Maxon Sweets: Issues and Tendencies of Australian Domestic Businesses

Company Profile

Maxons Sweets is a small family owned, Sheffield based business. The business first came together in the 1950s when 3 family owned businesses - Dixon's, MacDonald's and the Pitchfork's - came together to form what is now known as Maxons Sweets. They are well regarded for their close attention to the quality of ingredients that go into their confectionary and the overall quality of the finished product, which is why they are still well known to this day. Their focus is predominantly on the nostalgia aspect that confectionary can bring to people’s lives, however they have begun to branch out, partnering with Sweet Peaks, a top energy brand in Sheffield. To produce brand new energy drops and gels for hikers and athletes, as well as being involved in the sponsorship of the Cycling Sheffield Team and Sheffield Hallam Triathlon Club. They produce a large variety of confectionery which can be found in old fashioned sweet shops up and down the country, as well as larger distributors such as the Co-operative, with which Maxons Sweets secured a contract for regional supply across 70 stores in South Yorkshire. Maxons also have “some fantastic listings” with big names in the retail market such as: Asda, Tesco, Boyes and Morrisons to name a few. Maxons Sweets produces around 1.8 tonnes of sweets each day, as well as having a turnover of £1.1m and employing 20 staff, shows that it is a very successful small business.

Global trends are a vital topic that a business must look into when wanting to expand themselves, this is because countries have different laws and outlooks when it comes to certain goods and services. In this particular case, with Maxons Sweets, it would be advisable for them to do some research on sugar taxes across the global confectionery industry. Another point which may be useful to have some research on would be eating trends, with more people in this decade being health conscious, the sales on high calorie and high sugar containing foods is falling. The business will want to look at the risks and cons of expanding into countries which have high sugar taxes and a strong tendency to opt for healthier foods and snacks, as opposed to countries which may have lower or non-existent sugar taxes and are more inclined to purchase higher calorie foods. This combined with disposable income in varying countries will determine the overall success of expanding trade into new countries.

With vintage sweets still dominating the market in Britain, and are generally favoured by the British public, it’s safe to say that Maxons Sweets is safe in its ability to expand in the coming years. Most polls reveal that the lack of artificial flavours and abundance of sugar is what continuously draws them back to vintage sweets, this is something that Maxons Sweets prides themselves on; boasting that “over 90% of our products use no artificial colours”. Maxons’ focus on maintaining the vintage sweets section sets them apart in the market, as more and more companies are moving to produce higher sugar containing products, such as the likes of Haribo.

However with dietary trends changing in this new age which encourages veganism, eating raw and the idea of cutting out sugar from our daily lives pose a great threat to domestic businesses such as Maxons. The environmentally conscious mindset also comes into the decision making of whether or not consumers will purchase the food item, especially if the item is packaged in reusable materials as opposed to plastic packaging. People are cutting out foods which obviously contain sugar, despite the fact that they (in moderation) may actually be better for them than the high sugar calorie they eat on a daily basis, under the guise of it being high in fiber. This presents a large problem for domestic businesses such as Maxons Sweets because it means that confectionery sales are falling as a result. The UK currently has no sugar tax for foods being exported or imported, only for drinks - the soft drinks industry levy - as a result Maxons would not face a charge on any of their goods, under UK law.

Global Trends

Oceania is a geographic region that includes: Australasia, Melanesia, Micronesia and Polynesia. It has a total of 24 countries and as of 2019 an estimated population of 42.3 million people. Oceania would be a prime destination for Maxons Sweets to expand into because it the business already has trading roots in both Australia and New Zealand, which provides a massively beneficial basis which can be built upon. Thus, despite the fact that Oceania is a less regarded continent for business expansion, with only two major economies, the fact that it is so - when compared to continents such as Asia, North America and Europe - provides a unique experience for a domestic business to fully expand and increase their global standing in many economies that are currently untouched.

FMCGs, otherwise known as Fast Moving Consumer Goods, are products that are sold quickly and have a relatively low cost. Confectionery is included to some extent in that it has a somewhat short shelf-life, caused by either high consumer demand or perishable goods. This benefits Maxons Sweets, because confectionery sweets are in high demand in most economies, and they also have the advantage of the opportunity to greatly increase their sales during certain holiday festivities, such as Christmas, Halloween and Easter. This opportunity to heighten sales can be further exploited through discounts and pricing schemes. This, combined with the ability to bulk buy from Maxons Sweets increases their ability to grow their profit margin.

The cultural indicator of power distance is an important one in businesses, especially domestic businesses such as Maxons, as it enhances their employer brand and employee engagement. Another cultural indicator is long term orientation, it is useful to a business if the ranking for this is low as well, because it means that there is a greater freedom for a business to move into the country’s industry, as they are more willing to learn from other countries, and often provide a higher adaptability. The last cultural indicator used here is, uncertainty avoidance. This is a debatable topic on whether or not it is better to be ranked higher or lower, because lower means the country’s inhabitants are more tolerable to risk taking and change, whereas country’s scoring higher on this indicator suggest that they are more susceptible to using laws, regulations and behavioural norms to reduce or manage uncertainty. Whilst the former option may mean there is a greater number of entrepreneurial individuals in the culture, the latter also means that there are likely already strategies for risk management or avoidance utilised in the culture which is beneficial to new businesses entering the country’s market for the first time.

Government integrity is an economic indicator which measures the rate of corruption, a high score means that a country has a low level of corruption, which is something to aim for. Another economic indicator is trade freedom, this is based on two factors, the trade weighted average tariff-rate and non-tariff barriers. Again, a high score is ideal for this as it shows that a country has a high amount of trade freedom. Political rights is a political indicator and measures a country’s performance in terms of the quality of: the electoral process, political participation, government corruption and transparency and the far political treatment of ethnic groups. A business will want to expand into a country with a high ranking of political rights as that means that political rights are fair and just. Civil liberties is another political indicator and measures the level of human rights that a country has, so clearly a high level is a good indicator for a business to move into that country, thus a high ranking in this category is ideal.

