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School of Business

EXAMINATION

Semester One Final Examinations, 2022

IBUS7302 Operating International Business

ANSWER FOUR (4) OF THE SIX (6) QUESTIONS

Question 6.

TNA Australia provides innovative production solutions for the global processing and packaging industry. It was founded by Alf and Nadia Taylor in 1982 and today has operations across the world.  The firm, which maintains a manufacturing base in Melbourne, Australia, utilises innovation in a traditional manufacturing sector to follow a strategy of incremental internationalisation that has seen it become the biggest player in its industry worldwide.

The company spent much of the 1980s installing machines for the Australian potato chip manufacturer Smith’s chips. At the end of 1989, the TNA team congratulated themselves on their achievements at     Smith Chips. However, they also looked into the economics behind their venture. As Australia had only 20 million people, they realised there was a limit to the amount of chips such a small population could   consume. This led them to become involved in international markets. They approached Austrade, the   Australian Trade Commission, and were provided with a very small export development grant. This allowed TNA to set up TNA Europe.

Alf Taylor went to the UK and set up a small office in England with two employees. He chose the UK and Europe for the firm’s first overseas venture, as he believed the technical aspects of the firm’s product were suited to this region. The company needed to consider the easiest path to success when financing its internationalisation, Taylors says, as each stage of expansion was used to finance the next stage.

This is a model that TNA has continued to implement as it has expanded globally. The UK market initially offered fewer hurdles for TNA. For example, the idiosyncratic differences between English and Australian firms using packaging machines were lower than they were in other parts of the world. Europe had slightly larger discrepancies, but the lack of compatibility with TNA in the US meant that this was an extremely difficult market to enter initially. TNA Australia’s first sale in the UK was with Walkers, a company that is now part of the PepsiCo Group. After the UK, TNA launched into Continental Europe which they mastered in six years.

Alf Taylor believes that having a strategically oriented global mindset was a key factor in TNA’s ability to move into the global marketplace. In the packaging industry, there are probably only about 20 competitors worldwide. The industry is worth approximately AU$1 billion, a relatively small industry in

Taylor’s view. TNA sought to gain an advantage over its competitors by employing suitable strategies for the industry environment. Importantly, the company analysed its competitors and determined that the competition collectively suffered from a lack of vision, such that the industry believed there was a physical limitation to what was possible with packaging machines. This provided TNA with confidence that if it implemented a grand vision, it would be able to dominate its competitors, whom it determined were extremely parochial. For example, the US packaging suppliers did most of their business in the

United States, the Germans operated in Germany, and so on.  TNA’s insight was that this made no sense from a business perspective; it didn’t matter where in the world a product was being packaged, the packaging requirement shouldn’t be different – they were correct. Today, 95% of TNA’s revenue is from    its offshore business.

Alf Taylor describes the initial process of market entry: “Banging on doors and it was just hard slogging ... We had no money and we hired a van, stuck a machine in the back of a van and drove it around and put  it in people’s factories, and ran trials. You sit there and philosophise and give them the laws of physics like there is no tomorrow, and they don’t believe any of it. But as soon as you sit the gear in their factory  and run their product on that machine and show them how efficient that is, it’s doing double the speed ... So if you managed to get them to let you go in with a machine at no cost to them, then you had a pretty   good chance of getting in.”

Reflect on TNA Australia Pty Ltd. case above on international entry strategy and alliances and answer all the following questions.

(A) TNA has chosen to retain its production of packaging machinery exclusively in Australia. What do you think are the advantages to TNA in doing this? (3 points)

(B) What might the drawbacks be? (3 points)

(C) Does the strategy of production in Australia make sense? Why – justify your answer? (3.5 points)

(D) What advantages has TNA’s entry into the markets it has chosen provided for its international expansion? (3 points)