Would competition improve the Australian business marketplace?

Australian retail giant Woolworths yesterday announced plans to sell its electronic stores division amid signs that some of Australia’s larger companies are now looking to separate their investments and focus upon their core divisions. However, the potential sale of the Woolworths electronics division has opened up an interesting debate regarding the domination of various parts of the Australian economy by a fairly small number of companies.

Is Australia really a truly free market?

When you take into account the exceptional economic growth seen in Australia over the last 20 years or so it may seem very strange to be nitpicking and looking at potential issues which have “gone wrong”. However, whether you are looking at the mining industry or the media industry, for example, there is no doubt that a relatively small number of major players dictate these markets at the moment. So is Australia really a truly free market?

There are some who would suggest that the size of the major media corporations for example in Australia has arisen because of their success in years gone by. There are others who would suggest that media companies in particular have used their influence in Australia to feather their own nests and push forward their own policies and objectives. The suggestion from some sources is that improved regulation is not enough and many of Australia’s larger conglomerates need to downsize, allow new entrants into the market and refocus.

How would an increase competition help the economy?

Historically, and this is not just Australia, where there are very small groups of companies dictating various areas of the economy they often accumulate “fat” around the edges. If you are a large company which literally dictates your marketplace then it is very easy to move margins at your leisure and perhaps operate with a little more “fat” than you would have if there was significant competition. So what would new entrants to the market actually do?

There is no doubt that any new entrants to various parts of the Australian economy, where they are dictated to by large conglomerates, could in due course inject much-needed competition as well as a better experience and potentially better value for money for consumers. Many experts are calling for overseas companies to target the Australian economy and break up some of these situations where two, three or even four large companies are dictating to the rest of the market.

Overseas companies very often have very different ideas regarding the structure of the businesses, how to operate a business, how to maintain margins and how to reduce costs without impacting upon customer value for money. In the long run there is no doubt that an injection of competition is healthy, both for the marketplace and for consumers, and will ultimately make the Australian economy leaner and fitter and more able to take on challenges in the future.

Should the authorities get involved?

On a worldwide basis we have seen companies such as Microsoft attacked by European and American regulators who have become very concerned about the company’s stranglehold on various areas of the computer industry. This is perhaps one example which has ultimately been successful even if it has taken many years to execute and still has many years ago. So should the Australian authorities break-up some of the larger conglomerates and encourage competition?

The more overseas investment in Australia the better this will be for the economy in the long run because it will attract trading partners and trading operations from overseas. In the early stages of an economic recovery you could argue that having a relatively small band of company leaders in various niche markets is helpful but once the economy has “kickstarted” there is a tendency to sit back and perhaps not be as motivated in the short to medium term as these companies may have been in the early stages.

Australia is a country which has attracted more than its fair share of overseas investment although when you bear in mind the size of Australia media companies and mining operations there is an argument that it is time to reduce the influence of these companies and inject more competition into the economy.

Training and investment

If a market is not particularly competitive and a very small band of companies have a relatively tight grip on consumers it is easy to reduce training expenditure and overall investment funding. However, as we have seen with the Australian government and its very proactive policy regarding the economy, a reduction in investment in training and other areas of your business today may not impact you immediately but it will impact you in the future. Customers are now squeezing more and more value for money out of business operations around the world and they want to speak to assistants who know what they are talking about and can offer them advice.

Will the Internet change the commercial environment in Australia?

Those who argue that some of the largest companies in Australia have far too much influence have also suggested that the Internet has been both a positive and a negative on the situation. From a positive point of view the Internet has increased, to a certain extent, the competition across-the-board boat although on a negative it has also allowed major companies with large marketing budgets to further consolidate their position and their influence online.

However, there is no doubt that the key to a more competitive marketplace and a more competitive Australian economy is likely to involve the Internet in some shape or form. The ability to set up commercial enterprises fairly quickly on fairly low investment budgets is always attractive but in the medium to longer term these operations need to be fully financed and professional in their approach to customers and the marketplace.

Conclusion

Competition is the lifeblood of any economy and it is not just Australia where we have seen major media companies for example hogging the limelight. It does become unhealthy when companies reach a level which allows them to dictate to the rest of the market and the ability to inject new blood will not only increase competition, improve customer services but it could likely increase overall sales.

Related Posts

1. Australian business heavyweights highlight need for overseas workers
2. Australian business sector uncertain going into 2011
3. Australian business calls for visa reform to meet skill shortages
4. Australian Business Council supports growth to benefit trade and investment
5. Australian Business Leaders Report Dire Trading