Close

Look out world, here you come

Think of your exporting journey decisionmaking as something akin to investment portfolio theory. Your goal is to balance risk and reward— or more specifically, opportunity and your chance of success. Make exports a part of your business plan and identify key target markets before jumping in.

Think of your exporting journey decisionmaking as something akin to investment portfolio theory. Your goal is to balance risk and reward— or more specifically, opportunity and your chance of success. Make exports a part of your business plan and identify key target markets before jumping in.

Having thrown the mental dart at the map and hit a country, apply some objective thinking and discipline into your dream of exporting and start drilling down into actions based on your research.

But just because we now live in a global economy doesn’t mean that everyone is equipped to take on the world, says Richard White, NZTE manager incubator development.

“The ‘born global’ phenomenon is not unique to New Zealand, but it is a reality for emerging companies in small economies that have high growth and export aspirations. Some commentators will say that you should build a strong domestic market before trying to export, but that’s not always a realistic proposition in this country. So it’s important as early as possible to identify the markets you want to target, and test your product offering with customer groups in those markets to satisfy yourself there will be willing buyers.

“Having done that you need to develop a business model that takes into account the trading environment you will encounter, covering sales channels, distribution, terms of trade, after-sales service and other such factors.”

From his position of helping hatch exporters, White says guidance is not a scare commodity for people wanting to go global.

“Your local economic development agency is a good starting point, while business incubators will work with earlystage companies with high growth potential to develop strategies and business models, help with product and market validation and capital raising, and use their international networks and connections to make sure you’re not going into a new market absolutely cold.”

Export marketing specialist Zomo’s Richard Duckworth also emphasises careful preparation for exporting.

“First, unless you’ve gone into business specifically to export from the get-go, it shouldn’t be on the agenda until you have your New Zealand business humming. An export plan must be something that you are totally committed to, not something you dabble in. Once you have your local operation under control you can start to invest time and effort into global aspirations, but you must find that perfect balance of attention necessary to maintain both aspects of your business as profitable enterprises.”

One exporting solution, he suggests, is to find and engage a suitable business partner, distributing agent or similar. But the field is tough.

“You’ve got to cover the basics first. Sure, you could hand your widgets across and let them do what they will, but you’re probably missing a beat. The story that goes with your widgets, their provenance and the values of you and your business are uniquely Kiwi and important features that will really resonate with consumers—so you need to work with someone who understands where you are coming from.

“You can try to make them understand yourself from across the planet, or you could work with someone based locally in the market that knows how to capture the story and present it compellingly, face to face. You’re too far away to have tight control so trust is going to be important. Consider paying someone to do things locally for you rather than giving up margin to the distributor and trusting them to do it. If you pay for someone’s services, then you have greater control and will get honest feedback.”

What to look for in a country

Your country decisionmaking and selection criteria are critical to the mix and chances of success. Measures should include:

  • Country demographics, market size and segmentation. Rather than aiming to take on the whole United States or Australia, for example, start with one state or even one city.
  • Political stability and security. Even the most seemingly secure place in the world could come unstuck.
  • Economic situation. Beware of countries going through hard times but remember adversity also can produce opportunities.
  • Regulations and entry requirements for your market. Despite globalisation and even freetrade agreements, there will always be bureaucracies to manage.
  • Distribution channels. Be very clear about what you are buying into and how you can protect and encourage your particular channel to perform. Beware of the first and most eager potential distributor and don’t sign up for long-term relationships unless there is a very good reason.
  • Required export documentation. Ease of access is a factor to consider, which often makes Australia a good first point of entry, but remember even they are different to us.
  • Customers—who are they, what do they want, why do they want it and why you will rock the market? Don’t make assumptions: reality check and test with people who know the market (such as locals) and be prepared to modify to suit the need.
  • Competitors’ products or services and performance. Confidence is a good thing but those who say “we don’t really care what our competitors are doing” should possibly reconsider.
  • Market entry models of other exporters and market entry strategies that best fit your business. No need to reinvent the wheel. Follow in the footsteps of those who have gone before.
  • Market trends. The latest hot spot could become a not spot. Don’t get caught in the transition.
  • In-country regulations. Be mindful that legal, accounting, health, safety and environmental factors may not be the same as at home.

Pick a model, any model

What you want to achieve in your plans for going global may help you determine your particular business model.

Once underway things may change, however, and as you expand and create new territories a different model may be more suitable.

