(Bloomberg) -- For a nation of just 25 million people, Australia punches above its weight in sport, science and medicine. But when it comes to success overseas, many of the country's biggest companies are falling short.
From QBE Insurance Group Ltd. to National Australia Bank Ltd., corporate Australia has burnt through at least A$6.1 billion ($4.7 billion) in offshore losses and writedowns in less than two years. In the U.K., Wesfarmers Ltd. is reviewing the future of its unprofitable Bunnings home-improvements business after wiping A$1 billion from the unit's value in February.
Confidence, irreverence and a refusal to conform -- traits that have arguably defined Australians for centuries -- may be partly to blame, say behavior analysts and business consultants. Those characteristics, nurtured in one of Asia's smallest and most remote consumer markets, can leave companies ill-prepared to compete offshore.
“There are some cultural factors at play -- Australians are more individualistic than most other people and we're less enamored of authority,” said Conor Wynn, who's studying behavioral change at Monash University's BehaviourWorks research body in Melbourne. “Just because you dominate the market here doesn't mean that's going to translate into a winning formula overseas.”
A case history of international blowups stretches back more than a decade. Australia's Multiplex Group failed to build London's new Wembley stadium on time in 2006, lost money on the project, and was then beset by legal claims. Insurance Australia Group Ltd. exited the U.K. at a loss in 2012, partly because of higher-than-anticipated injury claims.
Wesfarmers, whose Bunnings do-it-yourself brand is an earnings juggernaut in Australia, bought the Homebase chain in the U.K. in 2016. But it came unstuck after quickly imposing a new format that turned off customers, the Perth-based company has said. Advisory firm Lazard Ltd. is helping with a review of the U.K. division, a Wesfarmers spokeswoman said Tuesday. An update is due in June.
Click here to read about analysts' expectation of a U.K. exit at Wesfarmers
“You sometimes see a little naivety when you've got Australian businesses making assumptions about offshore markets,” said Jeremy Barker, the Australia head of EY-Parthenon, a consultancy unit of Ernst & Young Global Ltd. “There's certainly a long list of companies that have struggled.”
Overseas failure isn't the preserve of Australian companies. DaimlerChrysler AG, as the European carmaker was formerly known, in 2007 handed control of money-losing Chrysler to Cerberus Capital Management LP about a decade after paying $36 billion for the U.S. automaker.
But due to their distance from most developed markets and a lack of scale at home, Australian companies face particular challenges and need a distinctive product or business model to succeed, Barker said. By contrast, North American or European retailers might have thousands of stores, proven business models and established cost structures on their home turf before stepping offshore, he said.
To be sure, Barker pointed to “a pretty long list” of Australian offshore successes.
Macquarie Group Ltd. used the global financial crisis to make a series of U.S. acquisitions, and its stock has since soared more than six-fold. Overseas profit at Treasury Wine Estates Ltd. has jumped after the Melbourne-based company expanded in the U.S. and Asia. Global demand for Sydney-based Atlassian Corp.'s software has turned founders Michael Cannon-Brookes and Scott Farquhar into billionaires.
But Australian firms entering a foreign country need to do a better job of understanding the new market and its cultural differences, said Jana Matthews, director of the Australian Centre for Business Growth at the University of South Australia. Her advice: get educated on growth and leadership; and make sure the board of directors has a balance of genders because it's often women who ask pertinent questions about customers and their buying habits.
“The capacity to learn is there,” she said. “The knowledge hasn't been there.”
To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net.
To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net, Peter Vercoe
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