Why Australia Isn’t Very Good at Doing Business Overseas

April 4, 2018

For a nation of just 25 million people, Australia punches above its weight in sport, science and medicine. But when it comes to success overseas, many of the country’s biggest companies are falling short.

From QBE Insurance Group Ltd. to National Australia Bank Ltd., corporate Australia has burnt through at least A$6.1 billion ($4.7 billion) in offshore losses and writedowns in less than two years. In the U.K., Wesfarmers Ltd. is reviewing the future of its unprofitable Bunnings home-improvements business after wiping A$1 billion from the unit’s value in February.

Confidence, irreverence and a refusal to conform — traits that have arguably defined Australians for centuries — may be partly to blame, say behavior analysts and business consultants. Those characteristics, nurtured in one of Asia’s smallest and most remote consumer markets, can leave companies ill-prepared to compete offshore.

 

“There are some cultural factors at play — Australians are more individualistic than most other people and we’re less enamored of authority,” said Conor Wynn, who’s studying behavioural change at Monash University’s BehaviourWorks research body in Melbourne. “Just because you dominate the market here doesn’t mean that’s going to translate into a winning formula overseas.”

 

A case history of international blowups stretches back more than a decade. Australia’s Multiplex Group failed to build London’s new Wembley stadium on time in 2006, lost money on the project, and was then beset by legal claimsInsurance Australia Group Ltd. exited the U.K. at a loss in 2012, partly because of higher-than-anticipated injury claims.
 
Wesfarmers, whose Bunnings do-it-yourself brand is an earnings juggernaut in Australia, bought the Homebase chain in the U.K. in 2016. But it came unstuck after quickly imposing a new format that turned off customers, the Perth-based company has said. Advisory firm Lazard Ltd. is helping with a review of the U.K. division, a Wesfarmers spokeswoman said Tuesday. An update is due in June.

Click here to read about analysts’ expectation of a U.K. exit at Wesfarmers

But Australian firms entering a foreign country need to do a better job of understanding the new market and its cultural differences, said Jana Matthews, director of the Australian Centre for Business Growth at the University of South Australia. Her advice: get educated on growth and leadership; and make sure the board of directors has a balance of genders because it’s often women who ask pertinent questions about customers and their buying habits.

“The capacity to learn is there,” she said. “The knowledge hasn’t been there.”

Bloomberg
Original Article