18.3 Participating in a global economy
Australia’s economy and society have been affected significantly by globalisation.
Consumers
Shopping habits have altered. More Australians are choosing to purchase items online from overseas rather than local retailers. Prices are often cheaper. E-commerce is growing in Australia.
DEVELOPING YOUR UNDERSTANDING 18.1
Read the extract and answer the questions below.
Overseas based online retailers are far more innovative in coming up with ways to keep customers clicking.
All the signs are there that Australian retailers are not investing enough in their online operations.
More than A$24 billion was spent online during the 12 months to March 2013, with Australian online sales growing by 11.9% compared with general retail growth of just 3.4%.
And online retail sales across the entire Asia-Pacific region are anticipated to overtake North America in 2013, accounting for a third of global e-commerce revenues.
But the growth isn’t coming from Australia. It’s coming from China.
Source 18.5 Extract from on the article ‘Doing it better? Overseas online retailers aisles ahead’ by Joanne Jacobs (QUT),The Conversation
- How much did Australian spend on online transactions March 2012 to 2013?
- What evidence is there that Australians are turning to online commerce rather than traditional retail outlets?
- Explain what the writer suggests Australian retailers need to do in order to compete with overseas retailers.
- Identify and explain two factors that in your opinion have made online trading attractive to the Australian consumer.
RESEARCH 18.1
Producers
Australian businesses are active participants in the global economy. Import and export volumes have grown considerably.
Australian businesses are also participating in global supply chains where one product has its components produced in different locations. A good example is the Boeing 787 Dreamliner (see Source 18.6), worth approximately $4 billion over 20 years to Australia.
Businesses are also increasingly conducting business across national borders by using the internet. In the twenty-first century any business is capable of reaching a large international market, no matter its location.
Workers (employees)
A significant number of Australians are employed by multinational organisations. The new globalised economy is also changing the way people work. The traditional 9 to 5 working day is fast disappearing as many employers expect employees to adopt more flexible working practices.
The number of expatriate workers working in foreign countries is growing.
Government
Governments are actively involved in the global economy. Successive Australian governments have been involved in reforming the economy in order to make it more competitive. Tariffs and import restrictions have been reduced. Many restrictions on international trade have been removed in a process known as deregulation.
Free trade agreements have been signed with several nations like the USA, South Korea and Japan.
In 1945 the cost of an airfare between Australia and Europe was twice the average Australian annual salary. In 2014 it is just over 1 week of the average wage.
DEVELOPING YOUR UNDERSTANDING 18.2
Read the extract and answer the questions below.
Prime Minister Tony Abbott says a historic free trade deal struck between Australia and Japan will improve prosperity for both nations.
After seven years of negotiations between the two nations, Mr Abbott and his Japanese counterpart Shinzo Abe have settled on the major points of the two country agreement.
A 38.5 per cent Japanese tariff that currently applies on frozen beef will be halved to 19.5 per cent over 18 years, with large cuts in the first year.
The chairman of the Australian beef industry’s free trade taskforce, Lachie Hart, says the deal will be worth $5.5 billion to the industry over 20 years.
There are also significant advantages for other agricultural products, with fruit and vegetables, seafood, sugar and wine among the winners.
The duty-free quota for cheese – Australia’s single largest dairy export to Japan – will be boosted from 27,000 tonnes per year to 47,000 tonnes annually.
Tariffs will remain on rice, though, due to its special cultural significance to Japan.
Japanese exporters will see Australian tariffs lowered on electronics, whitegoods and cars, and Australian consumers will see prices lowered as a result.
Under the deal, Japanese-made cars will be, on average, $1,500 cheaper.
Source 18.8 From the article ‘Australia strikes free trade deal with Japan, beef and horticultural industries secure major concessions’
- Explain what a free trade agreement (FTA) is.
- How long did it take for Australia and Japan come to agreement on the terms of this agreement?
- Explain how each of the following is expected to benefit from the FTA:
- Australian beef producers
- Japanese car manufacturers
- Australian and Japanese consumers.
The global supply chain
A supply chain is a system of organisations, people, activities, resources and information involved in moving a product or service from suppliers, to manufacturers and then to consumers. The supply chain takes natural materials and components and transforms or processes them into a finished product.
As part of the supply chain management a number of activities have to occur. These include planning and organising parts and raw materials to ensure that they are available and ready to be used. This is particularly important when the raw materials and components need to be sourced from another country and through other organisations.
Often there are many exchanges in the supply chain between different companies. Each company is trying to maximise its revenue and profit from its contribution to the process. During recent years there has been a move by some companies to work more closely with each stage of the supply chain to ensure it is more efficient. A supplier of raw materials, for example, will try to coordinate its activities with those of the companies that are producing the product or service. A producer will try to manage its production process so that the distribution of its products to the consumer is more efficient and timely.
Trying to coordinate this process can become challenging, especially when goods and materials are being moved around the world and companies are operating in different political and economic conditions. Ensuring that practices remain ethical in all countries and that management is consistent across different workforces and regions is another consideration for companies.
Go to www.cambridge.edu.au/hass9weblinks and follow the link to see a video about how Starbucks manages its Global Supply Chain.
The development of supply chain management
Supply chain management (SCM) is designed to try to meet consumer demands through the most efficient use of resources including materials and components, production processes and distribution of the finished product. In theory the idea is to match demand with supply to ensure that all products made are sold. Logistics relates to the distribution of products and can be defined as the activities of an organisation or company involved in getting the materials and products from one department or company to another. Since the 1990s, companies have started to give the distribution function to other companies (this is known as outsourcing).
It is essential that there are reliable suppliers of materials and components that are also able to adapt and operate their businesses in a flexible manner. Supply chain management needs to address a number of issues including:
- local labour costs and conditions: these may be lower in some countries than in Australia
- exchange rates: the value of the currency such as the Australian dollar compared to other currencies
- tariffs: taxes on imported goods and other charges all add to the final price of a product
- time: sometimes having to get supplies and products from another country can be difficult if there is a hold-up in transporting the product. Shipping schedules, weather conditions, government regulations and the time taken to clear customs can all affect the distribution of products.
Decisions also need to be made about:
- supplier selection: a company has to determine best suppliers in terms of price and reliability
- location: decisions have to be made about how many suppliers will be used and where are they located. If suppliers are not close to transport, it can be difficult to get parts and products to other countries.