Business Times April 2012 by Keith Platt

business & Leisure: Frankston | Mornington Peninsula | Dandenong

APRIL 2012 | $4.95 (GST inc.)

SCULPTURE EXHIBITION SET TO BREAK ATTENDANCE RECORD

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Columns Health: Mike Ellis Markets: Richard Campbell Managing: Hamish Petrie

APRIL 2012

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COVER: Sharon and Peter Redmond run their business Sandstorm Events out of Frankston. Here is the team behind the successful sand sculpting events on Frankston and Cronulla beaches over summer : SEE P.10

ISSUE 22 / APRIL 2012

FRANKSTON / MORNINGTON PENINSULA / DANDENONG

Email: General: inquiries@businesstimes.net.au Editorial: news@businesstimes.net.au Advertising: sales@businesstimes.net.au Artwork: production@businesstimes.net.au Internet: www.businesstimes.net.au

Features

SCULPTING IN SAND:

Entrepreneurs find new use for sand on the beach.

‘BARBIES’ FOR ALL:

Dromana factory produces our public barbecues.

BusinessTimes is published 11 times a year by BusinessTimes Pty Ltd and printed by Galaxy Print & Design, 76 Reid Parade, Hastings, Victoria 3915. Postal: PO Box 428, Hastings, Victoria 3915 Tel. 03 5979 3927 Fax. 03 5979 7944

Are you in BusinessTimes? For advertising, contact Marg Harrison on 0414 773 153 or marg@businesstimes.net.au Make sure every business knows your business. DISCLAIMER: Information in BusinessTimes contains general advice only. No article or column has been prepared taking into account any individual reader’s financial situation, investment objectives or particular needs. Readers should personally consult professionals for advice on any matter, including investment, health and the law. While all care is taken, BusinessTimes accepts no responsibility for errors or omissions in the published material. Views expressed are not necessarily those of BusinessTimes Pty Ltd. All content is copyright.

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Councils ordered to talk By Mike Hast THE state government has told Greater Dandenong Council to conduct public consultation over its proposal rezoning of flood-prone land at Bangholme for industrial development. In mid-January, Frankston Council wrote to Greater Dandenong asking it not to proceed with the rezoning, saying it was worried that allowing 340 hectares for industry would increase the risk of flooding in Frankston. Greater Dandenong ignored the plea when it last considered the matter on 23 January. The issue highlights the lack of coordination between councils in dealing with flood threats in the region. The two municipalities are in the 855-square kilometre Dandenong Valley, which includes floodplains, wetlands and

485 kilometres of rivers and creeks that originally drained into a swamp. Frankston Council said it would be making a submission to a government advisory committee, which is considering so-called urban growth boundary anomalies. Part of the Bangholme land is owned by land developer Intrapac through two associated companies, Hadenbrook and Fendbrook. The 340ha – bounded by Eumemmerring Creek, Frankston-Dandenong Rd, EastLink tollway and Harwood Rd – could be used for factories or as a so-called inland port linked by rail and road to an expanded Port of Hastings. Self-styled Dandenong Valley flood expert Alan Hood, of Bangholme Rural Land Holders’ Association, says the government’s instruction to conduct public consulta-

Eastern Treatment Plant at Bangholme.

tion could “become Greater Dandenong council’s worst nightmare, uncovering public liability implications from hundreds of families living in the low-lying areas of Frankston along the drainage corridor from Bangholme”. Mr Hood says the council failed to conduct an assessment of the drainage corridor. “It also failed to conduct public consulta-

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tion prior to its 14 November vote, so some DESAL CAN SAVE SCIENTISTS have shown the viability councillors were denied knowledge of just of new desalination technology that uses how many people would be affected by almost no electricity and could save water. their decision when they voted,” he said. Project leader Victoria University “This may now exceed a thousand Associate Professor Mike Duke said a people following revelations of flood-related three-month trial at Newport power insurance hikes from $700 to $5700 in the station proved desalination of wastewater already overloaded Bangholme drainage – which usually relies on electricity – corridor through Seaford, which simply has could be powered by an industry’s own no more capacity for additional runoff.” waste heat. The membrane distillation Greater Dandenong councillor Peter technology uses waste heat to evaporate Brown, who proposed the Bangholme wastewater rezoning after being contacted by Intrapac, For all legal services a business and its people need through a fine membrane, which then condenses as treated water. said the council did not have time to consult Associate Professor Duke said the theEst. community 1954 before the deadline for trial showed the system used 50 per cent the government’s urban growth boundary less electricity to desalinate water than anomaly submissions. traditional techniques; an updated design “We chanced our arm to put in the www.whitecleland.com.au used 95 per cent less electricity. proposal before the deadline and not have “If it were scaled up to a continuously public consultation,” he said. operating industry of similar size to He said the council did not have time to Level 3, 454 Nepean Hwy Frankston 9783 2323 Newport it could desalinate around seven respond to Frankston Council’s submission million litres of water a day, which is before it dealt with an attempt to change the equivalent of supplying fresh water rezoning submission by Cr Paul Donovan in Level 8, 256 Queen Street, Melbourne 9602the 4022 to about 25,000 people in Melbourne,” late January.

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Getting to the point THE end may be near for that old seminar, presentation or lecture aid PowerPoint. Launched in May 1990, PowerPoint took its cue from the slide projector and allowed presenters to sit back in the shadows reading verbatim from the screen. The “slides” could be printed off and handed out as seminar notes. But now Meetings & Events Australia (MEA) has banned PowerPoint-style presentations at its annual 21-24 April conference in Sydney. The conference theme is “Open your mind” and Ita Buttrose is MC. MEA CEO Linda Gaunt said the web was “full of expert presentations you can watch in your own time … so meetings need to provide something beyond that”. Presenters at the Sydney conference are being told to tell stories rather than read out lists. On MEA’s banned list are bullet points, flow charts, template backgrounds, clip art, reading from the screen “and other proven yawns”. Not banned are photos, videos, demonstrations and “old-fashioned storytelling” although no image is allowed to have more than 10 words.