Scanning

These nine countries: New Caledonia, Guam, Northern Mariana Islands, Cook Islands, French Polynesia, Niue, Pitcairn, Tokelau and Wallis and Futuna Islands are eliminated as there is not enough data on them. Cultural indicators are have a large impact on whether or not a country will be successful in a new region. This is because if the product, in terms of Maxons Sweets doesn’t meet the wants and needs of the local markets the business will fail. Therefore, much research must be done before expanding into these regions. Fortunately, for Maxons Sweets, they already have a footing in two of the major economies in the Oceania region - Australia and New Zealand. This not only has already allowed them access to the cultural indicators of these two countries, but also gives a useful insight into the rest of the countries contained within Oceania. The cultural indicators selected for this process are as follows: long term orientation, uncertainty avoidance and power distance. These measure critical aspects of a country’s culture and allow a business to gauge how and why they may have to adapt their style of business in order to suit different cultures. Unfortunately the data gathered for Oceania on cultural indicators was only substantial for 3 countries: Australia, Fiji and New Zealand, and as a result scanning isn’t possible for cultural indicators. However it does show that these three countries are viable options for Maxons Sweets to either continue their business in, or move into as there is data readily available in order to help this transition.

Economic indicators used in this assessment are the following two: government integrity and trade freedom, these are useful to new businesses entering different economies as it has a direct impact on how a business can operate within the country and whether or not they will be successful and make a profit. With 15 countries left, there is room to eliminate 5 countries from this category. With the two major economies in Oceania scoring high in both of these indicators, the rest of the countries in selection will be judged in comparison. As a result, the Solomon Islands are eliminated from the selection as it scored low on government integrity with 37.2 which means that there is likely a high level of corruption, which won’t be beneficial to a new business entering that country’s industry. Kiribati Is also eliminated for similar reasons, for scoring low in government integrity, however it also has a low score for trade freedom which would restrict the amount of imports that Maxons Sweets could do, this is less than ideal as this would be their main source of business and focus in this area. Samoa, Micronesia and Tonga are also eliminated as they do not rank high enough to garner satisfactory results for Maxons Sweets.

The political and legal indicators selected for this process are political rights and civil liberties and this measures the worth of the population of the country and how they are treated by their government. From an ethical point of view, Maxons Sweets will therefore want countries that score high on these indicators. Therefore as a result, Papua New Guinea is eliminated because although it scores relatively high, when it is compared to countries such as Australia and New Zealand it falls behind, and is not the best option. Following this, the Marshall Island, Nauru, Palau, Tuvalu, Vanuatu and American Samoa are eliminated, despite all scoring 9s or 10s in the political and rights and civil liberties indicators, they yielded no data in the other indicators and therefore do not offer substantial data for Maxons Sweets to gain knowledge and in depth information of how their business could expand successfully in these regions. Therefore, the four remaining viable countries are: Australia, New Zealand, Fiji.

Risks and Opportunities

With Australia having a population of 25 million, it provides a strong basis for a business to learn what the consumers want and expand their market. Australia has a sugar consumption per capita of 42kg a year, which shows that they regularly indulge, hence the high score. This is excellent news for Maxons. Australia is currently one of the richest countries in the world which shows that their GNI per capita is thriving, it is highly recommended for businesses to invest in Australia, as it is considered to be a low-risk choice. Their logistics performance index is also excellent, as seen in the table. Tax is also relatively high, but this is expected when looking at it’s economy. Australia has a strong political system and are therefore not a worry for any new businesses in this regard.

New Zealand has a population of 4.7 million, so although this is smaller than Australia because it is a developed economy this doesn’t cause concern. New Zealand inhabitants also consume on average 54kg of sugar per capita, per annum. This shows a high tendency to indulge which is beneficial for Maxons. It is also a developed country which means that it’s GNI per capita is high, which shows a strong basis for potential growth in this economy. New Zealand’s tax rate is also fairly high which may increase costs for business. It’s political system is stable, which eliminates concerns.

Fiji has a smaller population of around 800,000 people, this is less than ideal for a domestic company as it doesn’t provide a big enough market to successfully grow. It’s sugar consumption per capita, last measured in 2013 only came to 34.3kg, showing a lower tendency to indulge. It’s GNI per capita is also fairly low, which won’t help a new business in it’s expansion. Tax is relatively low in comparison to the other two, however this doesn’t outweigh the cons that is brought with the other indicators. Political unrest is high which is a major cause for concern and could cause the company to lose profits if it was to expand into Fiji. After looking at this evaluation, Australia is the most viable option for further expansion for Maxons Sweets.

Entry Modes

Exporting

Maxons Sweets already exports into Australia, so the existing trade links would only benefit an increased trade route. Exporting is also the easiest way to enter the international market as it is a low risk strategy and it also provides the benefit of having the ability to limit costs because the business does not have to set up full operations in the country. An increased level of exportation into Australia is the best option of entry modes as it would be building and improving on the already established foundation.

Licensing and Franchising

Although this option makes for a fast entry at a low cost into the international market, it’s not necessary because that basis already exists in Australia with exporting. It also has many downsides, given that there is often less control and this can heavily backfire on the company because there are many laws and regulations to abide by which if not followed exactly will cause many legal problems.

Conclusion

To conclude, Australia would be the best option for Maxons to expand into further. Given there is already trading links and a strong foundation, it gives the potential to become a secondary base of Maxons Sweets, which would give access to further expansion in an emerging continent in the future if they wanted to in the future.