Some of the options to consider:

  • Subsidiary. This creates an impression of longevity and substance and allows you to share the parent company’s governance and monitoring systems. Can be expensive and it’s critical to ensure the networks you are theoretically buying remain in place. 
  • Distributor network. It’s vital that a selected distributor has the knowledge, passion and vision to represent you and that their incentives/motivations are aligned with yours. Be aware that contractual arrangements and the flexibility of your distributor may affect future opportunities.
  • Joint venture. These provide the ability to exploit a synergy of products or to leverage off the business partner’s networks and experiences. Again, an alignment in business type and market experience is beneficial.
  • Acquisition. This approach provides the benefit of a subsidiary but also provides access to knowledge gained from past experiences, understanding of the customer base and connections to stakeholders in the market.

But make sure you watch out for the rocks. Any particular model you select may need to be reassessed due to:

  • Lack of financial resources
  • Lack of capability
  • Inadequate product differentiation
  • Inefficient structures
  • Time in market to effectively implement your plan.

Remember ...

Here are the five Cs of exporting:

  • Clarity. This relates to having a clear vision of your product, market definition and a plan for measuring, monitoring and ultimately achieving success.
  • Cash. As it’s the lifeblood of any business, ensure significant financial resources are available to meet establishment costs. Assume more is better so that you don’t have to engage/disengage and then start over. Your path-to-market strategy (direct to customer or wholesale) will help determine the war chest needed.
  • Connections. Getting your networks and partnerships right will dramatically increase your market knowledge and access to opportunity—use your New Zealand mates and establish new friends and people of influence, and of course employees, in the market you’re looking to enter.
  • Capability. Make sure you have, on the ground, the people capability, governance structures, processes, oversight from New Zealand management and sufficient financial backing so you can establish and manage expectations.
  • Commitment. Breaking into the market takes time, sacrifice, and the right balance between leadership strategy and putting in the real hard yards.

The final checklist

Review your strategy, governance, management team, business case, product design, intellectual property, marketing materials, pricing, packaging, standards/accreditations, production capability, logistics, distribution networks and stock levels to suit the old and new world and your new ambition.

By then you will need a holiday. Try revisiting the market to check things out on the ground. (The holiday is the time you spend on the flight watching movies—the rest is hard work soaking up the look and feel of the market from street level.)

Then go and talk to your bank manager about growth. Do a solid set of models on cash flow, growth rates and profitability.

Revisit your information source to double-check your assumptions, and network to help you build your business faster. Then focus on doing something reasonably small really well. Then do something else a bit larger really well. Keep up the process.

Keep testing your assumptions and your models and checking that you are using your resources efficiently for the best short- and medium-term return.

Don’t be afraid to stop doing things that aren’t working. A sunk cost is sunk. Get over it.

Take time to build relationships that matter. You have to get inside the head of your customer to provide them with a total business solution.

Look around for creative partnerships that will help provide that total solution.

Use the easy confidence of the Kiwi can-do culture, but overlay it with a huge amount of professionalism and responsiveness.

Enjoy the ride and keep remembering you are doing this for you and your country.

A silver lining

A more established market may seemingly be on the ropes, but nimble businesses can succeed if they respond to these apparent needs:

  • Renew. In a crisis of consumer and business confidence new purchases will fall but spending will increase: refitting the super yacht, renovating the house, refurnishing the office, recarpeting the hotel.
  • Reuse. Business solutions that save costs through reusing waste products or improving energy efficiency will win customers spurred on by a need to save the bottom line and the planet. Pitching a product or service in terms of benefits to business fundamentals is music to many market’s ears.
  • Redefine. People still want luxury, but they want luxury to cost less. Redefine your product or service as the next best thing to champagne and with a much more interesting story/label/design/colour/cultural tradition. Give demanding consumers, used to spending big, the solution that will allow them to retain the cool factor at the same time as cutting costs.
  • Rethink. Governments and NGOs in particular, as the budget squeeze comes on, will be interested in business processes, IT solutions, off-shoring and so on that improve efficiency and responsiveness. In the private and public sector, long-term loyalties to existing suppliers could be questioned and it may be your turn to reach the shortlist on that new supply contract for a big utility or auto-manufacturer.
  • Remain. If Europeans, Americans or even Japanese decide that now is not the time for the dream holiday to Kenya, they will increase domestic expenditure on dining out, entertainment, decking and pools, sports equipment, new clothes and so on. New Zealand wine can create the flavour of an exotic holiday at every meal.