AUSTRALIANS remain disengaged with their superannuation, according to a new poll released in March. The Essential Media March poll, commissioned by the Australian Institute of Superannuation Trustees (AIST), found many of us do not have a clear idea where our funds invest our super savings, with 45 per cent saying they “didn’t know” how superannuation in a balanced fund was typically invested. Only 15 per cent of respondents thought correctly that a ‘balanced’ default investment could have more than 50 per cent in growth investments. While the poll showed that more than 75 per cent of fund members had opened and read their most recent annual or half yearly statement, less than half read it thoroughly or noted their investment returns. And despite there being, on average, three super accounts for every Australian, almost two thirds (61 per cent) of respondents had not used government or industry tools to help them locate their lost super. The poll found 75 per cent of Australians back raising the compulsory super rate from nine to 12 per cent, with one in three thinking the six-year phase-in period – which is set to begin on July 1, 2013 – was too slow. AIST CEO Fiona Reynolds said the poll results highlighted the need for funds to better communicate with their members using plain language to give a clear understanding of how and where super savings were invested. “As we head towards 12 per cent and account balances rise further, people will need to start thinking more about their super, particularly as they get closer to retirement,” Ms Reynolds said. The poll – which canvassed opinions on a range of current superannuation issues – also found that despite three years of volatile investment markets and lower returns, less than one in eight Australians has switched to a more a conservative investment

option in their superannuation fund. Of those that did switch to a more conservative option, the rate was highest among those aged 55 and over, with about one in four switching to lowergrowth options. However, a quarter of Australians said they were considering switching, while another seven per cent had switched to more risky, higher growth investment options. Other key findings were: • 20% of Australians think they will need more than $ 1 million in retirement • 39% of Australians aged 35 and over think they will retire with less than $200,000 in super • One in four Australians expect their super returns in 2011-2012 to be 0-5% • 23% expect their super returns in 2011-2012 to be between 6-10% • Only 7% expect negative returns this financial year • 45% were unsure how their superannuation was invested – 52% (women); 37% (men) • 85% of respondents have not heard anything about ‘MySuper’

Send us your email address so we can send you our fantastic magazine via email and you will go into the draw for a weekend away at Madison Spa Resort. Email to marg@businesstimes.net.au OR call Marg on 0414 773 153 6 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | April 2012

CALL FOR TIGHTER SUPER RULES

THE Actuaries Institute has repeated its call for stronger governance standards for Australian superannuation funds, saying the requirements for super funds should be brought closer to existing governance standards for banks and insurers. The Institute emphasised the need to build and maintain members’ confidence in Australia’s superannuation system. Actuaries Institute CEO Melinda Howes said Australian super funds were becoming substantial financial institutions in their own right, with the largest four funds each managing assets of more than $40 billion and the largest 10 managing a combined amount of $348 billion [Source: APRA, February 2012]. “Yet the super regulatory regime is very different to that for other large financial institutions like insurers and banks,” Ms Howes said. “Given the size and significance of the sector, APRA should be provided with the power to impose the highest standards of transparency and governance to our public offer super funds.”

protect phones from hackers

TELSTRA has issued a list of security steps businesses can take to reduce the risk of their phone systems being hacked. Warnings have gone out to Telstra’s one million customers, following an increase in cases where hackers have gained unauthorised access to business phone systems. Darren Kane, director of corporate security and investigation, said Private Automated Branch Exchange (PABX) units and voicemail systems were the most common fraud targets. “Customers have been shocked to suddenly find themselves liable for debts worth tens of thousands of dollars – this is on top of the hassle and disruption to business these attacks can cause,” he said. “As with most equipment, the phone systems people use relies on PINs and passwords, and if they are not up to date or regularly changed, it’s like leaving the

Apple of our eye APPLE has topped the list of world’s most admired companies in the 15th annual study conducted by Fortune Magazine and global management consulting firm Hay Group. Google ranked second followed by Amazon. com, Coca-Cola and IBM. Australian company BHP Billiton ranked fourth globally in its industry (Mining, CrudeOil Production). The full list can be found at http://www. fortune.com/mostadmired. key in the door for a thief,” he said. Telstra’s top 5 essential security for tips for business are: 1. Conduct regular security audits of all voicemail, telephone and PABX systems. Cancel or disable features not required including old voice mailbox accounts. 2. Regularly check both inbound and outbound call records, especially to unusual destinations, and calls made and received at unusual times. Don’t wait for your Telstra bill to check calls and costs. Use Online Billing to check call records at any time. 3. Make sure access to phone or PABX systems is strictly limited, controlled and secured. Prepare a contingency plan and be ready to put it into action when a security breach occurs. 4. Treat phone PINs as seriously any other financial or computer access code. Ban employees from using easy-to-guess PIN numbers and make sure they are secure, not written anywhere, and changed regularly. 5. Make sure computer security is up to date. Use firewall rules to block undesirable internet activity and close unused IP ports. Business Customers needing more information should contact a Telstra Business Systems dealer, or the Telstra Business Systems Helpdesk on 1800 022 218.

Pollie poll predictable IT’S no surprise that a survey has found 60 per cent of Australians don’t believe what their political leaders say. The annual Trust Barometer survey released by public relations firm Edelman, also reveals a similar proportion think the country is on the wrong track. “There is a complete misalignment between the public’s expectations of government and what they think is actually being delivered,” according to Edelman chief executive Michelle Hutton. The survey of 1000 general public and 200 informed public found 71 per cent of respondents believed it was important the nation’s financial affairs were managed effectively, but only 18 per cent thought this was happening.

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1. THE annual Longest Lunch Frankston was held at the George Pentland Botanical Gardens and catered for by Black Tie. Melbourne Wine and Food Festival, Bank of Melbourne, Stonier Wines, Lintons Garden and Home, Crittenden Estate, Tullyâ&#x20AC;&#x2122;s corner produce store and Sunny Ridge Strawberry Farm supported the lunch, dubbed The Mad Hatters. 1. Friends Di, Deb and Jo. 2. The entertainers: Flinders Christian College. 3. MELBOURNE City CEO Dr Kathy Alexander was guest speaker at the quarterly Freemasons in the CBD luncheon. Pictured (from left) are Kathey Alexander, Vaughan Werner, Grand Master of Freemasons Victoria and Margaret Harrison, of BusinessTimes.

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4. MT ELIZA Networking Group met at Canadian Bay hotel, Mt Eliza, on 6 March. Jo Jarman, of Energy Photography, with Christian Gibson, of CPG Constructions.

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8 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | April 2012

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5.THE launch of Frankston’s Fiesta drew an international crowd to the arts centre on 2 March. 1. Hidenobu Sobashima, Consul-General of Japan in Melbourne, with Gill Thompson, the arts centre’s business development and marketing manager. 6. Retired businessman and fashion identity Hal Salter (left) with Howard Davis 7. PENINSULA Network breakfast at Barmah Park, Moorooduc on 6 March. 1. Yvonne Lynch, of Webflight; Ken Jungwirth, of KJ Enterprise Solutions, Alan Wickes, of Thinking People, business and personal development, and Terri Nation, regional business development manager of The Ors group. 8. MONASH University (Peninsula campus) business breakfasts are arranged monthly by the Business and Economics faculty. The latest breakfast at Peninsula Golf Club on 15 March was addressed by Sharon Redman, of Sandstorm Events, organisers of the annual sand-sculpting exhibition on Frankston foreshore. Joel Weber, of Corporate Traveller, Mornington, left, Lois Gray, of Monash; and Paul Garrett, of Southern Partners, Mornington accountants.

