Australia’s Business Environment and What It Means for Your Organisation

Business environment can be defined as the sum of all internal and external factors, including employees, management, customers, suppliers, supply and demand, government activities, technological innovation, social and market trends, and economic changes, for example. This range of factors makes it clear that your business environment, external as well as internal, matters and affects your decision-making.

Internal business environment

A company’s internal business environment is always important, but in these turbulent post-COVID times, it’s more significant than ever. McKinsey data suggests that organisations should reimagine their business model to come back stronger after the pandemic.

Focus areas

Four strategic areas for enterprises to focus on are recovering revenue, rebuilding operations, rethinking organisational structures and accelerating digitalisation. After all, McKinsey finds, those businesses who step up their game will be better prepared to meet the challenges of our ‘new normal’ than their more hesitant competitors.

Digitalisation, in particular, can get you ahead as more and more customers prefer digital-first solutions. This may need to involve a redesigning of your existing processes, especially with more and more employees preferring to work from home at least some of the time. Automation is another key component of modern internal business environments, with research from the McKinsey Global Institute suggesting that by 2030, automation is likely to affect around 60 per cent of all jobs. And don’t forget the advantages of tech-enabled recruitment that’s increasingly used in Australia, powered by emerging technologies like AI.

Risk and reward

According to Gartner, executives and other decision-makers need to recognise that making decisions in a turbulent business environment must come with a higher level of risk than usual. And that increased risk-taking is essential if you want to be able to keep up with the pace of innovation. Boards that take greater risks in expanding their product lines, transforming their working methods or deciding on entering new markets, for instance, are more likely to drive growth in a rapidly changing business environment.

In an increasingly ‘winner-takes-it-all business environment’, in which McKinsey research determined that up to 95 per cent of economic profit is earned by the top 20 per cent of companies, any organisation that isn’t adopting new approaches is in danger of failing.

External business environment

Naturally, your business is also affected by your external environment. A brand-new McKinsey study found that macroeconomic and geopolitical factors have made the global business environment rather volatile recently. However, a turnaround might be in sight, with energy prices off their peaks, inflation slowing down and economic growth seemingly stable. Positive signs, for sure!

As an Australian employer, you’ll be pleased to hear that Australia’s business environment is ranked 15th out of 190 economies when it comes to ease of doing business. Austrade explains that Australia’s political stability, transparent regulatory system and sound governance frameworks all help to underpin its economic resilience. In addition, Australia’s effective governance offers multinational corporations a safe and secure business environment.

Despite its relatively small population, Australia is a diverse and well-educated nation with an efficient economy that can more than hold its own in the global marketplace. Technological advances have helped Australia compete on the global stage and tap into new markets. Even the looming recession that is worrying some global economies is unlikely to hit Australia, according to Indeed Hiring Lab’s Senior Economist, Callam Pickering.

What makes Australia’s business environment so unique?

Global Australia explains that the free, prosperous and stable nation of Australia offers a secure base – and a particularly supportive business environment – for companies that want to expand their business ventures: ‘In Australia, fair and effective governance is seen as the foundation for economic growth and a free society. […] Transparent and dependable institutions give businesses the confidence their investments will be protected’.

According to the Why Australia Benchmark Report, Australia ranks

• 1st in the world for financial freedom
• 2nd in the world for judicial effectiveness
• 2nd in the world for monetary freedom
• 3rd in the world for trade freedom

What’s more, Australia is one of just nine countries worldwide to hold an AAA credit rating. All of these factors combine to make Australia an unparalleled business environment that is attractive on many levels.

What this means for you

There’s no doubt that a company’s ability to adapt to rapidly changing environmental circumstances is key to its survival. This applies today more than ever, given the fast pace of technological innovation and the new working models we are seeing after the COVID-19 pandemic.

When building – or growing – your business, examine both your internal and your external business environments. Are you making the most of the benefits offered by them? Or do you need to make some changes to maximise your opportunities, this year and beyond? As we have seen, Australia is a one-of-a-kind market with unparalleled opportunities. To stay competitive, take full advantage of our unique business environment.