Australian infant formula exports to China: factors for success
Creators: name: Marano, Somo George
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 350706
subject: International business
classificationCode: 350709
subject: Organisation and management theory
classificationCode: 350711
subject: Organisational planning and management

description: This thesis investigates the infant formula export trade from Australia to China. The primary aim is to evaluate the main factors for success and failure among firms that export this dairy product. The research question to be answered is ‘What are the factors for success at the organisational level for exporting Australian Infant formula to China? This thesis argues that specific factors are required to successfully export Australian infant formula to China.<br><br>The thesis sets out the context of the problem by providing an overview of the Australian dairy industry. Next is the description of the Daigou phenomenon, a grey export channel operating out of Australia by opportunistic traders through Chinese social media platforms. This indirect mode of exporting has been a key influencer for consumers in China. Following on, the growth of general dairy consumption in China, especially infant formula, and its origins are detailed. Here it is shown how domestic lapses in food safety, especially in the dairy product sector, have pressed Chinese consumers to seek imported dairy products that are presumed to be safer. This particular demand has been the main driver for imported infant formula in China. The extensive socio-economic changes in China have opened up a rapidly expanding market, but also placed specific constraints upon it.<br><br>The second section examines the general literature on theories of internationalisation and the firm with reference to export success. In particular, the thesis reviews the evolving interrelationships between the Uppsala Model (UM) and the Resource-Based Theory (RBT). The UM’s doctrine is drawn from studies about how firms learn when exporting. The literature suggests that firms with no export experience first venture into a market where cultural, social and institutional characteristics are similar to that of the home country. Their aim is to minimise risk from uncertainty. As the firm’s knowledge increases, so too does its commitment, which sees both becoming assets and motivators for seeking new markets under the same conditions. To extend their theoretical insights, UM theorists applied the RBT, which contends that those firms that have a larger amount of rare and valuable resources will have greater competitive advantage. Through the RBT, UM theorists were able to identify the rare and valuable resources generated from the cycles of learning.<br><br>The second section also critically analyses the literature on the subject of export performance to China. This was done by examining the key arguments about export performance within the Chinese context. It is argued that practical factors or capabilities referred to in the literature are probably generic to any market success for exporters to China. That is, the literature does not explain success in the dairy sector, particularly that segment for infant formula. This thesis demonstrates that attention must be paid to different country contexts, hence its inability at explaining how firms, who should have failed, succeeded, and vice versa. This section finishes with an overview of the four Miles and Snow Typologies which are used to assess an organisation’s strategic approach and its corresponding resource and capability base. Application of the Miles and Snow Typologies provides greater clarification to the success factors due to the equifinality of successful firms.<br><br>The third section explains the research design needed to answer the research question, which was carried out primarily through a qualitative multi-layered approach. Interviews with an Australian government trade promotion agency were carried out at the macro level. At the meso level, interviews were conducted with various industry associations, while at the micro level, four Australian (non-foreign multinational) organisational case studies were selected. These four organisations all had differing business models with half taking a business-to-business approach while the other half a business-to-consumer model.<br><br>The fourth section analyses the results from the macro, meso and micro layers, which are subdivided into pre- and post-market entry success factors. Four elements are shown that an organisation must address in order to succeed in exporting infant formula to China. These four that are common to the macro, meso and micro layers and are: product traceability, partner selection, a firm’s distribution, and branding strategy. Depending on a firm’s business model, these factors will vary in dependence.<br><br>The fifth section critically examines the UM and the successful path Australian infant formula exporters undertook. This discussion displays the interrelationship between a firm’s business model, psychic distance and speed of internationalisation from Australian to China. Following on, the factors for success address the four elements above under the RBT, showing product traceability as a new determinant to export performance literature and as a key constraint for Australian exporters into China. Furthermore, this section examines the fact that the literature on dairy exports to China does not sufficiently capture these essential factors for success. Both knowledge of, and the capability to fulfil, the specific requirements of China’s food safety regime are essential. The discussion shows that firms pursuing competitive advantage in China’s infant formula market must pay particular attention to meeting these requirements.<br>