QCAA Business Strategic development

Answer(s) could include:

• hedging is a method used to reduce losses from exchange rate variations
• hedging entails a business making an investment which makes a return that can be used to offset any losses from another investment
• two forms of hedging are forwards and options
• forwards are when the exporter and the customer sign a contract that sets an exchange rate for the transaction. When a payment is made the agreed exchange rate will apply
• options are when an exchange rate is set which can be used instead of the current exchange rate at the time of payment. If the exchange rate is better for the business, it can be used in the transaction instead of the agreed rate.

Answer(s) could include:

Stability of foreign governments:

• lack of political stability in a country will affect business operations. If a country is unstable there may be riots, protests or corruption and this may hinder or complicate business operations. For example, due to the unrest in Hong Kong it would not be wise to start business operations there, whereas countries such as Canada or Denmark are seen to have stable governments
• businesses should assess how stable a government is, what type of government the country has, how they will be impacted by changes in government and the legal environment within the country.

Relationship of foreign governments with the Australian government:

• the relationships between governments can have a big impact on a business’ success in a global market
• if the Governments share good relationships, and usually hold agreements such as free trade agreements and partnerships, this would be positive for a business
• if the Governments have disagreements or restrictions on trade, this can cause difficulties for business operations. For example, Australia and Indonesia suspended live animal trade due to cruelty to animals, causing friction between the governments.

Answer(s) could include:

• Different countries have different laws in relation to product liability. When a business is operating in a global environment they must research and abide by the laws in relation to product liability
• Laws of some countries hold the business responsible for any loss, damage or injury caused by any product
• Legal liability travels with every product that is exported and sold overseas.
• Consumers can exercise rights by filing product liability suits against exporters, manufacturers and suppliers of products
• Businesses need to be aware of different policies and regulations in different countries in which they operate in order to manage product liability.

If businesses don’t abide by laws in different countries in relation to product liability they may encounter:

• fines and penalties for breaching laws and regulations
• civil damages
• boycotts and negative social media campaigns
• costly court actions
• product recalls
• loss of market share
• loss of sales
• damage to the business public image, in the event of a product failure.

A liability claim can put severe financial strain on a business.

Answers could include:

Financial gain:

• innovation could allow Fizzology to charge premium prices to their unique, new drinks like the business' kombucha and fizzy flavoured teas. This will allow Fizzology to increase profit margins
• Fizzology could enjoy higher revenue growth if the business offered low-sugar and organic drinks. These drinks could attract health-conscious consumers and increase the business' overall sales revenue
• if Fizzology uses innovative manufacturing technologies (such as energy-efficient machinery), this could reduce costs and improve the speed of production. This would allow the business to streamline its production process and reduce operational costs, allowing higher profits to be earned.

Expansion of global market presence:

• innovation allows Fizzology to differentiate itself, creating a competitive advantage in the Australian and global market by offering unique, healthier drinks and eco-friendly packaging that meet current consumer trends and tastes. Fizzology can do this by offering their kombucha range, fizzy flavoured tea drinks and reducing sugar in their popular Fizzology flavoured drinks
• with many new products tailored to global consumer trends and tastes, Fizzology could expand its reach. Fizzology could also appeal to international customers across the globe more effectively
• brand image plus loyal clients may come from Fizzology striving to be ecologically mindful in processes and packaging. By launching items that reflect wants from consumers for health plus sustainability, Fizzology may get global praise for its sustainability, quality and uniqueness.

Increased market share:

• innovation can attract new customers, build brand loyalty and help the business compete against established global brands. Introducing low-sugar, organic drinks caters to health-conscious consumers, providing a distinct market edge with the potential to increase profit
• innovation can help Fizzology tap into new markets as well as a new customer base that prioritises sustainability, health and special product offerings. For example, launching certain kombucha drinks can attract younger, more eco-conscious consumers valuing ecological responsibility.

