in goods and services increased.

Prime ministers of both countries decided to re-engage on Comprehensive Economic Cooperation Agreement (DFAT,2018)

Value of local currency versus the Australian Dollar (AUD)

1 AUD = 53.49 INR on 14 August 2020.

Existence of an Australian embassy or consular section, its size and significance

The Australian High Commission is located in New Delhi, India (Australian High Commission, New Delhi). 

General relationships between the two countries

Diplomatic relationship established. Establishment of Australian-Indian Council (Australian High Commission, New Delhi).

What are the regulations for international firms to set up their operations in the chosen country

Freedom to operate.

At least one director of the company must be Indian citizen (Mehta, 2018).

Colombia:

Item of research

Findings

Status of the trade agreement with Australia

MoU signed from2009.

Education is Australia’s largest export.

Australia invested in mining sector of Colombia (DFAT, 2018).

Value of local currency versus the Australian Dollar (AUD)

1 AUD = 2,694.28 Colombian peso, on 14 August, 2020 (Data provided by Morningstar for Currency and Coinbase for Crypto currency)

Existence of an Australian embassy or consular section, its size and significance

Australian embassy is in Bogota, Colombia with Sophie Davies as the ambassador (DFAT, 2018)

General relationships between the two countries

Very healthy relationship.

Australia launches the Australia-Colombia policy dialogue in 2018.

What are the regulations for international firms to set up their operations in the chosen country

International firms must register themselves in Colombia’s chamber of commerce.

Appoint a legal representative with legal right to live in Colombia.

Obtain tax identification to file monthly or annual tax.

Both the countries have low currency value, which means less financial investment in terms of AUD. Many agreements and policies have been signed for trade and business. The process of foreign business establishment is well defined. Here is a detailed view of the above table:

India- Two way trade in goods and services increased to $30.4 Billion dollar in 2018. Prime ministers of both countries decided to re-engage on Comprehensive Economic Cooperation Agreement (DFAT, 2018). The Australian High Commission is located in New Delhi, India and Barry O’Farrell as the High Commissioner (Australian High Commission, New Delhi). Diplomatic relationship established. Establishment of Australian-Indian Council (AIC) to promote Australia’s relationship with India (Australian High Commission, New Delhi). Positive and friendly relationship based on common believes (High Commission of India, Canberra). A foreign company may operate with limited or unlimited liabilities, foreign citizen can be the full-time director or partner, but at least one director must be an Indian citizen. Also, the Indian government provides a lot of incentives for foreign business doers (Mehta, 2018).

Colombia- Many MoU were signed between both countries from 2009 to present time. Education is Australia’s largest export. Mining sector in Colombia is the Australia’s investment interest (DFAT, 2018). 1 AUD is equivalent to 2,694.28 Colombian peso, on 14 August, 2020 (Data provided by Morningstar for Currency and Coinbase for Crypto currency). Australian embassy is in Bogota, Colombia with Sophie Davies as the ambassador (DFAT, 2018). Very healthy relationship promoting trade, agriculture exchange, education and resources. Australia launches the Australia-Colombia policy dialogue in 2018 to improve bi-lateral relationship. International firms must register themselves in Colombia’s chamber of commerce, appoint a legal representative (can be of foreign nationality) with legal right to live in Colombia and obtain tax identification to file monthly or annual tax.

Recommendation on Bunnings Group Limited Overseas Expansion Strategy

The markets of both countries is full of future possibilities. Both countries requires infrastructural supply provider. Bunnings, which had already proved its capabilities in Australian market, may try to move themselves to these markets. The company’s wide range of products have the capability to take over the market. Although risk is there, but the chances of overcoming those risk and challenges is also high. I recommend Bunnings, to expand its market in India, as the risk is low as compare to that of Colombia. Focus on house improvement is increasing there, day by day. A huge pool of customer is readily available there. The infrastructure is developing making the sustenance better for the international firm. With the revision in trade policies with Australia, it has become more convenient for an Australian companies to operate in India. Although, the corporate tax rates are high, but it can be made affordable. There are many firms in India who assist foreign companies while dealing with law and policies. With an overall potential market and appropriate trade policies, India can be very valuable for Bunnings. Bunnings not only provide products and services, but also fulfils the needs of making home a better and happy place.

References for Bunnings Group Limited Overseas Expansion Strategy

Australia and Colombia Strengthens Foreign Relationship for Economic Growth, SOMOS 21. [Online]. Available at: https://somos21.org/news/199476 [Accessed on 20 June 2019].

Australian High Commission. New Delhi. [Online]. Available at: https://india.highcommission.gov.au/ndli/Australia-India_Relations.html

Bunnings Services. [Online]. Available at: https://www.bunnings.com.au/our-services

Business owners in Colombia identify non-tariff obstacles to trade. Centre du commerce international. [Online]. Available at: https://www.intracen.org/nouvelles/Business-owners-in-Colombia-identify-non-tariff-obstacles-to-trade-en/. [Accessed on 5 March 2015]

Colombia country brief. Department of Foreign Trade. AustralianGovernment. [Online]. Available at: https://www.dfat.gov.au/geo/colombia/Pages/colombia-country-brief

India-Australia relation. High commission of India. Canberra, Australia. [Online]. Available at: https://www.hcicanberra.gov.in/page/india-australia-relations/

Legal Team Colombia. 2020. Legal Requirement to Start a Business in Colombia. Bizlatin Hub. [Online]. Available at: https://www.bizlatinhub.com/legal-requirements-start-company-colombia/ [Accessed on: 7 January 2020]

Mehta, J. 2018. Requirements for doing business in India. TMF group. [Online]. Available at: https://www.tmf-group.com/en/news-insights/articles/2018/may/requirements-doing-business-india/ [Accessed on: 28 May 2018].

The most attractive Colombian cities for investors. Latin American Post. [Online]. Available at: https://latinamericanpost.com/20350-the-most-attractive-colombian-cities-for-investors. [Accessed on 24 March 2018].

Wesfarmers annual report. 2019. [Online]. Available at: https://www.wesfarmers.com.au/our-businesses/bunnings

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