Wafex Company Analysis

WAFEX

CASE ANALYSIs

INTRODUCTION

Wafex is a wholly owned Australian business involved in the horticulture industry since the year 1990. The company is presently Australia’s leading exporter to flower importers and wholesalers domestically and around the world, with expertise in providing Australian native wildflowers both fresh and dried varieties. Wafex’s business strategy is to be proactive in selling, with a strong customer focus, and continually looking for opportunities to add value to its services. The company and its owners are aware of the importance of exporting for the survival and expansion of the company; and also believe quality and time to market are important factors in gaining a competitive advantage in the international market.

The purpose of this case analysis report is to discuss Wafex’s feasibility of entering the China market; identify Wafex’s target market; consider a suitable marketing mix for the company’s upper socio-economic target market; discuss possible environmental factors in Australia that can affect Wafex; and an explanation on why Wafex have strong personal relationships with both suppliers and customers.

(Q1.) The feasibility of wafex entering the china market

Wafex presently export to over 16 countries (Wafex, 2006)1 that include Japan, USA, and Taiwan, and it can be assumed that the company persist to look for more opportunities to expand its exporting business overseas, such as the prospect of entering the China market. The viability of Wafex entering China is negative, although Wafex may possess certain strengths however there are major threats, which may hinder the company’s feasibility of entering China.

STRENGTHS AND OPPORTUNITIES

The uniqueness of Wafex’s products вЂ*Majority of exported products are all exclusively Australian grown, which gives the company a competitive edge against competitors when entering China market.

China’s entry into the World Trade Organisation in 2001 has opened up many opportunities for Wafex. The company could capitalise on the increase in their Asian market size: Japan, Taiwan, Singapore, Hong Kong, Korea, and potentially China.

Under the Australian-China Agricultural Cooperation Agreement, Wafex has been given funding by the Federal Government to pioneer the trade delegation to China, giving them an artificial competitive advantage over competitors in other countries (Maarschalk, 2004) . This funding gives Wafex the opportunity to research and develop new varieties of flowers and products that Chinese customers demand for.

Promotion of Wafex in the China market may not be as costly since the positive reputation of Wafex has been spread to China from Japan, thus reducing advertising costs. However, additional information is needed in understanding the Chinese culture and values and forms of promotional mix that attracts this market.

China has a system of modern transportation with shipping ports, road and rail networks (TravelChinaGuide.com, 2008) , Wafex’s logistic providers can take on the opportunity to form networks with China’s air/sea freight transportation networks, and thus create possibilities of negotiating transportation costs to China.

THREATS

There is a high possibility that Wafex will face strong competition when entering the Chinese market as other foreign competitors have the ability to produce Australian native products at a much cheaper price (Maarschalk, 2004)2.

China is a possible threat as a strong competitor to Wafex:

China has low cost labour and greater accessibility to the Japanese and other Asian markets.

China had an estimated 60,000 hectares of land under cultivation for flowers and foliage in 1994, oppose to Australia with only 3940 hectares in 1993 (International Labour Organisation, 2008) .

The Chinese government has “Committed to help build the infrastructure necessary to make the country a cut-flower export powerhouse. China has more hectares in flower production than the rest of the world combined” (Florists’ Review Enterprises, 2006)

China’s export value of cut flowers in 2006 have increased since 1990’s (figure 1), there’s potential it will further rise when the country becomes a �Cut flower export powerhouse’.

Trade Barriers: High tariffs are still maintained on exported products that compete with domestic industries in China (Office of United States Trade Reprehensive) . China’s tax regulations are into conformance with international standards (Parliament of Australia Senate) . Therefore at present, cut flower exports to China carry a 70 percent import tax, including cost of transport, plus a value-added tax of 17 percent (Richard Tomlinson, 1995) .

Large hindrances to Wafex increasing their market share areвЂ* increase in transport cost and fuel prices; airport expenses on security due to high security in airports since the terrorist attacks; and implementation of bio-terrorism laws.

The appreciating Australian dollar has a negative effect for Wafex exports, due to it slashing the returns for the company. There may be a possibility that Australian exported products in China are twice expensive when purchased by wholesalers/importers, thus influencing China market to purchase cheaper priced products from foreign competitors.

Overall, Wafex targeting the Chinese market is not a feasible option, because of many barriers that Wafex could face if exporting to China. Also China may become a powerful competitor of Wafex in the future; since China’s economy is strengthening, thus allowing them to develop their own flower industry and may outsource in regions such as Australia as well as invading on Wafex’s markets and attract some of Wafex’s resources (Maarschalk, 2004)2.

(Q4.) Wafex’s Target Markets

WAFEX Australia has had an international focus for its