Answer(s) could include:

Step 1: Create urgency/create a sense of urgency – create a sense of urgency by convincing team members of the need to act immediately by demonstrating the potential risks. There needs to be a compelling case for change, so people understand why change is necessary. Fizzology needs to:

• communicate the risks of not adapting its product range. If it does not adapt its product to be healthier or show environmental consciousness in its packaging and processes, it may lose market share and fall behind competitors
• highlight the growing consumer demand for healthier and sustainable products, motivating resistant team members to recognise the necessity for change
• collate research and data on consumer trends and behaviour and link it to sales results directly impacting the success of Fizzology
• build support for the new initiatives so that the sense of urgency is shared – so much so that the team members would no longer be happy with the current state of the business.

Step 4: Communicate the vision/enlist a volunteer army – share the vision throughout the business, clearly and consistently by using multiple channels to build understanding and support for the vision. Fizzology needs to:

• win the hearts and minds of its team members in order to get everyone on board with the new vision; a business that creates drinks that are healthy and upholds environmental and sustainable processes and practices
• communicate the vision and strategy clearly to all levels of senior and middle management through staff meetings and email updates
• provide training and information sessions on the new products, so that team members have a shared understanding about the benefits of the new product range
• use clear and consistent messaging to address concerns about job security and emphasise how the innovation will benefit employees and Fizzology's future success as a business.

Answer(s) could include:

Timing:

• timing for product development is important in order to align with consumer trends and tastes. If Fizzology can launch new products that meet current market tastes for more healthy and eco-friendly beverages, it might catch consumer interest and build brand loyalty with speed. However, if Fizzology launches products too early or late, it risks missing chances. That leads to poor sales and missed opportunity
• if Fizzology does not adapt to the current trends and the tastes it may risk other competitors establishing themselves with similar products. However, rushing such process could lead to poorly developed products that fail to meet consumer expectations as well as tastes
• launching products ahead of competitors can give the advantage of being into the market first, allowing Fizzology to establish brand leadership into niche segments such as kombucha and fizzy tea drinks. However, if it delays entry to the market, established competitors might already have caught an important share of the market, making it difficult for it to compete
• timing can be impacted by government regulations and industry standards. Investing in research and development at such a time can position Fizzology ahead of compliance requirements as well as improve their sustainability credentials.

Costs:

• innovation requires substantial upfront investment, including hiring experts, acquiring technology and conducting trials
• high costs could then strain Fizzology's financial resources plus impact on profitability in the short term
• the total costs of innovation can be huge; businesses need to invest in research, prototype development, testing, and also the actual creation of new production processes. In the event Fizzology does not allocate enough budget or needs to then cut the research and the development spending due to financial constraints, the quality of innovation could possibly suffer, resulting in underdeveloped products that may fail among consumers
• innovation investments take time to gain returns financially. Fizzology may need to stop if costs are too high across a longer time frame, leading to lost opportunities. It can also damage Fizzology's reputation
• introducing newer products will usually require investment in new machinery, training for staff, as well as sourcing sustainable materials for these products
• financial forecasting and cost analysis are key to ensure the innovation and the production remains profitable for the business. If Fizzology can effectively increase production and purchase resources in bulk, the business' overall cost per unit decreases, contributing to higher profit margins.

Answers could include:

Threat of new entrants:

• this force looks at how easily new entrants can go into the market and disrupt existing businesses
• high barriers to entry, including high capital needs or strict rules, can reduce the threat, while minimal barriers can add to threats
• new competitors that enter into the market can increase the competition, driving the prices down and reducing the market share. Several barriers such as economies of scale and strong brand loyalty can help Fizzology overcome that threat
• existing big brands may deter other new entrants to the market
• new entrants that offer similar ecologically friendly and health-conscious products could now limit Fizzology's ability for establishing itself on a global scale
• Fizzology could focus on markets that have high entry barriers. Such markets have strict regulations and also important start-up costs; their new kombucha and fizzy tea products can give Fizzology a competitive edge over new entrants that are less resourceful.