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Taking sand to the beach ... now that’s a business Sand may not sound like the best material on which to build a business. Analyse the word and there are many connotations: sand shifts; runs out of time; gets abrasive; is used to draw a line. But to Sharon and Peter Redmond the pliability of sand provides a firm base for a business that runs on a continually changing product – sand sculptures.  Their Frankston-based Sandstorm Events grew from a not-forprofit’s fundraiser into a company that is in demand at home and overseas. Now it’s a company that sponsors are literally asking to be allowed on board.  Bookings for sand sculpting events next year include Western Australia, Singapore, Dubai and Columbia. The annual showcase event is Sand Sculpting Australia, held on Frankston’s Waterfront.  After being lured by Frankston Council from neighbouring Mornington Peninsula Shire five years ago Sharon Redmond believes the event has brought more than 320,000 visitors to the city. She estimates this equates to spending of more than $32.5 million and marketing “for Frankston both locally, interstate and internationally worth in excess of $2.5m”. The figures are calculated on a formula used by Tourism Victoria based on the address of each visitor to the sand sculpting exhibition.  “In regards to the media, we keep track of every piece of PR and marketing material for each event and place a dollar value on it [as if] if we had to buy it. These figures are then all checked by Frankston Council’s marketing team,” Sharon said.  This year’s event, ending on 30 April, is “on track to break our record and achieve 100,000 visitors in a four-month period”.  Husband Peter, with a background in graphic design and illustration, started as a “junior” sculptor at the 2006 event at Rye, but is now a senior member of the Sandstorm’s Australian team.

Words & pictures by Keith Platt

He stays on site long after invited sculptors have left, maintaining the works, teaching the art of sand sculpting to children and demonstrating “speed carving”.  As the demand for Sandstorm’s product has grown, Peter has found himself carving sand in Darwin, Mackay, Perth and Lakes Entrance, on large public events and smaller corporate jobs. Sharon’s sand carving “moment” came in 2002 when confronted by a 30-tonne sculpture of a castle on the Rye foreshore.  “The hairs on my arms rose up and l was simply in awe of what l was looking at. I had spent many years as a child on the beach trying to create a sand castle with a moat around it – and l could not conceive how they had created what l was looking at.  “I immediately saw an opportunity for Vision Australia to develop an event that could provide brand awareness and a fundraising opportunity.”  Research and development included going to Canada for the world championships to sign up 14 sand sculptors as in 2003 there were just two in Australia.  “I knew nothing about how to build a sculpture - what was required, what would be needed – all I was focused on was getting this started. Along with this no one really knew what a

10 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | April 2012

COVER STORY

SANDSTORM Events team Sharon and Peter Redmond at the current sand sculpture exhibition on Frankston foreshore. By the end of April more than 100,000 people will have visited the exhibition. And that will be a record, says Sharon Redmond.

sand sculpture was.”  Buoyed by her own faith in the product and support of the CEO at Vision Australia’s George Vowell Centre in Mt Eliza, months of work finally saw the opening of an event in Cronulla, NSW.  “Being crazy, I had talked my board into holding two events – one in NSW and one in Victoria. After all, if you were bringing out international sculptors – you needed to make the most of it.”  Sharon’s business hunch was spot on: 65,000 people paid $2 at Cronulla and 50,000 did the same at Rye.  “Along the way we developed sponsorships and relationships that are today still with the event.”  Sharon sees the concept of the business being a partnership with sponsors as the backbone of its success. “I would have to say that it is the partnerships and sponsorships that we have formrd that has been the real power behind our past (and future) growth.  “My working life has always been about finding partnerships and ways to work with people to achieve my goals.  “The first 21 years of my life were spent working in the not-for-profit world and in this environment, as resources are always tight and ideas large, you quickly learn to hone your skills in developing partnerships and sourcing support to achieve your goals.”  Ongoing sponsor “partnerships” for the Frankston event are Aidan J Graham Quarries and Rocla Quarries (sand), Leader Newspaper Group and Mix FM (publicity) and Quest

Apartments (accommodation).  “The interesting fact within all of this is that my entire marketing budget annually is less than $45,000,” Sharon says. “I have a part-time admin assistant, a part-time graphic designer and an operations manager. When the event is running we employ a casual workforce onsite in excess of 70. What is really interesting now is that we are now being approached by partners wanting to align with us and these partners are proving to be a further impetus for growth for our company and flagship event.”  Sharon says Sandstorm was this year approached by Channel 9, Metro Trains, Qantas in-flight media, OMD and Village Roadshow, “all wanting to align with the event”.  Channel 9 “provided us with exposure on TV that we can’t afford”, Metro Trains has posters and fliers on stations throughout Melbourne and Qantas shows incoming passengers a three-minute video. Existing partners are willing to pay for more involvement, such as family days, corporate team building, sculptures for product launches, passes and on-site product placement.  Sharon has “simple rules” for these enduring sponsor “partnerships” which include “aligning with companies that have values that align with mine”; no “over selling”; honesty; “find out what the win-win is”; ongoing communication; deliver more than you have committed to; help them feel ownership and that they are part of the “family”; your successes are their successes, so celebrate together and share; always follow up and report on the successes and failures of the relationship; and plan carefully and be well resourced. “If you can bring into your business active partnerships that have a win-win for both, and you make them feel like they are part of something special, great

April 2012 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 11

contributions

THE world is becoming smaller as global mobility ramps up and new graduates will be job hunting all over the world. This has advantages and disadvantages for human resource operations trying to attract and retain talent. Over the past 10 years, assignee levels globally have increased by 25 per cent; this figure is set to more than double, if not triple going towards 2020. By Robyn Vogels While increases in assignee levels look promising, the trend will be towards more short-term assignments, averaging less than two years. Companies will need to be much more aggressive and will encounter rapid changes in their global assignees. Adjusting business strategies now could ensure a smooth policy in place to embrace this fast-paced future. Making sure you have a talent pipeline in place well into 2020, could secure your company during a period of aggressive recruitment and global mobility. While this all seems to be very positive, it is important for companies to be prepared. There are many advantages to attracting international talent to your business. • Staff from another country can pass on practices and skills that can enrich your local employees and benefit production. • Local education and training will be enhanced. • There is always the possibility of attracting your own nationals

back to Australia. The experience they have gained internationally will be of a huge benefit to your company and their relocation costs will be less than those of an expatriate. Progressive companies will be those who think on a global scale. The global financial crisis opened eyes to the future of the global marketplace. We realised how interconnected today’s markets are; the impact each country can have on its neighbour; and how each local company can effect divisions on a global scale. Of course, technology is advancing to support international relocation. In future, most of an international relocation will be handled on line and by phone. Mobile phones will track an assignee’s movement, arrival and car collection. Even home inspections can be tracked by phone. Moving across borders will be even more commonplace: companies and governments will have to work closely to ensure rapid and fluid movement of people. Key education institutions should be working with businesses to ensure curriculums cover what is in demand in the workplace. Many large companies today influence the education being provided by tomorrow’s workforce. The next decade will be defined by the key global placements that companies have in place. Strategies on attraction and retention of staff globally will define the winners. The main three strategies to help you attract international staff are: • It’s not always about the money. Making the new employee feel welcome and cared for is vital. This goes beyond just the employee, “a happy worker has a happy family” and it is important that all the family needs are met.

