François Perrot Walter Rha Adrian Wozniakiewicz

1. François Perrot Walter Rha Adrian Wozniakiewicz Walter Rha, François Perrot, Adrian Wozniakiewicz

2. Capital City • Canberra named capital city in 1908 • Population • 22 million • 60% concentrate in Sydney, Melbourne, Brisbane, Perth and Adelaide. • Free-Market Economy • High GDP per capita • Low rate of poverty • 13th largest economy in the world • Recognized for its human development, quality of life, health care, public education & economic freedom • International Presence • Member of the UN, G-20, Commonwealth of Nations, OECD, APEC, WTO • Industries • Agriculture, Dairy, Banking, Mining, Wool & Cotton, Wine, Fisheries Australia

3. The Commonwealth of Australia • First discovered by Dutch explorers in 1606 • North Western Australia • Captain James Cook discovers eastern Australia in 1770 • Establishes a new penal colony for Britain • Since the European settlements in the late 18th century • Australia experiences significant population growth • Victorian Gold Rush 1851-1860’s (population tripled) • Convict labor System 1787-1852 • Continent was set up into parliamentary governing crown colonies • Six colonies • Western Australia, Northern Territory, South- Australia, Queensland, New South Wales • In 1901 the six colonies unite and become the federation Commonwealth of Australia • In 1908 Canberra is named the capital city of Australia • As a compromise between rivals Melbourne and Sydney History

4. Worlds Largest Producer of Leads, Diamonds • Uranium • Worlds largest Uranium reserves 23% • 3rd larges producer • Exports valued at $1.1 billion annually • Coal • Worlds largest net exporter of coal accounting for 29% • Dubbed the “Saudi Arabia of Coal!” • Bauxite • Worlds largest producer of Bauxite 33% of global production • Highest grade deposits of Alumina • Aluminum • 5th largest aluminum producer • Zinc • Large reserves • Nickel • Large reserves Mining

5. Agriculture: • 12% share of GDP • $155 billion a year industry • 134,996 farms covering - 61% of countries landmass • Dry-land farming & Irrigation Mix • Due to the dry and infertile soil • Horticulture & Viticulture • Fishing: • $2.3 billion a year industry • Aqua farming sector • Accounts for 32% of the total industry • Fish exports roughly $1.84 bullion a year Agriculture & Fishing

6. Wool • Export oriented • 90% of production is exported • Accounts for 9% of world production • Market Leader in fine quality wool sector • Producing 50% of worlds Merino wool • Dairy • Fourth most valuable agricultural export • $3.4 billion a year industry • Employs over 40 000 people • 1.6 million cows producing on average 9023 million liters of milk per year Wool and Dairy

7. Wine • Over 2000 wine companies • Employs roughly 31 000 people • $2.8 billion industry • Exports over 722 million liters a year • Tradition • Rich tradition of winemaking dating back to 1788 • Tourism • 3.9% of Australia’s GDP • $32 billion a year industry • 5.7 million visitors in 2010 • Decline in Tourism between 2001- 2003 • Due to external events (Ex 9/11, SARS) Wine & Tourism

8. Banking • 2009: Total banking sector assets $2.59 trillion • Government regulated • Prohibits merger between two major (AUS) banks in order to preserve competitiveness • Stock Exchange: • 1861 First Exchange – Melbourne • ASX (Australian Securities Exchange) • Formed in 2006 • Merger of ASK and Sydney Futures Exchange • Diverse international and Domestic Customer base Banking & Stock Exchange

9. Services: main component of GDP • Constant Real GDP growth • Doubled in last 20 years Economic performance

10. International Trade & Region • China: Australia’s major business partner • Top exporting destination (20%) • Top import origin (15%) • US: use to be the major one in 2007 with $47bn • Regionaltrade • Exports: Japan 2nd, India 3rd. East Asia (incl. ASEAN) = 67% • Imports: US 2nd, Japan 3rd. East Asia = 52%

11. The CAD isgrowingfastbut is of no concern Fiscal deficitonlyduring the 2008 global crisis No “twin-deficit”

12. Stronglygrowing net FDI inflowssince 2000 2010 Dun&Bradstreet top rank fors safe FDI A.T. Kearney FDI Confidence index: 6th Miningaccounts for 25% of the FDI inflows Foreign Direct Investment

13. Government Eliminate distortions: • Strong financial and regulatory enforcement • Corruption perception index: 8th least corrupted country (=Switzerland) • Social context: social security, unemployment benefits, educational • Skilled migration program: point based system, adjustable to the needs • Macroeconomics stability: • RBA stabilizes inflation around 2-3% by keeping interest rates high in “normal” times • 2008 Global finance economic crisis: • Monetary policy: RBA sharp cut on rates (from 7.5% to 3% in 6 months) • Ease financial pressure on indebted households and businesses • Stimulate consumption • RBA guaranteed bank deposits and wholesale’s funding of Australian banks • Fiscal policy: • US$8bn stimulus package (1% GDP): pensioners and low-income families (bonuses), housing construction, trainings • Feb 2009: US$26bn package for nation-building (education, infrastructure, tax break for SME, $ for workers, farmers, students) Stimulate FDI

14. Basic Education: Overview • Education is compulsory from 6 to 16 years of age • Literacy rate is 99% for men and women • Government expenditure on education as a percentage of GDP was 4.8% in 2009 • Government initiated the Building the Education Revolution (BER) program in 2009 • BER Proposes to provide infrastructure funding worth $14.7 billion to Australia’s 9,540 schools Macroeconomic Competitiveness:Social Infrastructure

