What Are the External Factors Companies Must Face When Deciding to Expand Overseas?

Topics: Nutrition, Fast food, United States Pages: 5 (1853 words) Published: September 4, 2012
Australian businesses have expanded overseas for the last few decades. Whether they are successful at doing so or not depends on many external environmental factors surrounding them in the foreign country. For Sumo Salads, which is an Australian brand that was established back in 2003 by a group of people who wanted to shift the lifestyle of Australians to a healthier alternative, they must understand how these factors will have a great influence on them if they were to expand to the United States of America (USA). Sumo Salads is currently present in Australia, New Zealand, London and Dubai as of the moment (Sumo Salads, 2012). These countries were fast to pick up on the fad of healthy eating due to the world’s increasing obesity rate. Because of this, by expanding Sumo Salads into one of the world’s highest obesity rated countries, Sumo Salads can be in for another success. External factors that they would face would be legal factors, social influences and trends, competition and the effect of seasonal factors.

Legal Factor
The legal system is different in every country so Sumo Salads must research this aspect well if they were to expand into the USA. They need to have a well and thorough understanding of the commercial law in the USA, which regulates employment, advertising, workplace safety and health, as well as food safety. This step can be quite hard so Sumo Salads need to determine if they would need to seek help from professionals in that field. Since they would be operating in the USA, they need to hire USA residents. In Australia, our national minimum wage is $15.51 while in USA the minimum wage is $7.25 (Fairwork, 2012). This can be beneficial for the expansion because since labour costs will be cheaper, Sumo Salads can make a larger profit out of the sales compared to Australia if they become successful. Like in most countries, there are laws that regulate the well being of the workers in a business as well. The presence of a workers’ union in the USA isn’t as strong as it is in Australia, which makes our working conditions better (Unions in Australia ensure workers get a fairer share of the pie than in North America, 2012). So due to that, Sumo Salads can also save further money on employment because they wouldn’t feel as pressured in the USA to satisfy workers to the same level as in Australia. Besides laws governing how businesses operate with employees, there are laws that govern the food that is being produced too. The food from Sumo Salads must bypass the standards that are set out in USA to avoid any food contamination that might jeopardise their brand when first starting out. By bypassing, Sumo Salads should be even better than local competitors in USA. According to (Thomas, 2011), it is suggested that the USA should develop an independent food agency to ensure high quality food. They stated that producing food with the highest nutritional quality has decreased over the years because it has become more expensive for food manufacturers. It’s also mentioned that people are willing to spend more on higher quality products if they were available (Thomas, 2011). Sumo Salads can take advantage of this opportunity and introduce a healthy fast food chain that has the potential to be profitable in the states, as well as healthy. Not only that, but they will also be satisfying the food standards of the USA to ensure food safety.

Social Trends
USA has one of the world’s highest rates in obesity with one in every three adults considered to be obese in 2010 (Pittman, 2012). This makes USA an appealing country for Sumo Salads to expand to because nowadays, the general public is more aware of the consequences of having an unhealthy diet (Pittman, 2012). One of the biggest fast food chains that contribute to obesity, which is McDonalds, has even started to introduce healthier alternatives in their menu. Sumo Salads can perhaps gain some of its market share by expanding because unlike...
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