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Contact Founder of Personnel Relocations,Robyn Robyn Vogels, knows what it to move internationally, having spent 15 years of her life, W: takes www.personnelrelocations.com moving and living around the world. Robyn’s understanding of language barriers; of moving processes, and urgency to E: cultures, info@personnelrelocations.com make important decisions, has all mixed together with her love of helping others. F: facebook.com/PersonnelRelocations like the first time you wanted to build a puzzle, someone sat with L:Just you,linkedin.com/in/robynvogels worked as a team, showed you a process, and so you started 12 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | April 2012 to build. Together, you finish the puzzle quicker and less stressed. This is what Personnel Relocations does with a new international arrival. Together, build their new life in Australia, one step at a time.

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“Maslow’s Hierarchy of Needs” shows love, shelter and security as being one of humans’ basic and biggest needs. • As always, good communication is the key. In-depth knowledge about the expat can reveal many possible reasons why they may refuse or terminate an international assignment. Communication is a two way street, so be sure that your assignee is well briefed on how your company will assist the family. Arrange cross- cultural training. Understanding a culture better will always open the door for better communication • Make sure all policies and procedures are in place for the relocation. Quick actions will result in a more seamless transition. Explanation of tax implications, healthcare cover and contractual obligations should be done well in advance of the family arriving. Relocating an employee internationally can cost as much as three times his or her annual salary. The typical expat is therefore an investment, and as such, your company will want a “return on investment” as soon as possible. It is vitally important to engage the new employee. Take their relocation very seriously and make sure it is as seamless as possible. Besides what has been covered there are many personal and legal restraints on expats. Human Resources departments need to be prepared. • Robyn Vogels is the Founder and Managing Director of Personnel Relocations Australia. Raised in South Africa, Robyn has lived and worked in nine cities in four continents and now lives in Melbourne. Robyn’s personal understanding of moving a family as well as her passion for keeping abreast of international relocation trends has made her a respected leader in her field. Contact Robyn at www.personnelrelocations.com.au Email info@personnelrelocations.com Facebook: http://www.facebook.com/PersonnelRelocations

BUSINESSES investing in a solar electricity system can achieve better than 15 per cent returns on their investment, according to Braeside operation Solar Dynamics. As well as saving on costs businesses can enjoy tax benefits over a five to six year payback period. With electricity costs increasing every year (we have all heard the news on costs doubling in just a few years) protecting your business from these increases can be a great investment in itself. Family business Solar Dynamics says that the old saying ‘you get what you pay for’ still applies. “While we won’t be the cheapest we will ensure value for money,” says owner Wayne Foster. “We add value and give businesses peace of mind through our commitment to homework, product selection, client education, and, if necessary, by negotiating individual energy rates,” said Foster, “To make it even easier we handle all the rebates and paperwork required to remove all the hassles and we’ll also give you some tips along the way.” Solar Dynamics has a team of site inspectors, qualified installers and administration staff to handle complete solar power fit-outs – from a hot water service to a solar electricity system. Heading into the fourth year of operation Solar Dynamics has kept abreast of huge changes in the market place in relation to product, costs, changing government rebates and demand. Specialising in the surrounding region and not trying to “service

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CONTRIBUTIONS

13 the world”, Solar Dynamics is aiming to provide a hassle free, serviceorientated solar solution for property owners or businesses. Said Foster: “Investing in a solar system is a one-in-a-lifetime investment and most people don’t invest in a major asset for their home or business over the internet or phone. “That’s why a specialised site visit by one of our team allows clients to fully understand what they are looking at and what result they can expect while getting a complete no-hidden-cost quote on the spot.”

A PROFESSIONAL VOICE

NARRE Warren business Joy Voice is in its 28th year of producing telephone on-hold messages and professional voice-overs. Its other services include provision of master-of-ceremonies and celebrants, video production and, more latterly, website audio. Over the years the company has adopted new technologies, incorporating the latest in MP3-based digital equipment that produces quality sound with extreme reliability and a two-year full replacement warranty. Joy Voice offers research, scripting, recording, production with royalty-free music and installation. Joy Voice principal Sjaak Kusters says his business model differs from most others in the industry because the on-hold systems are sold outright. “You purchase the system and own it, avoiding contracts and ongoing payments. There are no lease or rental agreements unless hey are requested,” Kusters said. Joy Voice has more than of 2500 clients Australia wide across all industries, including government, hospitality, engineering, finance, manufacturing and medical. Kusters said he will arrange a free demo and quote at your office. Contact: Sjaak Kusters, 03 9705 1399 or 0418 149 715.

ATO USING DATA MATCHING

DATA matching technology used by the Australian Taxation Office led to many of the 1200 prosecutions last year for tax and superannuation offences. Information from government departments and other third parties is used by the Tax Office to cross check personal

and business records such as car registrations and supply orders for businesses. “The ATO also undertakes risk profiling to identify people and businesses that may have not declared all their earnings or overinflate their deductions,” Tax Commissioner Michael D’Ascenzo said. “We can see how personal and business claims compare to other taxpayers. If alarms are raised the ATO investigates those claims and taxpayer records more closely.” Forty eight people convicted of tax crimes received sentences from three months to nine years and 11 months. Of the 1149 people and 370 companies were convicted for other tax offences ranging from failing to lodge a tax return, providing false and misleading information to receiving a fee for preparing an income tax return when not being a registered tax agent. The Tax Office is spending $337 million over four years for GST-related offences, including identifying people who do not lodge their business activity statements and businesses that over-claim entitlements or under-report taxable supplies. The ATO last year prosecuted 545 individuals and 211 companies for more than $12.55 million worth of GST offences. More than 1.9 million small businesses were evaluated by the ATO’s risk detection systems for not reporting cash income. This led to prosecutions being launched against 41 individuals and nine companies for more than $3.22 million worth of “cash economy” offences. Among the GST offences was an unemployed woman from Victoria who was sentenced to four years and nine months jail for GST and identity theft. The woman had set up 11 businesses, some under other people’s names without their permission, so she could attempt GST fraud of more than $470,000. The woman used the identities of people she had previously prepared tax returns for; deceased people; non-existent businesses; and false addresses. A takeaway food services company from Heidelberg was fined $10,000 for five offences for failing to lodge income tax returns. The magistrate said it is not the responsibility of the accountant, but rather the entity and its directors to ensure lodgment occurs.

