International Expansion of Gousto in Australia: A PESTEL Analysis and Market Entry Options

This report provides a PESTEL analysis of Australia for the international expansion of Gousto, a UK-based meal kit provider. It also suggests market entry options and a suitable mode of entry for Gousto in Australia.

Management
Report

EXECUTIVE SUMMARRY
Gousto is UK based meal kit provider company. Australia is the selected company for
international expansion of Gousto. The PESTEL analysis of Autrlia depicts that various external
environment factors have created opportunities and threats dot international expansion of
Gousto. The specific product launched by the company in Australia will be fitness recipe box
which offers consumers Australian cuisine designed to boost the health of the consumers. It will
also be sustainable.
The company has opportunity to expand smoothly in the country because of strong UK and
Australia political relationship while there is threat from Australia China trade war. The
blooming meal kit industry in Australia provides growth opportunity to Gousto while the
economic damage caused by pandemic is threat to long-term survival of the firm.
The company faces a threat and opportunity in growing meal kit industry in Australia as
there are several competitors in the market. The rise in online shopping offers Gousto
opportunity for quick international expansion while the complicate data protection laws of
Australia are threat.
The rise in environmental awareness provides the respective firm an opportunity by
offering sustainable products while there is threat of low profitability. Successful expansion can
be completed by following legislations in Australia while there is threat if delayed decision
making.
Forming strategic alliance with fitness company is the most effective method for entering
Australia as it will lower the risk of international expansion of Gousto in Australia.
Differentiation focus is the suitable strategy for Gousto to gain success in Australia. It will help
the company offer unique products for target audience of business professionals in Australia. The
firm will be able to build unique brand image and distinguish itself in the meal kit industry of
Australia.

Table of Contents
EXECUTIVE SUMMARRY...........................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
PESTEL..................................................................................................................................1
Market Entry Options.............................................................................................................5
Market Segmentation..............................................................................................................6
Porter's Generic Strategies......................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
International expansion helps business firms gain strong position in their industry by
increasing their consumer base and lowering reliance on local business cycle (Abdinazarovna,
2019). The business firms selected for this report is the UK based meal kit service provider
Gousto. The company was founded in the year and retails meal kit products in UK. This report
recommends a specific product which need to be launched by the company in an international
market. PESTEL analysis of the country is provided in this report along with explanation of
market entry options which can be sued by Gousto. The market segmentation for Gousto is also
provided in this report with justification for potential target consumers of the company. Porter's
generic strategies are explained in this report along with recommendation of specific strategy for
Gousto and critical analysis of the best suited strategy.
MAIN BODY
PESTEL
The country suggested for Gousto to expand intentionally is Australia and the service
which will be offered by the company to Australian consumer base is fit and sustainable meal kit
delivery service. This meal kit will be specifically designed according to taste of Australian
consumers keeping in mind different flavours of traditional Australian cuisine. Consumers will
get 30 options for recipe boxes which will rotate each week. The recipe boxes will be provided in
sustainable packaging and consumers will be able to trace each fresh ingredient of the recipe box
to ensure that it is sourced sustainably and ethically. In context of the fitness aspect of the service
every recipe box option will be created to help consumers improve their health by including
recipes which help consumers attain specific fitness goals, improve health deficiencies or battle
specific illnesses such as diabetes. Australia is a suitable country for international expansion of
Gousto because the market size for the prepared meal industry in the country is $1 billion
Australian Dollars (Prepared Meals Production in Australia- Market Research Report, 2021).
The respective company will be able to exploit the high potential available in the Australian meal
kit industry and make international progress (Bell, Bryman and Harley, 2018). The various treats
and opportunities present in Australia for Gousto can be determined by conducting a country
specific PESTEL analysis of Australia. PESTEL analysis of Australia is provided below:
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 Political Factors: The political environment of Australia is stable and the country has
constructed positive relations with neighbouring countries as well as major powers in the
world. Australia also shares positive political relations with United Kingdom. Both
countries are commonwealth nations and share the same monarch which is Queen
Elizabeth the seconded. The trade war between Australia and China has introduced
political tension in the country (Haak-Saheem and Festing, 2020). China is one of the
largest trading partners of Australia with significant importance. Such political instability
between China and Australia is economically and politically damaging for business firms
in Australia.
Opportunity: The stable political relations between UK and Australia provide Gousto an
opportunity successfully expands in the country. The company will be able to exploit shared
history of between UK and Australia to connect with foreign consumer base and create
foundation for long term survival in the country.
