Global Resource Management Case Analysis for
Australia
Dr. Jane Ross
MBA 606
August 7, 2005
Roadrunners Transnational
Australia Subgroup
Sean P. Bruce
Marlene I. Hodges
Marcela Yagual
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EXECUTIVE SUMMARY
This is the final subgroup report on the exploration of the Australian market
potential for SIRIUS Satellite Radio. This report includes a quick review of previous
subgroup reports discussing a variety of issues to include Australian tariff situation
analysis, product and service standards, anti competitive practices, potential licensing
arrangements, franchising and joint venture opportunities. This analysis further analyzes
Australian human resource issues and suggests a geocentric approach to staffing. The
business opportunities in Australia are available and favorable to SIRIUS due to the lack
of satellite radio competition. This fact helps to mitigate the risks for establishing
themselves in Australia; however, the initial market entry costs are expected to be quite
expensive. Since this will be the first globalization effort for SIRIUS they will be
trailblazing their own economic, environmental, and social sustainability efforts. To be
successful SIRIUS must study the sustainability environment and prepare to operate in
accordance with Australian standards. Overall, the opportunities for SIRIUS Satellite
Radio in Australia seem to be favorable. Armed with this study, SIRIUS should enjoy
great success as they pioneer forward into the Australian market.
Australia Resource Management
TABLE OF CONTENTS
Human Resource Issues…………………………………………………………………………3
Important Business Opportunities and Risks……………………………………………………6
Sustainable Business Issues……………………………………………………………………..8
SIRIUS Situation Summary…………………………………………………………………….11
2
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Human Resource Issues in Australia
Human resource managers for global organizations play an important role in influencing
company culture. Hill (2005) defines Human Resource Management as the “activities an
organization carries out to use its human resources effectively.”(p.618) As SIRIUS prepares to
enter the Australian market, there are several issues that need to be evaluated concerning staffing,
compensation and labor relations.
Staffing
“Staffing policy is concerned with the selection of employees for particular jobs.”(Hill,
2005 p.620) However, human resource professionals are not simply looking for individuals with
specific skills, but with certain personality traits that will fit into the organization’s culture.
Organizations pursuing an international approach usually take one of three staffing approaches:
Ethnocentric, Polycentric, or Geocentric.
“The ethnocentric staffing policy is one in which all key management positions are filled
by parent-country nations. A polycentric staffing policy requires host-country nationals to be
recruited to manage subsidiaries, while parent-country nationals occupy key positions at
corporate headquarters. A geocentric staffing policy seeks the best people for key jobs throughout
the organization, regardless of nationality.” (Hill, 2005 p.621-3) For SIRIUS’ Australian
operations, the company will most likely pursue the geocentric approach to staffing. The idea is
that SIRIUS needs Australian representation at the corporate level for two reasons. An Australian
executive would be able to assist SIRIUS’ executives in Australian business practices and
strategies. Additionally, employees in Australia may respond better to an Australian executive.
It is important, however that the corporate culture remain the same across countries.
Staffing in Australia should be fairly comfortable for SIRIUS because the language,
cultural environment and business practices are very similar. Business etiquette is also very
similar to Americans, with attention paid to advance planning, promptness and punctuality. Like
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the U.S., Australia has strict anti-discrimination laws that make it illegal for employers to
discriminate against employees or those applying for work.
Compensation
Compensation differs significantly between U.S. and Australian executive. An important
issue is how SIRIUS can adjust compensation to reflect national differences in economic
circumstances and compensation practices. In a survey conducted by Towers Perrin, “Australian
CEO’s are paid an average of $646,316 compared to $1,403,899 paid on average to U.S.
executives.” (Hill, 2005 p.633)
In Australia, wages are set out by law, the Workplace Relations Act 1996. The minimum
wage is currently set at $467.40 per week or $12.30 per hour. (Australian Government, 2005)
Many jobs are covered by a federal or state industrial award, which is a legally binding document
that sets out the minimum entitlements of employment such as wages, allowances, overtime,
hours of work, and leave entitlements for recreation or illness, or by an agreement between an
employer and a group of employees or unions representing them.
Leave entitlements are similar to that in the U.S. where most workers are paid for public
holidays, except for contract workers and casual employees who are paid for actual hours worked.
The holidays are similar as well, with a few exceptions such as Australia Day, Canberra Day,
Easter Saturday and Easter Monday, Anzac Day, Queen’s Birthday and Boxing Day. Australia’s
parental leave entitlement is an issue that SIRIUS would need to adjust to. Parents or guardians
of a newborn child are entitled to 12 months leave of absence. The 12 months can be divided
between the two parents or guardians even if they are employed by different employers. When
they return from their leave, the employee must be provided with the same job, or a job with
similar characteristics, with the same employer. This entitlement, although great for the parents,
will be expensive for SIRIUS as the company may have to pay for temporary help, while at the
same time, pay a 6 – 12 month salary of the individual on leave.