14 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | April 2012

All things aren’t equal By Helen Conway, Director of the Equal Opportunity for Women in the Workplace

THE Equal Opportunity for Women in the Workplace Agency has been toasting 125 organisations awarded the EOWA 2012 Employer of Choice for Women citation. The citation recognises their efforts in areas such as closing the gender pay gap, placing women in executive management and offering a flexible workplace for those men and women with caring responsibilities. Most importantly, the citation requires the organisation’s CEO to be the driving force behind a culture that supports the advancement of female employees. On our roadshow across Australia, many of these executives told us how gender diversity had contributed to better organisational performance. They also highlighted the competitive edge they’ve gained in attracting and retaining the best people. In Australia, with significant skills shortages, low unemployment and relatively low female labour force participation, this argument would seem compelling. The surprise is that so few CEOs are acting on this economic logic. And that, after decades of debate, gender equality in the workplace is still elusive. The gender pay gap is of particular concern. At 17.6 per cent, it is about the same as it was 25 years ago, causing a serious financial impact on the earnings of women as well as their retirement savings. Women are two-and-a-half times more likely to live in poverty in their old age than men. Progress on closing the gender pay gap has been slow because men and women are concentrated in different occupations, industries and job levels, because women still do more of the family and caring work and because many jobs done by women are still undervalued. The recent decision by Fair Work Australia in relation to the social, community and disability sector was a welcome development in properly valuing work in a female-dominated sector. However, there is still a long way to go. As for leadership, the EOWA census of women in leadership in 2010 showed little change since our first census in 2002. Encouragingly, these results did promote much debate and some improvements.

Better Teams with Free Tools you’ve probably never used All business owners seem to struggle with the same things, not enough time in the day, getting all of your employees to treat each customer as you would and making sure that tasks are done the same way every time. A lot of the time it comes down to getting the right information out to all of the members of your team. At Extreme Networks, we have implemented some low cost solutions that have helped our company greatly. Firstly, we installed a Wiki, using Mediawiki, the software used to run Wikipedia. It is free, simple to use and can be installed quickly. We use our wiki to store many of our policies and procedures. It keeps track of who makes edits so you can see who contributes. Changes are simple to make. We choose Mediawiki because it is Part of the Extreme Wiki quick and easy to edit. We find the team will now make changes to the P & P manual on the fly as circumstances change, and Mediawiki has all of the approval processes built in. Secondly, we created a dashboard of all the most important information in the company. For us, it is client tickets open, the status of customer web servers, phone calls that need to be made, new opportunities and a few other pages. The pages rotate through every 5 seconds so within 1 minute, anyone can get up to speed with what is happening in the company. We pull data from 3 different databases, as well as some Excel spreadsheets.

Lastly, there is Microsoft SharePoint Foundation 2010. SharePoint Foundation is a FREE download and provides an incredible amount of capability, including blogs, discussions, and the capability to share and collaborate with Office documents. It is a great way to share information like a calendar for holiday and sick leave, company document storage, links to common websites, the company phone list and it can also be used to display KPIs for the company with a bit of tweaking. It is all about taking all of the data that you have within your company, and turning it into knowledge. Downloading and playing with these to determine which is right for your company is the first step. Picking the right KPIs to monitor is the second, but once you have it up and running, sit back and watch. You will be amazed at how much of a difference it can make in your company. If you are interested in how surfacing KPIs can help your business, please call (03) 97857162 and ask about our business consulting services. We are the only IT company on the Mornington Peninsula with an MBA graduate from Mt Eliza Business School on the team. Mediawiki can be found at: http://www.mediawiki.org/wiki/MediaWiki SharePoint can be downloaded from: http://www.microsoft.com/download/en/details.aspx?id=5970

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April 2012 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 15

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MANUFACTURING

‘Barbies’ for the masses By Keith Platt

DAVID Christie fired up a couple of barbecues before Christmas, and they were still running hot in January. But unlike most blokes who light up and forget, he didn’t run out of gas or cop a roasting from his wife or kids. Taking barbecues to the limits of their use is Christie’s business. In fact, D A Christie Pty Ltd is a family business started 47 years ago by his father (also David, known as Sandy) that supplies most of the free barbecues found on foreshores and public land throughout Australia. Many of the barbecues made in the family’s Dromana factory are located in isolated areas, so dependability, durability and hygiene are essential. The two barbecues fried up before Christmas were advances on the current models of gas and electric units. The barbecues originally developed and sold by Christies were coin-operated, but damage by vandals trying to retrieve “gold” coins persuaded public authorities that it was far cheaper to make them available without charge. The genesis of Christie’s entry into the barbecue market came when David Christie senior, an electrical engineer working from his Dromana home, was asked to design a coin operation for a barbecue on the foreshore. Impetus for sealed barbecues came from total fire ban days and Christies “really hit the market” in 1974 after approaching municipal councils and national parks managers. The first of their barbecues were installed at Mentone and Parkdale. The business now has three generations of Christies on its staff, with David Christie as managing director, his wife Adele sales manager and son Alex customer relations co-ordinator. Merle Christie, David’s mother, is company secretary and on the board of directors. The brick and stone barbecues have now made way for ones made of extruded aluminium with compressed fibre cement panels, topped with stainless steel benches and cooking areas. The company has “dabbled” in

David Christie indicates coloured pins representing the location of his Dromana-manufactured public barbecues in parks and foreshores across Australia .

domestic barbecues but returned to its niche “because we can’t compete with Asia and China”, David Christie says. The company has sold more than 40,000 barbecues, more than 80 per cent going to the Australian market. “It’s not a very big market, with about 2500 being sold here a year,” Christie says. “And they have a 10-year service life.” He says there are a few cheaper brands marketed in Australia but offer little follow-up support. Christies has seen steady growth, and now has a staff of 23. There are five reps on the road, knocking on doors, bidding for tenders and “making relationships”. Christie says his company has “set the de facto standard” for outdoor, free barbecues, making them too high for youngsters to touch the hot plate and a six second safety delay on the operating button. Pre-heating at a temperature recommended by microbiologists ensures

