Westfield Holdings Limited is an Australian publicly listed company that continues to experience extraordinary growth in the international marketplace. This report will incorporate the company's reasons for expansion onto the international stage, its methods of expansion and its strategies used to manage its operations that envelop 87 shopping centers in four countries.
Reasons for Expansion
In critically examining Westfield's global strategies, it is important to reflect on the broader reasons why many Australian businesses are increasingly pursuing a global strategy. The reasons for their expanding overseas include:
ÃÂ¼To find new markets and increase sales
ÃÂ¼To achieve economies of scale from a larger operation
ÃÂ¼To cushion the effects of fluctuations in the domestic economic cycle
ÃÂ¼To take advantage of regulatory differences, or
ÃÂ¼To minimise tax
Although not all of the above reasons are significant in Westfield's strategies to expand globally, some certainly can be considered significant. For example, Australia's comparatively small market (with a population of less than 20 million) represents limited opportunities for Westfield to expand its shopping centre creation or management domestically.
By limiting itself to Australia, Westfield would have missed the opportunities to take advantage of changing demand in new and emerging markets and thereby increase its sales that would flow from successful entry into overseas markets.
Westfield's global expansion strategy also expands their income generating potential. For example, with each additional development, Westfield commands development fees of 3% of total development cost, leasing fees of 10% of the first year's income of each specialty store and property management fees of 5% of gross income.
Expanding was also essential to Westfield in order to remain competitive. By operating solely in Australia, it would be unable to achieve the economies of scale that are typically enjoyed by oversea competitors. The nature of many businesses means that the bigger their...