Executive Summary

This report examines provides a comprehensive summary of the threats and opportunities for Fonterra to expand its operations into a new market within Japan.

Japan has a relatively stable political and legal environment which reduces the risks associated with entering the foreign market. The political system is a democratic system, with a Westminster form of government similar to Australia, which is favourable for western cultures when conducting international business. The legal environment on the other hand, is built on the foundations of the European Civil Law system with an English-American influence. Therefore Australian businesses must understand the differences when conducting business to ensure the …show more content…

As a result this section of the report will highlight the key macro issues Fonterra must take into consideration before doing business in Japan.

Political System

The political environment is essential for Fonterra to understand when looking to expand into Japan. The political environment is the government system within a country which shapes its economic and legal systems (Hill, 2011).

In 1947, following World War Two Japan adopted a Westminster form of government, which centralises the power to be in the hands of the Prime Minister similar to in Australia (Globaledge, 2011a). This is favourable for western countries when exporting overseas as it is familiar with a constitutional monarchy. This means the emperor known as a symbol of the state is used during ceremonial duties; however the parliament is led by a Prime Minister who conducts the countries governance (Globaledge, 2011a). The Japanese government is a parliamentary democracy, with the members of parliament elected by the people.

Fonterra must be aware of the trade barriers the Japanese parliament imposes as it may affect their ability to expand. Australia and Japan have a strong trade relation, thus since 2007 have been under negotiation to form a Free Trade Agreement (DFAT, n.d.). Once this agreement is formed there will be minimal or no government imposed barriers and the flow of goods and