16 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | April 2012

hygiene on hot plates that attract birds and animals when no one is around. “Pre-heating at over 100 degrees centigrade for more than four minutes kills most organisms that could hurt people. The best way to clean it is to pre-heat and then pour on a glass of cold water.” “Others tend to follow our lead, so part of the challenge is to keep ahead with our development.” This extends to making packaging easily transportable and barbecues that can be quickly assembled. Christie’s barbecues are exported to New Zealand, Singapore, United Arab Emirates and most of Europe. The global financial crisis put a stop to most exports in 2008, but by the beginning of this year inquiries were “picking up”. “Public money dried up overseas, Australia doesn’t realise how lucky we were,” Christie says. Two barbecues were being shipped to Zurich in Switzerland where authorities were trying to stop the use of small, portable barbecues heated by disposable charcoal. One barbecue installed in a park in Hamburg, Germany, had saved 600 kilograms of ash being dumped as well as improving air quality. “Overseas visitors are amazed when they see that our councils provide free barbecues. “We see ourselves as a market leader in these types of outdoor barbecues while for other manufacturers these are just a sideline.” Christie barbecues utilise some parts made overseas, mainly because they are not available in Australia, but the metal fabrication is done in Dandenong. And the need to test a barbecue’s stamina and reliability? “They get one year’s use in a month. The ones we’re doing now have been going three months and they’re still chugging along. “It’s accelerated testing. The real world testing is done on Dromana foreshore. Just about everything has been tested – there’s nothing like being in the public domain.” And just to show that Dromana is the spiritual home of the Christie barbecues, one coin-operated unit remains. Still heating on command, still doing it job.

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April 2012 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 17

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CALL me crazy, but I’ll probably go back to Bali one day.  The small Indonesian island is a favourite destination for hundreds of thousands of Australians each year and tourism is the major source of foreign exchange.  And just like all those other Australians, I made the journey late last year – it was my third visit. Last time was 34 years ago and, needless to say, back then I was chasing waves. Bali has changed. Big time. In three decades its biggest money-spinner has gone from agriculture to tourism. It is becoming a nation of hospitality workers. My memories of it being hectic, with visitors continually confronted by hawkers, did nothing to prepare for me contemporary Bali. Everything I remembered was magnified.  The string of villages that stretched west from Kuta are now joined in one long accommodation, entertainment and restaurant strip.  Tracks leading to the beach through groves of coconut palms are no more; the palm groves are no more.  Taxi drivers, motorbike riders, shopkeepers and any number of people on the street offer any number of products or services.  Multi-storey hotels line the beachfront and on the beach itself deck chairs are hired out, along with surfboards, drinks and massages.  Music blaring from every commercial outlet is supposed to be a magnet for customers, like light attracts moths. All it achieves is an off-putting cacophony. The difference to 1977 is mind blowing. Back then I was shocked by the development that had happened since my previous visit in 1973. In the 1970s, tourism was providing a living for many Balinese, but nothing like the lifeline it is today. Agriculture was the backbone of the island’s economy; tourism now provides more than 80 per cent of Balinese income, making it rich in comparison to the rest of Indonesia.  Its success has also led to an influx of people seeking a share of this foreign currency bonanza, mostly from neighbouring Java. Just how important tourism is to the economy is quickly borne out by conversations with taxi drivers and hotel staff who all took a big hit when terrorist bombings in 2002 and 2005 saw tourists avoid the place like the plague.  Surfers remained among the faithful, never forsaking the island’s perfect waves and easygoing lifestyle.  The local currency, the rupiah, dropped 30 per cent against the US dollar in late 2008. Fears of violence seemed to drop proportionately, sparking a tourism revival.  Then came the global financial crisis, but by 2010 Bali was welcoming 2.57 million foreign tourists a year and hotel occupancy rates returned to more than 60 per cent. The Australian mining boom has also been a boon, with FIFO (fly in, fly out) workers mainly from Western Australia setting up home in Bali. It’s cheap to rent, there’s action day and night and there’s surf. Many have set up house with Indonesian partners while others take their families, with hired help to look after the kids and household chores.

WORDS & PICTURES BY KEITH PLATT

daze

Late last year we had trouble finding a room in several recommended boutique hotels.  It is the range and amount of accommodation that has changed the most in the past three decades.  As Bali became more popular with tourists it also had to change to meet their tastes. Five stars are not uncommon and the latest growth is in upmarket spa and “wellness” industries. There seems no end to the pampering opportunities being offered, with developments boasting cliff

18 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | April 2012

top horizon pools where no hawker’s profile can mar the apparent serenity.  Of course, the hotels offer day trips to try the Balinese “experience”. Bungy jumping, white river rafting and parasailing can all be combined with a visit to a traditional Balinese village, where the gates close to outsiders at 5pm.  Art and cultural centre Ubud, has traffic jams. There’s a divide between the tourists who frequent the streets and beach strips from Kuta to Legian to Seminyak and those who pay for the pampering offered by the exclusive resorts.  Stubby-clutching Bintang t-shirt-wearing tourists banter with Balinese hawkers in the Kuta area.  “Is the bungy jump free if I do it in the nude,” is one Aussie’s opening bid. The Balinese on the gate answers with a smile.  Surfers talk about “six foot with a few bombs out the back”. Not to be misinterpreted for a terrorist plot.  There seem to be parallel universes coexisting in this place.  Every now and then there is bad news: such as the ‘Bali boy’, an Australian teenager arrested for buying drugs; warnings that tattooists may be spreading HIV; an Australian schoolie electrocuted as he leaves a nightclub; methanol being used in martinis (methanol or methyl alcohol is more commonly used as an antifreeze, solvent or fuel and is not subject to liquor excise taxation). Drug couriers are languishing on death row while others serve long jail terms. Others, with a lower profile, seem able to slip out of the country before too many questions are asked. The hazards are numerous, but tourists seem undaunted in their quest for an exotic overseas experience.  Travel writers talk of Bali dishing up a “sensory overload” in food. People are “interesting” and colours “vibrant”. Few mention traffic jams or open drains which have nowhere to go but the beach. In the mid-1970s I earned the wrath of some in the surf industry by pointing out a few of Bali’s shortcomings, including food poisoning (affectionately known as Bali belly) and theft. They accused me of destroying the dream (which they were packaging in tours and products) and ignored my overall assessment, which recommended going there.  Bali has become such a part of Australian and European culture that nothing I could write now would raise an eyebrow.  While not officially another state of Australia, Bali is a place that