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Labor Relations
“One task of Human Resource Management is to foster harmony and minimize conflict
between the firm and organized labor.” (Hill, 2005 p.637) Australian workers are free to choose
whether or not they join a union. The Australian Council of Trade Unions (ACTU) is the only
peak council and national center representing the Australian workforce. The ACTU represents
workers in almost every position, including finance, government and the service sector.
According to ACTU, “25% of the 9.2 million people employed in Australia, belong to a union.”
(www.actu.asn.au) Over the last two years, union membership has been increasing mainly
because of changes in the workforce structure. For example, the OECD explains that “the
Australian government has cut back on government involvement in the delivery of employment
services by making more use of market forces and the private sector.” (www.oecd.org)
As mentioned earlier, awards and agreements are other forms of organized labor used by
the Australian workforce, to set out working conditions, wages and entitlements. Awards can be
set by the state or federal governments. “Federal awards are the responsibility of the Australian
Industrial Relations Commission (AIRC), while State awards are the responsibility of State
industrial tribunals.” (http://www.wagenet.gov.au) Certified agreements (CA) are collective
agreements made between an employer and a group of employees or unions representing them.
Australian Workplace Agreements (AWA) were introduced to give employers and employees
flexibility in setting wages and conditions, and to enable them to agree on arrangements that suit
their workplaces and preferences. An AWA is an individual agreement between an employee and
the employer.
SIRIUS’ human resource department will have to adjust its strategy to meet the needs and
policies of the Australian workforce. However, there are many similarities between the U.S. and
Australian work environment. Both countries follow strict anti-discrimination laws, have similar
business etiquette and use labor unions. Therefore, the shift to the Australian market should not
require drastic changes in SIRIUS’ human resource structure.
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Important Business Opportunities & Risks Associated with Establishing Business
Operations
The satellite radio market in Australia is extremely limited. Kansat currently
offers satellite television and internet service in Australia, although information as to
their success rate and financial information is not readily available (Kansat Satellite
Television and Internet, 2003). Kansat does not offer radio programming. WorldSpace,
another satellite radio provider for the European, South American, and Asian continents,
merely provides satellite coverage for the far western portions of Australia with their
AsiaStar satellite (Cratt, G., 2004). Additionally, to our knowledge the only other
satellite radio provider known to us is XM Satellite radio. XM, like SIRIUS, currently
operates in North America and, to the best of our knowledge, have not revealed plans to
enter the Australian market. Therefore, from a pure business opportunity perspective, it
would seem SIRIUS faces little competition risks in Australia.
Establishing a satellite radio network is no inexpensive task. To provide coverage
of North America, SIRIUS maintains three satellites in orbit with a fourth in ground
storage as a spare. Although the costs of purchasing and launching these satellites were
not available, SIRIUS insures each satellite for $110 million (SIRIUS Satellite Radio
2002 Annual Report and Proxy Statement, 2003). To provide coverage in Australia, it is
assessed a similar arrangement will be necessary. These initial costs are quite high and
pose a significant business risk should SIRIUS fail in Australia. In order to mitigate the
initial expense and risk of satellite radio, SIRIUS may consider other options to provide
their service. For example, we could launch high altitude, near-space blimps. At
Defense Tech.org (2005) we learn at altitudes of 65,000 to 350,000 feet they have quite
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the footprint needed for our purposes. The Air Force is experimenting with them right
now (¶1).
Music is an integral part of the Australian culture. According to the Australian
Record Industry Association (2005), there were $26,745,000 (Australian dollars) in sales
of singles and $540,058,000 (Australian dollars) in album sales for 2004. For
comparison the exchange rate on 14 July 2004 was 1.38 Australian/$1 American (XRate.com, 2005). The Top 50 Singles chart ending 1 Aug 2005 for Australia share the
same top names and songs as you would expect to find in American charts. Certainly,
culturally the business opportunity exists. The shared language and similar tastes in
music serve to mitigate the cultural risks.
Australia continues to prosper economically. According to data obtained from
OECD (2005), Australia’s GDP continues to grow. The GDP per capita grew more than
7% from 2000 to 2002. That represents the ninth highest GDP in the world.
Unemployment rates have consistently decreased from 6.8% in 2000 to 5.2% in 2005.
The number of vehicles on the road have increased from 62.3% in 2002 to 63.3%,
representing the seventh highest number of moor vehicles per capita in the world. The
conclusions from these statistics are obvious; Australia is prospering.