Bargaining power of buyers:

• this force is to do with the influence in which customers hold over any business
• it can also relate to the number of buyers, switching costs, purchasing size and price sensitivity
• buyers gain power when they have lots of options or when switching costs are minimal, allowing buyers to demand reduced prices or superior-quality products
• consumers and retailers have increased bargaining power due to access to multiple alternatives, especially in the soft drink industry. Buyers may demand lower prices or higher quality, forcing Fizzology to continually innovate and maintain competitive pricing
• to reduce buyer power, Fizzology should emphasise the uniqueness of its kombucha and fizzy tea flavoured drinks and promote its environmental and sustainable processes through its marketing campaigns. This will improve its chance of successful expansion.

Rivalry among competitors:

• this force examines the amount and strength of competition within the industry
• high rivalry results from factors like numerous competitors, industry growth or similarity of products offered in the market
• established global brands with significant resources can intensify competition through competitive pricing, extensive marketing and product innovation. This would be prevalent in the soft drink industry with high profile brands
• Fizzology may need to allocate substantial resources to marketing and research and development to maintain relevance
• Fizzology should focus on countries where the market for sustainable and low-sugar drinks is underserved and differentiate its brand by continuously innovating and responding quickly to changing consumer trends and tastes if they are to expand successfully.

Recommendation:

• while the global market presents challenges, such as big soft drink brands being highly competitive, the rising demand for health-conscious and environmentally-sustainable products aligns with Fizzology's new focus
• expansion is feasible if the company targets countries where its unique kombucha and fizzy tea flavoured drinks can differentiate it from its competitors
• it could be argued that with high profile brands with huge resources it may not be feasible to expand globally and that Fizzology should focus on being successful in the Australian market.

Answers could include:

Currency fluctuations:

• refers to changes in the exchange rate of a currency relative to another currency; these fluctuations can result in an exporter losing money
• exchange rates are determined by the supply and demand of a currency in the foreign exchange market
• factors that influence the supply and demand of a currency include a country's economic and political conditions, interest rates, inflation and market expectations.

Non-payment of monies:

• refers to a situation where one party fails to fulfil its obligation to pay money to another party
• can have significant financial consequences for the party owed money, especially if they rely on the payment to meet their own financial obligations
• to avoid non-payment, it is important to establish clear payment terms and conditions upfront, including deadlines, methods of payment, and consequences for non-payment.

Answers could include:

E-commerce:

• involves the use of websites where potential customers can view and purchase inventory
• allows a domestic business to enter global markets without having a physical presence in a target country
• the growth of e-commerce and the use of mobile devices have enabled better communication between staff, customers and suppliers around the world.
  Examples:
• customers can customise a business's website with a chosen currency and language to enhance their shopping experience
• businesses can use social media to sell their products online, allowing them to access a global market.

Distribution of products:

• technology can be used to communicate directly with customers globally through email and websites
• technology can be used to help track inventory and automate distribution in global markets
• technology in transportation will aid the transfer of products from domestic to international markets.
  Examples:
• GPS technology can be used to track data in real-time, making tracking faster and more efficient
• increased access to data and collaboration in supply chains using technology such as Zoom or Teams to assist.

Answer(s) could include:

Financial gain:

• An increase in satisfied customers can lead to an increased market share, sales and repeat customers. Innovation can also lead to creating a delay in the decline stage of the product lifecycle resulting in greater profit for Matilda.
• Product innovation occurs if Matilda sources new and/or more products to sell. This may increase interest, sales and, in turn, profit.
• Process innovation occurs if Matilda is able to improve her processes through new technology. She could see productivity gains and better customer satisfaction, resulting in increased financial gain.

Expansion of global market presence:

• Innovation can be a driver of business growth. Therefore, Matilda expanding into the European market will enhance her global market presence.
• Innovation can give Matilda a competitive edge over her foreign competitors.
• Matilda's innovation can lead to her successful expansion into Europe and ensure that she is competitive in global markets through her business being new and different.