Threat: The political instability caused by the Australia and China trade war has introduced
political threat of such instability leading to economic downfall of Australian currency and trade
in Australia. Economical Factors: Meal kit market Australia registered a positive compound annual
growth rate of 4.71% during the period of 2014 to 2019 with sales value of AUD 197.28
million the year 2019 and an increase of 4.82% in the year 2018 (Meal Kits (Prepared
Meals) Market in Australia - Outlook to 2024; Market Size, Growth and Forecast
Analytics (updated with COVID-19 Impact)). This data showcases the economic potential
present in the Australian meal kit industry. The Australia economy increased with the rate
of 0.7% in the second quarter of 2021 which showcases the negative impact of COVID-
19 virus on the economic conditions of Australia. The Australian Bureau of Statistics
declared that the country avoided technical rescission (Australia avoids recession for now
but economic growth already slowing before Delta hit, 2021).
Opportunity: The respective gains huge opportunity for growth Australia. This can be seen by
the positive growth of the Australian meal kit industry and high demand for meal kit providers in
the industry. The company will prepare for long-term survival in Australia by entering the meal
kit industry in the country early before it reaches its saturation point.
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Threat: The economic downturn in Australia caused by the introduction of delta variant creates a
threat for the respective firm. This is because economically weak conditions of Australia limit
consumer purchasing power and ability to attain high profitability in the country. Social Factors: The social factor related to Australia is that consumers are shifting
towards ordering meal kit services instead of ordering prepared food from eating
establishments (Ready, steady, cook: customers swap meal kits, discounts in pursuit of
dinner excitement, 2021). This social trend has been influenced by the pandemic as
families across Australia are focusing on experimenting with cooking and trying new
cuisines. This has led to introduction of new firms in the meal kit delivery service
industry. Some of the established meal kit delivery names in Australia are Hello Fresh,
Paper Leaf, Marley Spoon and Dinnerly. These companies provide consumers different
meal kit delivery options with different strengths such as low cost or huge variety of
recipes.
Opportunity: The growing social trend of ordering meal kits and recipe boxes in Australia
provides Gousto an opportunity to increasing consumer base in the country by fulfilling their
demand and offering innovative products in the meal kit industry in Australia.
Threat: The growth of the meal kit industry in Australia has also introduced threat for
international expansion of Gousto in the form of increased competition. The established brands
in the meal kit service industry of Australia such as Paper Leaf will provide the respective
enterprise tough competition and increase threat of competition for the firm. Technological factors: The increased online shopping in Australia is the main
technological factor affecting business firms in the country. Apart from this another
factor which affects business firms in Australia is the Australian Privacy Act, 1998 which
regulates data usage by federal and private firms and is different from the UK GDPR law
(De Massis and Foss, 2018). This law puts forward Australian Privacy Principles which
need to be followed by every Australian, Australian Capital territory and Norfolk Island
government agencies. Some of the principles provided under this legislation state that
firms need to ensure open and transparent management of data and notify individuals
while collecting their personal data. In addition to this business firms also have to follow
certain rules in order to engage in direct marketing while using or disclosing personal
data of employees.
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Opportunity: The opportunity provided by increasing online shopping in Australia is that it will
make it easier for the company to expand and penetrate the Australian market. The company
operates digitally and the shift towards digital shopping is beneficial for expansion and future
growth of Gousto in Australia.
Threat: The Australian Privacy Principles as outlined in the Australian Privacy Act, 1998 are
complicated and restrict usage of and collection of private data for the respective company
(King, Brooks and Tabari, 2018). This creates a threat for the firm as the company will not be
able to collect and use consumer data easily to gain accurate consumer insight. Environmental factors: The environmentalist movement in Australia is strong because the
country has suffered massive damage because of climate damage such as fires in the
Australia during the year 2019-2020. This has impacted corporates as they are now
offering environmental friendly products and are increasing their sustainability.
Increasing sustainability is one of the top priorities of business firms in Australia
currently.
Opportunity: Gousto offers product in environmental learnedly packaging with ingredients
which are ethically and sustainable sources. This provides the company opportunity to create a
distinguished brand image in the country and gain competitive edge over other meal kit providers
in Australia by offering them variety of meal kit options in sustainable manner
Threat: The threat faced by the company is related to high costs of increasing sustainability of
meal kit services (Cosenz, 2017). The respective firm will not be able to attain high profitability
because of this and may fail to survive in the market for long time period. Legal Factors: The legislative requirements for international business firms in Australia is
complicated and new firms have to take time in understanding each and every law in
Australia so that business operations are completed in a lawful manner (Kirchmer, 2017).