15. Healthcare: Overview • In 2009, Healthcare expenditure of Australia stood at around $51.6 billion, representing 5.5% of GDP • OECD average of 8.4% • 70% of Australia’s healthcare expenditure is funded by the government MacroEconomic Competitiveness:Social Infrastructure

16. Legal Landscape: Performance • Australia ranks in the 96.7 percentile on the government effectiveness parameter. • measures quality of public services, civil service and degree of independence • Australia ranks in the 95.2 percentile on the rule of law parameter. • measures extent to which agents have confidence in the rules of the society and particularly at the quality of contract enforcement, the police and the courts. • Australia ranks in the 96.1 percentile in the control of corruption parameter. • measures the extent to which public power is exercised for private gain, especially corruption, as well as the private and elite influence over the state MacroEconomic Competitiveness:Political Infrastructure

17. Assimilating Foreign Technology: • India-Australia Strategic Research Fund in science and technology • China-Australia Special Fund for advanced science and technology development. • Australia also entered into scientific bilateral collaborations with the US, Canada, South Korea and Japan. • Administrative Infrastructure • 1st: OECD listed Australia as most open economy • 2nd lowest levels of red tape in terms of business procedures Building the Diamond:Factor Conditions

18. Improving Efficiencies: • The Australian government has funded projects supporting: • telecommunication and IT infrastructure • broadband services for local and rural areas • the development of green telecommunications • carbon trading. • The government has also been successful in setting up Tele-education in remote areas Building the Diamond:Factor Conditions

19. Reducing Impediments to Competition: • Australia has transformed itself from an inward-looking, highly protected and regulated economy to anopen and export-oriented economy • Australia is a member of various internationalorganizations including: • Asia Pacific Economic Cooperation (APEC) • ANZ Certa (1983 FTA with New Zealand) • Common Wealth Cairns Group • International Monetary Fund (IMF) • Organization for Economic Co-Operation and Development Building the Diamond:Context for Firm Strategy and Rivalry

20. Building the Diamond:Context for Firm Strategy and Rivalry • Effective Competition Policy: • The Australian government will take measures targeted at promoting competition and cracking down on anticompetitive practices • Trade Practices Act (TP Act) 1974 include moves to further defend small business from predatory pricing • Effective Intellectual Property Protection Mechanisms: • Australian patent law prohibits double patenting. • It does not prohibit two patents for the same invention but of differing claim scope.

21. Market value • The Australian metals & mining industry shrank by 5.6% in 2009 to reach a value of $63,613.2 million. • Market value forecast • In 2014, the Australian metals & mining industry is forecast to have a value of $96,280.9 million • an increase of 51.4% since 2009. • Market segmentation • Coal is the largest segment of the metals & mining • Accounts for 52.9% of the industry's total value. Market Overview

22. Buyer Power • Average buyer is large company > Boosts Power • Low level of product differentiation > Boosts Power • Large number of customers > Reduces Power • Mining necessity for many buyer’s business > Reduces Power OVERALL ASSESMENT = MODERATE LEVEL OF POWER • Supplier Power • Mining companies are vertically integrated > Boosts Power • Mining equipment specialized and specific > Reduces Power • Availability concerns of future commodities > Boosts Power OVERALL ASSESSMENT = MEDIUM - HIGH LEVEL OF POWER Mapping the Cluster

23. Threat of New Entrants • Very high initial investment costs > Reduces Threat • Increasingly stringent environmental regulations > Reduces Threat • Resource Super Profit Tax > Reduces Threat • Criminal Penalties for violating environmental laws > Reduces Threat OVERALL ASSESSMENT = WEAK THREAT Mapping the Cluster • Threat of Substitutes • No direct substitutes for metals and minerals > Reduces Threat • Indirect Substitutes require changing technologies > Reduces Threat • Very High Switching Costs > Reduces Threat OVERALL ASSESSMENT = LOW THREAT

24. Rivalry • Scale economies favor large companies • Mergers and acquisitions are expected to increase competitiveness > Boosts Rivalry • Exit barriers are high thus major players are strongly motivated to remain in industry > Boosts Rivalry • Industry margins are susceptible to changes in prices and growth is hard to sustain > Boosts Rivalry OVERALL ASSESSMENT = STRONG LEVEL OF RIVALRY Mapping the Cluster

25. BHP Billiton Group • BHP Billiton is a diversified natural resources group. • The group exports coal, iron ore, copper, nickel, manganese ore, primary aluminums, and manganese and chrome ferroalloys. • The group has a global presence with more than 100 operations in 25 countries. • Market Capitalization of $249 Billion USD Key Companies

27. History of major mining booms • 1850 gold rush • Late 19th mineral • 1960s mineral & energy boom • Late 1970s, early 1980s energy boom • Today: commodity boom • Strong growth of developing countries: growing demand for commodities • Australia: coal, iron & steel, aluminum, copper, etc. • Strong world demand: minerals and ores • China: top destination for Australia’s exports • Growing demand for uranium until January 2011 • World trend Mining Cluster: Historyof demand

28. MiningCluster: performance • Employment and Investment • World growing demand for metals, previous metals and ore (China, India) – growing investments • Growing technology requiring less man-labor • Mining booms: investment, value added

29. Government subsidies? • Subsidies in 2006 (research by Institute for Sustainable Futures for Greenpeace Australia): • Electricity: US$ 2bn • Transport: US$ 7.5bn • Strong Aluminum subsidies too

30. Comparison with Indonesia • Indonesia has a similar profile in mineral resources: coal, precious metals, uranium, iron, etc. • What is different? • Barriers to trade, political instability, corruption, lack of financial and regulatory laws enforcement, >750 dialects, thousands of islands • Indonesian boat people seeking asylum in Australia