produces a different state of mind: come and leave your troubles and ethics behind.  The real estate industry is gaining a major foothold in the Balinese economy, although managing to actually own outright a slice of the island can be fraught.  One company’s brochure asks “Would you like to own a beautiful house in Bali?” and four pages later announces the conditions for the “owner to possess the land and building for 25 years” with the “possibility to extend the contract after 25 years if you have a sponsor”.  With a population of just under four million, Bali regularly receives about 2.5 million tourists a year, with Australians topping the list.  Although nearly 90 per cent of Balinese are Hindus, their island is a small outpost for what is now a religious minority among Indonesia’s 240 million people. The 2009 census recorded three per cent of Indonesians as being Hindus while 88 per cent followed Islam.  Settled for more than 2000 years, Bali presents an unusual cultural mix based on religious practices that survive in a society firmly based on making a buck.  Daily offerings to the gods in small woven palm leaf plates are placed on footpaths, usually containing rice and other foodstuffs as well as cigarettes. The scent from slow-burning sticks of incense is overwhelmed by exhaust fumes while the offerings themselves – a source of food for birds, squirrels, rats and dogs – are trodden underfoot.  Undaunted, the faithful set new canang sari (small offerings) in place the following day. The brief life of the offering does not matter because it is believed that its essence will already have been taken by the demons they are meant to appease.  Cremations (ngaben) are big public affairs, with long, colourful parades ending at special grounds outside villages or on the beach. Lavish and spectacular, the expensive ceremonies are often held years after the death of the person being cremated and are a tourist attraction.  Bali is an economic miracle, but will the real cost eventually be at the expense of its culture?  Will the rest of Indonesia want a bigger slice of the foreign exchange so visible in those open wallets landing day in, day out at Bali’s Ngurah Rai international airport?  The confusion and contradictions reign and I’ll probably return one day, feeling yet again that I’m in a familiar yet strange place.

April 2012 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 19

HEALTH

Believe what you want All poets and philosophers who find Some favourite system to their mind In every way to make it fit Will force all Nature to submit. – Jonathan Swift People sometimes say to me that they don’t believe in Chinese medicine. When I think about it, it’s usually men saying that. What they mean is: “I don’t know anything about Chinese medicine, and certainly not enough to judge whether it’s a valid medical system or not, but I chose my team long ago – Western medicine – and I barrack for that team regardless.” I’m generalising as usual, but men seem to leap to such positions quicker than women then feel the need to defend them to the death – no matter any evidence to the contrary. If evidence does turn up, what follows is a phenomenon that psychology calls confirmation bias. This is when we selectively focus upon evidence that tends to support the things we already believe or want to be true while ignoring anything that would challenge those beliefs. So then it comes down to barracking for a team rather than rationally exploring the evidence. My usual response to the above comment is to say, “You don’t have to believe in Chinese medicine for it to work, just as you don’t have to believe in antibiotics for them to kill bacteria.” But it always gives me cause to ponder the nature of belief, because it’s not always helpful. Plenty of what we’ve believed in the West about our health turns out to be absolute tripe. Just about every week new research questions the assumptions upon which we base our health advice (a good recent example being further evidence about the damage that high fructose consumption does to the metabolism). But even when something is scientifically disproved, it takes a long time for the community “belief” to be broken down. I picked up the March 2012 newsletter of a health practice recently, and was shocked to find it full of once standard but now outdated advice I would characterise

Michael Ellis*

Chinese Herbalist

‘Plenty of what we’ve believed in the West about our health turns out to be absolute tripe.’ as dubious – at best. It’s hard to change people’s beliefs, even when the facts upon which they are based turn out to be flawed. We usually see the power of belief in religion – and there’s quite a lot of religionrelated behaviour going on just now. The Global Atheist Convention is happening in Melbourne during April,

20 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | April 2012

attracting celebrity atheists like the brilliant Richard Dawkins. The atheist convention has a kind of a yin-yang synergy – read fierce rivalry – with the 2009 Parliament of World Religions event also in Melbourne that involved the leaders of some 80 religious movements. Back then comedians rejoiced in the fantasy of hijacking the parliament’s opening to give the introductory speech: “It’s great news that the spiritual leaders of 80 great religions are here today, the bad news is that only one of you can be right.” The atheist convention was a sell-out months ago. Nothing like a big sporting contest to get Melburnians’ bums on seats! Whatever the nature of the religious experience that seems common to many, if not all, spiritual practices, the stories that religions have created around that experience surely cannot be taken as literally true. They can be only symbolic, not literal. It’s Easter when Christians go to churches and listen to the story of how Jesus was nailed to a cross, died, then was “resurrected” (although no-one ever explained adequately to me what actually happened at that point.) Perhaps rational Christians ignore the details of the story but accept the symbolism. Religions of all hues are full of improbable stories, to which their believers adhere with unshakeable faith. Which brings me to the other religious activity going on in Melbourne: the footy season. This is an extended period of worship during which time the media are full of the trials and controversies of the many participants in the game. The funny thing is, if we are true diehard supporters, each of us will see the season’s events through the prism of our own team bias. We will believe only good things about our club, its players, coaches, officials – we will defend their virtue no matter what – and we will resist seeing the merit in others. The famed Roman emperor Julius Caesar was nothing if not quotable. One of his best was: Fere libenter homines id quod volunt credunt. Men believe what they wish to be true. * Michael Ellis is a registered Chinese herbalist: www.mtelizaherbal.com

MARKETS

An amber light for BHP Once it was akin to blasphemy to even think of selling BHP shares. Since the discovery of the great Broken Hill lead “line of lode” in the 1880s it has always thought large and long term. Billiton is even older, dating back to the 1860s when Dutch explorers found tin on the first day they stepped on to Belitung island near Sumatra. Hundreds of deals and mergers later the combined group stands as a mining colossus with annual profit close to $22 billion, moderate debt and some of the world’s largest and best mining assets in iron ore, coal, copper, uranium and more. Billiton added bauxite, mineral sands and aluminium smelting. It is no piker in hydrocarbons either with its big oil and gas assets which now include a solid chunk of shale gas and oil in Texas. Add the Jansen potash deposit and there is no miner larger or more diversified. Depending on the market day, BHP is a $210-240 billion company, in the top 10-15 of listed world corporations with plans to spend $80 or so billion on expansions and efficiencies in the next five years. In iron ore BHP is keeping pace with Rio and Fortescue with 70-80 per cent lift in capacity planned for its Port Hedland operations. Olympic Dam alone is one of the world’s largest copper deposits and by far the largest uranium deposit with one third of global uranium. The value of its in-ground metals is reckoned at over a trillion dollars at current prices. Its copper output is slated to rise three-fold to keep it at number three in copper after Chile’s Codelco and America’s Freeport, but scale is not everything. Compared to many other major deposits, this one is expensive to mine with a low return on the $20 billion capex. One thing is clear: BHP’s strategy is always to go big and keep things simple. It got out of steel when it was clear that the Koreans made themselves leaders in steel technology and since then the venerable miner has spent little on R &D. Instead, it seeks long-life assets without bias to any one commodity. Despite its scale in iron Rio is bigger and Brazil’s Vale bigger again. Iron shipments represent a moderate 16 per cent of BHP’s profits at a time of high prices. As prices moderate

Richard Campbell* Stock analyst

Stock Analyst

One thing is clear: BHP’s strategy is always to go big and keep things simple. It got out of steel when it was clear that the Koreans made themselves leaders in steel technology and since then the venerable miner has spent little on R &D.

