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BSB119
AU
Queensland University of Technology
QQ Petfood started its company in 1997 when Dr. Susan Rowe a practicing vet accidentally developed 100 % natural liver treats which were made from human-grade livers. She was often asked to recommend nutritious and healthy treat for pets but she realised that no such products were available on the market. QQ Petfood has developed into a vast company which manufactures and exports pet foods to other countries as well as have chains of veterinary clinics across Australia which provides quality treatments to pets. The products are guaranteed and recommended by the best veterinarians and therefore are trusted by many people. Recently, the company has been considering exporting to Japan and New Zealand markets, therefore, this report will analyse the political, economic and business environments of Japan and New Zealand and their market potential for pet food products of QQ Petfood.
Japan can be recognised as the 3rd largest global economy with a GDP of approximately $ 4.9 trillion (Huber, 2019). In Asia, it holds the position of the second largest economy. Japan is one of the members of G20, G7, ASEAN and APEC. Although Japan’s government works closely with the industries still it is known to have a mixed economic system. Japanese corporations must pay a corporate tax on generated revenue in Japan as well as overseas. While any foreign company is required to pay tax only on the generated revenue within Japan. In Japan, corporate tax is of several types which includes corporate inhabitant tax, corporate tax, enterprise tax and special local corporate tax (Katz, 2015). The current percentage of Japan’s corporate tax is 23.2% but the government approved a reduction proposal of the tax rate to 20% for the businesses that increases their wages aggressively as well as increases the national capital expenditure (Lockwood, 2015).
Japan is supposed to face a population fall which is going to be below 100 million by 2048 and nearly about 87 million in 2060. This is going to have a serious impact on Japan and its economy. Therefore, Japanese politicians have introduced the integrated immigration policy, the purpose of which is to draw foreign workers and companies to Japan which can significantly reduce the gaps created in skills due to the ageing population and the shrinking rate of births (Hamilton & Webster, 2018).
Another negative aspect of Japan’s business environment is that the Japanese people have a tendency to prefer Japanese companies over foreign ones which makes trade and business difficult for many foreign organisations (Nuttavuthisit & Thøgersen, 2019). This was also the primary reason for foreign companies to fail in Japan. This does not necessarily mean that all foreign companies failed in Japan some are still doing very well. This is where the inclusion of Japanese cultural elements in imports have proved to be a successful strategy for business firms.
It is important to consider the cultural and societal aspects and features of Japan when a foreign company is doing business within Japan. Most companies that did not survive failed to incorporate Japanese elements in their products (Brel, 2019). Although, evidently 73% of the Japanese does not own a pet but today approximately there are 20 million pets in Japan. The pet sector of Japan is very mature much like their population and have access to high quality health care. Most pet owners spend excess amounts after pet care which includes grooming sessions as well. Japan’s pet sector has some key products which are more in demand like the organic and the premium pet food and ageing care. Although one of the greatest risk factors for imports would be the fact that almost 50% of the Japanese population favour domestic products over imports.
Japan is known for being a constitutional monarchy where the head of the state is the emperor. However, the monarch’s say in political affairs that are concerning the country are extremely limited. The prime minister of Japan as well as the cabinet has the power to control the affairs of the state. The constitution of Japan is that of a post-war pacifist (Richardson, 2020). It also has a substantial role in the international community. Although, Japan’s political environment internally is stable, the neighbours surrounding Japan are powerful and they have faced diplomatic challenges in the past. Japan has political disagreements and territorial dispute with many countries like China, Russia, North and South Korea (Neary, 2019). Japan has strong relationship with the US and have been trying to build relationships with other powers like Australia, the UK, India and France.
New Zealand is a wealthy as well as a developed nation where agriculture is the primary industry. In 2017, the approximate total GDP of New Zealand was $205.9 billion. New Zealand has exported almost $39.8 billion worth of products and goods worldwide in 2018 (Grimes et al., 2016). Primarily New Zealand exports to Australia, Japan, USA and China. Imported good and products mostly arrive from Australia, Japan, China, Germany, USA, Malaysia and Singapore. New Zealand strongly advocates free trade and analysts claim that New Zealand has mixed economy and are driven by principles of free market. The rate of unemployment in the country has seen many fluctuations recently. New Zealand has also managed to develop a fairly simple system of tax unlike many other developed and developing economies (Kelsey, 2015). For individuals earning more than $70,000 (New Zealand Dollar) the personal tax rate is 33% whereas, those who earn up to $14,000 the rate is 10.5% for them. All companies must pay a tax rate of 28%.