In January 2005, the U.S.—Australia Free Trade Agreement was set into motion.
Australia forged this agreement in an attempt to encourage open trade between
themselves and the U.S. with the hope of improving their own economy. The agreement
made huge strides in most areas of commerce with the exception of the agriculture
segment. Of particular benefit to SIRIUS Satellite Radio are provisions for enhanced
trade in the area of telecommunications and electronic commerce.
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The U.S.—Australian FTA has presented SIRIUS with a prime opportunity for
growth in the Australian market. However, according to the Economist Intelligence Unit
Viewswire (2005), Australia is attempting to forge similar FTA’s with China, Malaysia,
UAE, and the Association of South-East Asian Nations (ASEAN). These agreements
may become quite complex given the vast differences in political cultures and are
expected to take several years to complete. SIRIUS should move quickly to take
advantage of the already active U.S.—Australia FTA to establish a presence, and claim
market share before other FTA’s are ratified. However, this risk is somewhat mitigated
considering the lack of satellite radio providers originating from member of ASEAN.
SIRIUS is poised for a great opportunity in Australia as the risks are considered.
The demographics and opportunity fully support a decision to enter the Australian
market, with the initial setup costs representing the highest risk. A thorough market
study should be conducted to further determine if the risk will be rewarded.
Sustainable Business Issues
SIRIUS Satellite radio is planning to enter a foreign market, Australia, and by
doing so SIRIUS must address the sustainable business issues that it will face sooner or
later. Corporate sustainability is defined by the Dow Jones Sustainability Indexes as, “A
business approach that creates long-term shareholder value by embracing opportunities
and managing risks deriving from economic, environmental and social developments”.
SIRIUS would have to watch closely Australia’s financial, social and environmental
business performance in order to determine whether or not entering this market, although
with risks, offers good prospects for the organization.
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The first issue to tackle would be the performance of SIRIUS and Australia in the
financial arena. Before entering a new market, expanding, etc., SIRIUS would need to
have the resources necessary to embark in such an endeavor. For the last two years,
SIRIUS has done quite well. Its stock was selling for about over $3.00 in 2003, but it is
traded currently for about $7.50. A more in depth look at the company and how it has
been trading in the marketplace can be found at moneycentral. Shareholders’ are looking
for financial returns and long-term growth and SIRIUS has been able to deliver both.
The next step is to see how Australia is doing financially for no organization would want
to enter a country that is financially unstable. As stated in the Australian government
Department of foreign affairs and trade website, “Australia has one of the strongest
economies in the world- competitive, open and vibrant”. Australia not only enjoys a
strong economy, it also attracts many investors because of its tax system and low barriers
which makes it ideal for many organizations to open shop in this country.
After seeing that SIRIUS as well as Australia are both financially strong, a look at
the social aspect of Australia should be carefully reviewed. What an organization should
avoid is to be viewed in a negative way like Nike was not too long ago due to its
questionable factories overseas. Nike, with its expensive shoes and other merchandise
had factories in very poor countries where they were able to exploit people, including
children. There were many reports condemning and providing details of the terrible
conditions its labor force had to endure. Although the product SIRIUS will be exporting
to Australia is different than the one Nike was producing in these factories, the message
is to be socially responsible and not follow Nike’s footsteps. While reading the article
about immigration in Spain, I realized that not all countries approach immigration the
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same way. It seems as though the Spaniards are quite afraid and unwilling to take in
immigrants to do the jobs they themselves do not want to do. That does not make sense,
especially economically. If you have a workforce that is unwillingly to perform a task or
job, the rational thing to do would be to hire those who are willing to do it. Because of
the amount of immigrants entering Spain, this country decided to enact laws to protect
itself and its citizens from being overwhelmed with immigrants that would take the jobs
Spaniards do not want to perform in the first place. This sounds to me like poor
planning. Australia, on the other hand, seems to welcome immigrants and businesses by
decreasing or eliminating the many barriers they would encounter elsewhere.
The third issue to tackle, and one that many countries, are quite concerned with
happens to be the environment. SIRIUS does not produce a product per se, but rather
provides a service, radio satellite, but even like that, the organization must make sure that
it adheres to the environmental laws that are in effect in Australia and be responsible and
accountable for the decisions it makes regarding such laws.
Australia seems to be an excellent country to bring a product such as Satellite
Radio and market it, and after taking a look at the financial, social and environmental
issues that SIRIUS will face when entering this foreign market, I would venture to say
that it would do well. Australia wants to attract investors, businesses, etc., by lowering
or eliminating barriers and as a result it stimulates its economy. A combination like this
is a win-win situation for Australia and for the businesses that are thinking about entering
this market.