Increased market share:

• Innovation can assist with producing more appealing/innovative products and, therefore, increase market share for Matilda when she expands into the European market.
• Innovation can create a competitive advantage. A new product can create a consumer demand for the product, resulting in more products being sold and Matilda's business' market share increasing in the European market.

Answer(s) could include:

Timing:

• Timing can have an impact the success of innovation in terms of how it relates to customer purchasing cycles.
• Matilda has just read an ecommerce report in 2020 stating that European shoppers are spending more time shopping online. This means the timing is right for her to expand to Europe.
• It would be a good idea for Matilda to innovate her product, process and service while online marketplaces in Europe are attracting significant online traffic and high visitor engagement. This should lead to increased sales, thus success at this time is likely to be high and worth her investment in the innovation.

Cost:

• Investment in innovation, whether it is product, process or service, is costly.
• Money needs to be spent on research and development and can be significant. Therefore, it requires appropriate financial resources.
• Matilda has stated that she is willing to invest money into her business operations, so she has the best opportunity to be profitable.
• Matilda has seen a surge in online sales in 2020 and 2021. Therefore, she has income available to spend on innovation.
• If Matilda spends too much money on research and development, and innovation, and does not receive increased sales through the European market, she may be at risk of business failure.
• Matilda's financial investment in innovation may be important to her standing out from competitors in the European market, and be an important contributor to her success.

Answer(s) could include:

• Marketing through social media campaigns – researching and creating social networking sites used in Europe. This will be an easy and cost-effective way for Matilda to expand into the European Market.
• Adopting faster shipping technology. This will be positive for Matilda's business as it will improve customer satisfaction due to timely delivery of orders.
• Implementing safe payment methods – around the world customers are happy and confident utilising payment methods such as PayPal. This will assist Matilda expanding into the European market.
• Applying GPS delivery tracking systems – for both the business and the customer. This ensures the customer is updated via email or SMS, making them confident regarding the delivery of their order.
• Adopting e-commerce procedures. This will enable transfer of monies between currencies and countries instantly.
• Matilda can purchase relevant and reliable hardware and software for the business' needs. She can improve her website capabilities to change the language and/or apply different currencies. This will increase the business' reach to different countries where customers can make purchasing decisions using their own currency.

Answer(s) could include:

Availability of substitutes: Matilda needs to consider:
likelihood that customers will easily switch or use a competitor's product over hers.

• Are there similar products being sold online at a similar price or lower?
• Do the competitors pose a threat to her business' success?
• Are her products new, innovative and of high quality, compared to others on the market?
• Are there better-quality products available?
• Are there products of better value?
• Can she create buyer loyalty in Europe, or will consumers easily change brands?

Bargaining power of buyers: Matilda needs to consider the bargaining power of the buyers in Europe.

• What is the bargaining position of the buyers? Can the customers drive down the price?
• What is the level of quality and service demanded by buyers in Europe?
• What are the buyer numbers in Europe? Europe has a large population, therefore a large number of potential buyers.
• Which countries in Europe will have more buying power? Many parts of Europe have a large middle class, hence the disposable income to purchase Matilda's products.

Advice:
Due to the fact that Matilda is going to be investing in innovation of her product, process and service, the huge population of Europe and the fact that more European shoppers are spending significant time shopping online, there is no reason why she should not trial an entry into the European market. Her product is unique, luxurious and of high quality, thus should negate the issue of availability of substitutes.

The e-commerce report also affirms 'online marketplaces in Europe have attracted significant traffic and seen high visitor engagement that has translated into sales'. Due to the fact that more Europeans are spending time at home and shopping online, it is worth Matilda expanding her business into the European market.