Opportunity: The respective firm has the opportunity to avoid any legal troubles in the country
by taking services from experienced corporate law firms to handle their legislative issues. This
will help the company develop a clean brand image and start growth in Australian mrket with
positivity.
Threat: The threat associated with taking business decision after considering legal advice at
every step is that it delays decision-making and introduces threat of failure due to time wastage
at the enterprise.
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Market Entry Options
 Strategic Alliance: Under this mode of entry business firms enter into strategically
formed partnerships with another enterprise/es in order to ensure successful expansion in
a particular market (Massingham and Al Holaibi, 2017). The firms which are part of
strategic alliances pool their objectives to achieve the common goals of successfully
pleading in a new region. The advantage of strategic alliance as mode of entry is that it
reduces the risk of international expansion and provides the company more resources for
supervising successful expansion. The disadvantage of this mode of entry is that the
company loses control over international expansion and has to share the control with
other members of the strategic alliance.
 Mergers and Acquisition: When a company takes over other firm and establishes itself
as the owner it is defined as a acquisition while a merger refers to the process of two
firms joining forces to become a single entity with singular ownership. Mergers and
acquisition are effective tools for expanding internationally as they help business firms
connect with an established firm in the region. The advantage of using this mode of
entry is that it leads to creation of economies of scale which supports quick international
expansion of the company. The disadvantage of this mode of entry is that mergers and
acquisition bring organization wide change which can lead to employee resistance. In
addition to this conflict of cultures is caused because of mergers and acquisition which
harms stable profitability of the company (Mkhaimer, Arafeh and Sakhrieh, 2017).
 Foreign Direct Investment: This refers to the act of investing in ownership of a business
entity of one country by a company headquartered outside the national borders of that
country. This mode of entry is used for international expansion as it can be easily
completed. The advantage of foreign direct investment is that it helps in easy expansion
of footprints of business firms to international markets. The disadvantage of this mode
of entry is that it contributes to pollution and inflation.
 Licensing agreement: This is defined as business agreement in which one company
permits another firm to manufacture its product in exchange for specific payment. This
can be used for international expansion by allowing regional companies to use trademark,
copyrights, design and other Intellectual property for expansing the business in their
domestic market. The advantage of licensing is that it enables quick and easy entry into
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foreign markets assisting the company in overcoming tariff barriers and lower capital
requirements. The disadvantage of licensing is that it increases opportunities for IP theft
(Motylska-Kuzma, 2017).
From the above critical discussion, it is determined that the most suitable mode of entry
for international expansion of Gousto is strategic alliance. Under this mode of entry Gousto
needs to make strategic alliance with an international enterprise in fitness industry so that the
company is able to offer fitness services along with recipe boxes in Australia and chive the joint
goal of successful international expansion in the country. This is justified mode of entry for
Gousto as it will help the company gain resources to create strong consumer base in the country
for long-term survival. In addition to this it will also reduce risk of failure as Gousto is a small
regional enterprise with minimal international brand recognition. Strategic alliance with regional
Australian company will help the firm gain trust of employees and build strong brand image
overseas.
Market Segmentation
STP Analysis
Segmentation
Market segmentation is defined as marketing strategy in which select groups of
consumers are segmented into specific groups according to their similar characteristics and the
way they similarly respond to actions (Rendtorff, 2019). The market segment for Gousto on the
basis of psycho-graphic segmentation includes environmental friendly consumers who seek to
gain sustainable products. Psycho-graphic segmentation refers to segmenting consumers on the
basis of their lifestyle choices. The demographic consumer segment for Gousto in Australia is
high income professionals who want to gain home cooked meals which keep them fit in way
which does not consumer much time.
Targeting
This is defined as the process of selecting a target audience and marketing the produces
to the target audience to attain high profitability (Sousa and Rocha, 2019). The target audience
for Gousto in Australia are the business professionals who want to gain home cooked meals in
short-time and maintain their fitness. This is suitable consumer segment for the respective firm
because such consumer segments aim to gain services to prepare home cooked meals and gain
variety of meals. The respective firm fulfils the need of the consumer while also giving them the
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added benefit of sustainability. In this way the company will be able to attract and gain
profitability from the target consumer base.
Positioning
Positioning is defined the place which the company occupies in the mind of the
consumers (Egerová, Eger and Mičík, 2017). The Gousto will position itself as a sustainable
organization which offers variety of recipe boxes created to increase the fitness of the consumer
and also have positive impact on the environment. In addition to this the company will also offer
special recipe boxes which focus on improving health of the consumer from various diseases
such as diabetes, asthma and tonsils. This will have provided added benefits to the consumer and
help them gain secure leadership position in the country.
