As companies and organisations consider expanding into new markets, many are drawn to Australia's stable economy, high quality of life, and strategic location in the Asia-Pacific region. Yet, while the allure is strong, market entry is not as simple as registering a business and setting up shop. It requires a strategic and well-informed approach to ensure long-term success. At the core of this preparation lies the feasibility study—a critical step that can determine whether your expansion is poised for success or destined to face challenges.
Why Conduct a Feasibility Study?
The primary purpose of a feasibility study is to assess the viability of a proposed market entry. It goes beyond mere assumptions, providing a data-driven analysis of various factors that could impact your decision. Here's why a feasibility study is indispensable:
- Market Analysis and Understanding: Entering a new market means navigating unfamiliar waters. A feasibility study provides an in-depth analysis of the Australian market landscape, including consumer behavior, competition, regulatory frameworks, and economic conditions. It allows organisations to understand if there is a genuine demand for their product or service in Australia and how to position themselves for success.
- Risk Mitigation: Every new market comes with risks—economic fluctuations, cultural differences, regulatory challenges, and local competition. A feasibility study identifies these risks early on, offering insights into potential barriers to entry and the best strategies to overcome them. This proactive approach enables companies to plan contingencies and allocate resources effectively, minimizing potential losses.
- Resource Optimisation: Expanding into a new market demands significant investment in time, money, and human capital. A feasibility study helps ensure these resources are directed towards the right opportunities. It outlines the most cost-effective ways to enter the market, from choosing suitable locations to determining which channels will provide the best reach. This ensures that organisations make calculated investments, prioritising opportunities with the highest potential for returns.
- Credibility with Stakeholders: Whether you're seeking funding from investors or buy-in from internal stakeholders, a feasibility study demonstrates that you've thoroughly researched your expansion strategy. This builds credibility, offering stakeholders the confidence that decisions are grounded in rigorous analysis rather than mere ambition.
When Should You Conduct a Feasibility Study?
A feasibility study is not just a preliminary check before market entry; it's a strategic tool that can be used throughout different stages of expansion. Here’s when organisations should consider conducting a study:
- Before Initial Market Entry: For companies that have not yet established a presence in Australia, a feasibility study is essential before making any financial commitments. This ensures that the business is aware of local dynamics, understands legal requirements, and can accurately forecast revenue potential.
- Prior to Launching a New Product: Even if your organisation is already operating in Australia, launching a new product line or service requires careful consideration. The study assesses whether the new offering aligns with market demands and provides insights into potential pricing strategies, distribution channels, and target demographics.
- Scaling Existing Operations: If you’ve already tested the waters and are looking to expand your footprint, a feasibility study helps determine the optimal path for scaling. It identifies areas with the highest growth potential and provides an analysis of operational costs versus projected revenues, helping you avoid overextension.
The ROI of a Feasibility Study: A Strategic Investment
One of the most frequently asked questions is whether the cost and time involved in a feasibility study justify the investment. The answer is a resounding yes. Here’s why the ROI of a feasibility study is substantial:
- Informed Decision-Making: Making business decisions based on intuition can be costly. A feasibility study offers data-backed insights that guide strategic decision-making, ensuring that choices align with market realities. This reduces the chances of entering a market without understanding the potential pitfalls, saving substantial resources in the long run.
- Cost Avoidance: Market entry mistakes are expensive—misjudging demand, choosing the wrong partners, or underestimating regulatory complexities can lead to costly missteps. The upfront investment in a feasibility study helps avoid these costly errors, ultimately saving money that could be lost in failed attempts or corrective measures.
- Optimised Market Strategy: A well-conducted feasibility study doesn’t just tell you whether or not to enter a market; it provides actionable recommendations for how to do so successfully. This includes the best go-to-market strategy, target audience segmentation, and pricing models. By optimising your approach from the start, a feasibility study maximises revenue potential and shortens the time to profitability.
- Long-term Growth and Scalability: Beyond immediate gains, a feasibility study sets the foundation for long-term growth. By identifying sustainable opportunities and providing a clear roadmap for expansion, it helps ensure that your entry into the Australian market isn’t just a short-lived venture but a lasting success.
Kaufland's Withdrawal from the Australian Market: A Case Study
- Background: German supermarket chain Kaufland, part of the Schwarz Group, announced plans in 2017 to enter the Australian market, starting with Melbourne. They invested heavily—around $500 million AUD—in land, a distribution center, and initial site preparations, aiming to establish a strong presence.
- Decision to Withdraw: In January 2020, before opening any stores, Kaufland abruptly decided to exit Australia. The decision was based on a strategic review that highlighted several challenges:
- Shift in Global Strategy: The Schwarz Group chose to focus on its core European markets rather than expand into new, competitive regions like Australia.
- Intense Competition: Australia's grocery sector is dominated by Woolworths, Coles, and ALDI. ALDI, another German brand, had already established a strong foothold, making it difficult for Kaufland to carve out market share.
- Economic Uncertainty: With growing market volatility and the onset of global economic challenges, the long-term profitability of entering the Australian market became less certain.
Outcome: Despite the significant upfront investments, Kaufland decided to cut its losses before launching operations. The company sold its properties and redirected focus to more stable markets in Europe, thus avoiding deeper financial losses.
- Lesson: Kaufland's experience highlights the importance of thorough feasibility studies and market analysis before expansion. Their decision to withdraw early, though costly, saved them from potentially greater losses in a challenging and competitive market.
Entering a new market, especially one as diverse and dynamic as Australia, is a complex endeavour. A feasibility study serves as a compass, guiding your organisation through this complexity with precision and clarity. It transforms unknowns into actionable insights, helping you make strategic decisions that not only minimise risks but also amplify opportunities for success.
For organisations serious about making their mark in the Australian market, the question isn’t whether to conduct a feasibility study—but how soon. As you prepare to explore this new horizon, investing in a thorough feasibility analysis is the most strategic move you can make to ensure that your journey is not only successful but also sustainable in the long run.
Evelyne Wilton is a director at Core Global Group with extensive experience in strategic marketing, business consulting, and feasibility studies. She partners with organisations to deliver actionable insights and develop transformative strategies that drive growth and enhance brand presence. Evelyne’s expertise spans digital marketing, market analysis, feasibility assessments, and innovative campaign development, providing tailored solutions that align with each client’s unique goals.
Evelyne offers flexible, high-impact consulting services, including strategic roadmaps, feasibility studies, marketing audits, and hands-on guidance to optimise marketing efforts. Her strategic approach helps businesses navigate complex market landscapes, assess new opportunities, and achieve their objectives effectively.
Email her at evelyne@coreglobalgroup.com