The pessimists see $90 a ton ahead. Not only are Australian iron ore operations expanding so are Vale’s and so are all the large iron ore deposits in West Africa let alone smaller ones in Yemen etc etc. A supply surge is coming as China’s steel market levels off to 2025 and then falls perhaps sharply. India is very unlikely to take up more than a small proportion of this slack. This is not to decry BHP’s strong execution and exceptional current gross margins. At 44 per cent they are only slightly lower than world’s most successful company, Apple Inc – now more than twice BHP’s size. Even if the iron ore price falls back, the share price shouldn’t slump, nor the credit rating slip. Copper, oil or potash are likely to counter-balance across the longer span but in the shorter term the $20 billion or so spent on shale gas assets is likely to be

BHP’s Olympic Dam mine, South Australia.

from the current $140 per ton spot price, iron will still provide a sizeable $40-60 a cash margin But here’s the rub. China’s steel mills are making little or no money at these prices at a time when China’s GDP is being throttled back to a cooler pace of 7.5 per cent. After 30 years of 9-10 per cent growth, China’s high steel consumption phase is maturing. Many of the planned east coast office towers, bridges and rail have been built: the question is how long this process continues in the central and western provinces. There is no clear consensus. By our standards the next 10 years will be big in volume, but pricing may be a different matter.

written down by $10-12 billion following the slump in US gas prices after two big acquisitions. At acquisition the price of US gas was $ 8 “a therm”: now it has slumped to just over $2. Oil, on the other hand is providing bonanza returns. So this is a complex balancing act as some revenues lift and others contract. Long term holders will not care much as BHP has delivered solidly for 150 years, but for those with two to three year horizons, dexterity and caution are now required. *Richard Campbell is Executive Director of Peninsula Capital Management, Tel. 9642 0545.

April 2012 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 21

management

The commoditization of the retail market All business owners and managers struggle with their business to try to control their total costs to protect or grow their profit margins. However, most businesses don’t really understand the importance of understanding strategically what is happening to their market and their business within this market. One of the major pressures on small businesses today is the commoditization of their products or services. Products and services usually start their life as a distinguishable product with an individual brand. Through the life cycle of each product, market pressures are usually applied to reduce the range of differentiation of the product to the extent that it becomes a commodity. A commodity is a product that is not differentiated in any way because each individual example of the product is virtually identical from any supplier. When this happens, market processes set the pricing and the individual suppliers lose the power to distinguish themselves within the market. The classical commodities are gold, precious metals, base metals and some farm products. In a commodity market, the big suppliers are usually the low cost producers and the smaller suppliers are the high cost ones. The highest cost supplier who chooses to stay in the market sets the market price at their breakeven cost of production so they can just remain in the business. The only successful long-term strategy is to be the low cost producer and this is very difficult for the smaller players. Over time, this scenario is really unattractive for the high cost suppliers and they are usually squeezed out. So, if you are a small business, it is usually undesirable for your product or service to start to behave like a commodity. Unfortunately, the retail food market is increasingly being driven, product-byproduct, towards commoditization. The major supermarkets are doing this as they use their market power to reduce the brand value of individual suppliers and to build the market share of their house brands. The end result of this will be to squeeze out smaller food retailers who are trying to compete directly with them.

Hamish Petrie*

Business Consultant

The key is to ensure that your customers have a clear reason to return to your business as often as possible and are prepared to pay a little more for your selection of products and service.

In some cases, smaller retailers have joined together to try to build some purchasing power so that they can strive for a low cost position. While this can help, the only defence against commoditization is to retreat into a niche of the market where you can differentiate your products in some way. This may be by offering better quality products, or more specialised products combined with a level of service that the major supermarkets cannot match. The key is to ensure that your customers have a clear reason to return to your business as often as possible and are prepared to pay a little more for your selection of products and service. Unfortunately, the pressures to

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commoditize in the retail business don’t stop at the supermarkets food business. The Internet is also applying this same pressure as shoppers become more prepared to buy goods, sight unseen, based on their generic understanding of the products they are buying. Internet businesses may also have the opportunity to compete as low cost businesses because of international sourcing, very low overheads and no GST. So how do you successfully differentiate your business? The first step is to identify all of the potential aspects of your business, which could make you different to every one of your competitors. This may take some time and should certainly be discussed with all of your key stakeholders, e.g. your partners, your employees and even some of your customers. Once you have completed this initial analysis, you should then focus on identifying the fewest possible aspects that, when combined, will define your business uniquely. During this process, it is important to try to build your business

model so that the price of your product is not one of your customers’ primary considerations. For example, if your price were 10 per cent higher than your closest competitor, why would customers come to your business rather than go to them? This is a time to be really creative and to dream about how you would like to see your business evolve in the next few years. Don’t worry at this stage about how you might be able to implement your potential ideas; this comes later in the process. The important outcome here is to develop a business model that will differentiate you over time and allow you to build a brand that has some real customer appeal. Once you have developed this business

model, then it is important to test it before you start to consider implementation. To test your ideas, go back and talk it over with your key stakeholders. Go and visit some of your competitors and see how close they are to your business model. Obviously, build a financial model of the resources needed to implement your model. You also need to identify the key technical and people resources. One of the important tests is to consider how much personal time and effort will be required and to evaluate how this will fit with your personal and family situations. The implementation phase is the fun part, as your new business model will have

aspects that need to impact on every part of your business. Here you can get very detailed so that your suppliers, your employees and other stakeholders can really see how they can help you to be different to everyone else in your market. If you can do this successfully, then you will ensure that your business does not become just another casualty of the commoditization of the retail market

Action Planning Questions 1. Have you identified the forces that are trying to commoditize your business? 2. Do you have the opportunity to be the low cost producer and, if so, how do you

protect this over time? 3. Can you define the specific market niche in which you can compete successfully where price is not the primary concern? 4. Have you developed a new business model where you can describe the unique combination of attributes that differentiate your business? © Hamish Petrie 2012 *Hamish Petrie had a 37-year corporate career including 29 years with Alcoa Inc. His last position was as VP–People and Communication for the global Alcoa corporation based in New York, NY. He can be contacted at hamish@nitroworld.net or on 0404 345 103.

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