Porter's Generic Strategies
Cost leadership strategy
This strategy aims to become the low cost producer in the industry for specific degree of
quality. The strategy can be adopted by selling at industry average prices to earn high profits or
by selling lower the industry average prices to gain market share. Gousto can adopt this strategy
by developing economies of scale and engaging in vertical integration. The merit of this strategy
is that it increases market size and business sustainability. The demerit of this strategy is that it
can lead to decrease in quality by increasing financial cuts in important business areas (Eniola
and Entebang, 2017).
Differentiation strategy
This involves offering consumers unique products which fulfil their needs in an
innovative manner. This strategy can be used by Gousto by conducting advanced scientific
research to build original and unique products and construct corporate reputation for quality and
innovation. The merit of this strategy is that it develops brand while the demerit is that it can
strain resources.
Cost Focus strategy
In this strategy the company identifies a specific niche market and targets and offer
products of specific quality at lowest price possible. Gousto can adopt this strategy in Australia
by offering meal kit services at lower price than competitors. The merit of this strategy is that it
helps gain competitive edge while the demerit of this strategy is that the limited demand within
a niche market can cause problems (Grynko and Gviniashvili, 2017).
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Differentiation focus strategy
In this strategy the company targets a particular market with little competition and offer
unique products to gain leadership in the market. Gousto can adopt this strategy by offering
unique meal kit service in Australia which fulfils consumer demand in the industry in an
effective manner. The merit of this strategy is that it helps the company create distinguished
brand image in the industry. The demerit of this strategy is revenue increase is not guaranteed.
From the above discussion it is determined that the most suitable strategy for Gousto to
gain success in Australia is Differentiation focus. Under this strategy the company will provide
unique products to fulfil the demands of consumers and gain competitive advantage in the
country. The justification for recommendation of this strategy is that the firm will be able to offer
something new in growing meal kit industry of Australia and will create positive image for log-
term growth of the company. This will also facilitate high profitability for the company as the
firm will be able to offer something new to the consumers in the form of environment friendly
meal kit packages which help improve fitness of the consumers.
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CONCLUSION
From the above report it is determined that international expansion in lucrative market
facilitates growth of the company. Conducting country specific PESTEL analysis of an
international market uncovers the opportunities and threats of the specific market. This helps in
making effective decisions related to ways of entering the market and strategies which need to be
adopted for gaining competitive advantage in the international region.
There are different market entry options available to business firms for successfully
expanding in new markets. Several of these market entry options available for international
expansion are foreign direct investment, strategic alliances, mergers and licensing agreements.
These alternatives for entering an international market have both advantages and disadvantages
which need to be understood by enterprises before expanding internationally.
Selecting target consumer segment in new market is an important part of international
expansion as it affects the future decisions made by the company to deliver exceptional outcome
to the target consumer base. The market segmentation and targeting for the company can be
determined with the help of STP analysis. This helps identify suitable market segments for the
product or service f the company and determine the most profitable market segment.
Cost leadership, focus and Differentiation are options provided in Porter's generic strategies
which can be used by business firms to ensure successful expansion into an international market.
Cost strategy involves becoming cost leader in the market by selling products at industry average
or below industry average prices. Differentiation involves offering innovative and unique
commodity while cost strategy involves using any of the two previous strategies with focus on
specific niche market.
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REFERENCES
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Online
Meal Kits (Prepared Meals) Market in Australia - Outlook to 2024; Market Size, Growth and
Forecast Analytics (updated with COVID-19 Impact), 2021 .[Online] Available through
<https://www.reportlinker.com/p06000632/Meal-Kits-Prepared-Meals-Market-in-
Australia-Outlook-to-Market-Size-Growth-and-Forecast-Analytics-updated-with-
COVID-19-Impact.html>
Prepared Meals Production in Australia- Market Research Report, 2021. [Online] Available
through <https://www.ibisworld.com/au/industry/prepared-meals-production/5478/>
Australia avoids recession for now but economic growth already slowing before Delta hit, 2021.
[Online] Available through
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<https://www.theguardian.com/australia-news/2021/sep/01/australia-avoids-recession-
for-now-but-economic-growth-already-slowing-before-delta-hit>
Ready, steady, cook: customers swap meal kits, discounts in pursuit of dinner excitement, 2021.
[Online] Available through <https://www.smh.com.au/national/ready-steady-cook-
customers-swap-meal-kits-discounts-in-pursuit-of-dinner-excitement-20210914-
p58rnj.html>
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