Answers could include:

• EduOz.com should have a presence amongst the main social media platforms like Facebook, Instagram, LinkedIn. The most common way companies do this is by creating a short video about the benefits of the product which pops up in people's feeds. At the end of the video, there would be a button where a prospective customer can click to find out more and proceed to provide contact details (phone or email).
• LinkedIn would be another very suitable, place where EduOz.com can create a campaign. LinkedIn also has a 'learning' section on its user interface. Perhaps EduOz may want to provide a free sample of an online topic for users to try. EduOz.com may also want to sponsor a popular podcast also.

Answers could include:

Product features (standardisation)

• English as a language has a global functionality. It is the most common language used in business, so it may make sense to standardise its course which would then negate the cost of making alternative versions in different languages.
• As business environments (political, economic, social, technological) change, online courses may also need to be updated. Therefore, having just one language to deal with would be easier and cost effective.

Product name (standardisation)

• A uniform policy on the product name can enable a consistent and coherent brand message across various cultures.
• However, care must be taken to ensure that the name does not cause offence to local culture, and that the translation is not embarrassing. This may damage the brand quality of the product.

Answers could include:

Levels of education

• EduOz.com may need to make a decision to target recent school leavers who are just out of high school, or perhaps adults who already have a formal qualification and want another skillset in order to become entrepreneurs.
• The market segment of EduOz.com would have to have a basic level of English literacy if they are to understand most of the topic content, as it is written in English.
• There may need to be some translation of some key words so that students are able to understand certain key concepts.

Customs

• Customary greetings to students could be included in some course content that is suited to local cultures of international students, such as 'As-Salaam-Alaikum' (peace be with you) for Islamic countries or 'nihao' for the countries that have Chinese speaking students (Mandarin and Cantonese).
• EduOz.com developers will have to be careful not to stereotype certain cultures and seek advice as to the best way to communicate with students from diverse cultures.

Business etiquette

• The EduOz.com course could include content for entrepreneurs looking to do business in other foreign countries, so it would pay to learn about the way different culture's view notions of introductions/relationships, business card provision, being on time/punctuality, gifts, socialising expectations, working hours, handshakes and dress codes.

Communication protocols

• EduOz.com developers need to pay attention to how they convey their messages. For instance, some cultures may value directness and brevity, while other cultures may prefer a more indirect and nuanced communication.
• Even though the course a written in English, understanding the importance of subtle non-verbal communication between cultures is crucial in international business.

Answers could include:

Level of consumer demand

• Price: from an economic point of view, price can determine the level of demand for goods and services. EduOz.com must consider at what price customers in international markets are willing to pay.
• Scale of demand: it is estimated that by 2025, one billion students from around the globe will be actively seeking education and skill development.
• Economic growth: owners should monitor GDP levels in the various countries they would expand to. Increased GDP may mean more availability of disposable income, which makes it fertile ground to establish operations there.
• Product quality: the online education platform must be able to work well in all operating system and internet browser contexts (e.g., iOS, Windows, Chrome, Mozilla, Safari). The quality of the product must also be dynamic so that it works on desktops and mobile devices.
• Marketing: EduOz.com's branding efforts could also influence demand if people are persuaded to believe in the benefits the online product may provide them. Perhaps some testimonials from satisfied customers may be appropriate in establishing credibility.

Competitor activity

• 'Globally, the online learning industry is increasing rapidly with many regional education hubs being established by competing international learning institutions'.
• Competition within the Southeast Asian online education industry would be fierce. Competitors from Southeast Asian regions may have a significant competitive advantage in that they would have the resources available to translate into different languages, including Mandarin.
• Aspects of the competitor activity could be to scan those that are offering similar online learning products and the degree of market share they are currently holding.
• EduOz.com would want to know who the new and old players in the market are. As well as growth rates of all the competition in order to evaluate who are the biggest threats.
• Competitor activity in terms of marketing strategies would be a very important measure of feasibility, such as the occurrences where pricing wars happen or social media platforms where a high volume of advertising is taking place.