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Australia Situation Summary
Australia’s economy and government policies are favorable to foreign investment
and offers fertile ground for SIRIUS satellite to sew the seeds of successful market entry.
In 2005 the U.S.—Australia Free Trade Agreement was set into motion to encourage
open trade in most areas of commerce. The provisions for enhanced trade in the area of
telecommunications and electronic commerce are of particular benefit to SIRIUS.
Australia receives some government funding for radio programming for the Australian
Broadcasting Corporation and the Special Broadcasting Service Corporation. Although
Australia’s government has a certain degree of power over radio broadcasting, there are
also mandates to allow and encourage independence and flexibility in the content of what
its being broadcast. This provision allows SIRIUS the room necessary to offer a wide
variety of programming. The Australian government truly understands the negative
affect anti competitive practices have on the ability of the country to operate in the AsiaPacific market and U.S to form alliances of trade and investment. The tight government
regulations surrounding anti competitive practices severely penalizes the groups that are
caught in rings that restrict the supply of goods in and out of the country. Australia has
three major government organizations that act to prevent anti competitive practices, The
Department of Foreign Affairs and Trade, The Office of Consumer Affairs and Business,
and The Australian Competition and Consumer Commission.
SIRIUS has the potential to mitigate risks and realize success in Australia through
several different market entry methods. Licensing agreements ion Australia could help to
keep costs low, provide a constant source of royalties, and provide opportunities for line
extensions and ancillary licensed goods. However, SIRIUS may relinquish too much
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control through licensing agreements. Through franchising, SIRIUS would reduce risk
and liability while expanding at the same time. Through this option SIRIUS has limited
risk and liability, but if a problem were to arise in the future SIRIUS would want to have
something in paper; a contract, by which it can guide itself and know what steps to take
to correct or fix the problem at hand. Joint ventures may offer SIRIUS the most
advantageous option for entering the Australian market. An examination of the entry
factors to include transport costs, trade barriers, political risks, economic risks, and the
firms’ strategy reveal there is a climate open and conducive for SIRIUS to strongly
consider the joint venture method.
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References
(2004, July) Australia: Labor market. Economist Intelligence Unit. Retrieved August 3,
2005 from http://eb.eiu.com.
Australian Council of Trade Unions. About the ACTU. Retrieved August 3, 2005 from
www.actu.asn.au.
Australian Government Department of Foreign Affairs and Trade. (2005). A competitive
economy.
Australian Government Department of Immigration and Multicultural and Indigenous
Affairs. Retrieved August 5, 2005 from www.immi.gov.au
Australian Government (2003, July) Wagenet factsheet. Retrieved August 3, 2005 from
www.wagenet.gov.au
Australian Labor Market Policies. Organisation for Economic Co-Operation and
Development. Retrieved August 5, 2005 from www.oecd.org
Australian Record Industry Association. (2005). Sales by value for the years ended 31
December 1993-2004. Retrieved August 6, 2005 from
http://www.aria.com.au/pages/documents/Table1.pdf
Cratt, G. (2004, April 7). Worldspace radio by satellite in Australia. Retrieved July 12,
2005 from http://www.siliconchip.com.au/cms/A_101160/article.html
Defense tech.org. (2005). Support rising for near-space blimps. Retrieved June 5, 2005
from http://www.defensetech.org/archives/001577.html
Dow Jones Sustainability Indexes. (2003). Corporate sustainability. Retrieved
July 30, 2005, from http://www.sustainabilityindex.com/htmle/sustainability/corpsustainability.html
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EIU Viewswire. (2005). Australia. Retrieved June 10, 2005 from
http://www.viewswire.com.ezproxy.umuc.edu/index.asp?layout=oneclick&pubty
pe_id=1086275908&country_id=1550000155
Hill, C.W.L. (2005). International business with Global Resource CD, PowerWeb and
World Map (5th ed.). New York: McGraw Hill.
Kansat satellite television and internet. (2003). Retrieved July 12, 2005 from
http://www.kansat.com.au/index
MSN Money. SIRIUS Satellite Radio. Retrieved July 30, 2005, from
http://moneycentral.msn.com/investor/invsub/advisor/advisor.asp?Symbol=SIRI
Organisation for Economic Co-operation and Development. (2005). Australia. Retrieved
June 10, 2005 from
http://stats.oecd.org/wbos/viewhtml.aspx?QueryName=3&QueryType=View&La
ng=en
SIRIUS Satellite Radio 2002 Annual Report and Proxy Statement. (2003). SIRIUS
Satellite Radio. Retrieved May 20, 2005 from
http://www.shareholder.com/SIRIUS/
X-Rate.com. (2005). Historic lookup. Retrieved August 6, 2005 from http://www.xrates.com/cgi-bin/hlookup.cgi