New Zealand is known for being a parliamentary democracy as well as a constitutional monarchy. The head of the state as well as the Queen of New Zealand is Queen Elizabeth II. The Governor General of New Zealand represents her majesty, the Queen. The Prime minister of New Zealand recommends the Governor General. New Zealand is recognised for being diplomatic, small and stable with a very low rate of corruption (Gungoraydinoglu, Çolak & Öztekin, 2017).
New Zealand has a good reputation for being one of the best countries for conducting business as its business environment is supportive as well as welcoming for foreign companies and provides a good potential for success and growth (Gani & Clemes, 2020). The political, economic and social situation of New Zealand is quite peaceful and stable which motivates foreign investors to start their businesses in the country (Hamilton & Webster, 2018).
The demand for pet food imports is high in New Zealand although they are known to export large quantities of pet food. New Zealand has a large population of pets, in fact is known for being a country with one of the highest pet ownerships worldwide. Most of the households own a cat and about one-third of the population owns a dog. New Zealand also has an attractive petfood market as most consumers are willing to spend on their pets. The US and Australia are two major suppliers of pet food.
Recently, New Zealand has experienced a boost in the exports and the imports of petfood which has in turn boosted the production and despite of that they have a high import demand as consumers are increasingly demanding an extensive variety of product choices for petfood. The pet food market mostly demands natural and organic products along with raw or weight controlling products.
From the report above it is evident that New Zealand is the better choice for exporting QQ Petfood products as there is less risk factors and competition threats than Japan. Although both the countries have a huge demand for petfood imports, the only major risk factor with japan is that its population prefers domestically produced petfood products over imported products which can be a challenge for QQ Petfoods with already a big line of competitors like the US. On the contrary, New Zealand’s business environment along with socio-economic and political factors are comparatively more stable than Japan’s unstable political situation with Russia, China, North and South Korea which can be another threat for QQ Petfoods.
A conclusion can therefore be drawn from the above report about the chosen country which is New Zealand. It is the better choice in this context as it has a stable trade relationship with Australia along with a stable economic, political and social factors. The business environment of New Zealand is very supporting as well as welcoming for foreign businesses. The demand for pet food imports is also high along with huge competitors like US. Although, the country has a huge rate of manufacturing and exporting pet food products they require imports and the primary reason for this is the market’s huge demands for various kinds of quality pet food products. On the other hand, Japan although has a powerful and stable economic and social environment, have a few complications politically with surrounding countries. There are other risk factors in Japan when compared to New Zealand as the pet owners mostly prefer domestically produced pet foods over imported products. Although both the countries have a fairly stable trade relationship with Australia but due to less threats New Zealand is the better choice.
Brel, A. (2019). Specificities of business in Japan (Doctoral dissertation, БGani, A., & Clemes, M. D. (2020). Business environment effect on business visitor arrivals to New Zealand. Current Issues in Tourism, 1-13.
Grimes, A., Apatov, E., Lutchman, L., & Robinson, A. (2016). Eighty years of urban development in New Zealand: impacts of economic and natural factors. New Zealand Economic Papers, 50(3), 303-322.
Gungoraydinoglu, A., Çolak, G., & Öztekin, Ö. (2017). Political environment, financial intermediation costs, and financing patterns. Journal of Corporate Finance, 44, 167-192.
Hamilton, L., & Webster, P. (2018). The international business environment. Oxford University Press.
Hamilton, L., & Webster, P. (2018). The international business environment. Oxford University Press.
Huber, T. M. (2019). Strategic economy in Japan. Routledge.
Katz, R. (2015). Japan, the system that soured. Routledge.
Kelsey, J. (2015). The fire economy: New Zealand’s reckoning. Bridget Williams Books.
Lockwood, W. W. (2015). Economic development of Japan (Vol. 2161). Princeton University Press.
Neary, I. (2019). The state and politics in Japan. John Wiley & Sons.
Nuttavuthisit, K., & Thøgersen, J. (2019). Developing-Economy preferences for imported organic food products. Journal of International Consumer Marketing, 31(3), 225-249.
Richardson, B. M. (2020). The political culture of Japan. University of California Press.
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