Dear David: How (not) to take your business overseas

Idealog's agony aunt, David Downs, answers your burning questions about global expansion.

Dear David

I have a medium sized business manufacturing fruit drinks. I’ve owned it for years with my husband, and while things are a little better now the dollar is down, it’s been tough going over the past few years and we have quite a bit of debt.  We had the idea that we should be exporting into Vietnam because we met a nice person on holiday there who wants to bring our products in with us. We checked with our company director, who is also our local accountant, and he wasn’t sure.  What do you think? Is Vietnam the right place for us to export fruit drinks to? - Viet ma’am

Dear Viet ma’am

Oh dear, unfortunately yours is a story we hear a lot. Not that there are a lot of fruit drink companies going into Vietnam, more that you are thinking about this the wrong way. Unfortunately, I spot three common errors in your story that many exporters make.

1. Looking offshore to solve problems at home. Exporting may be a way to grow your business, but it is unlikely to generate the cashflow you might need in the short term, or fix your debt issue. If anything, it will make it worse to start with as it is expensive to set up an international business. Perhaps consider restructuring your debt, or working on your New Zealand business strategy, so you can take on more growth financing.

2. Lack of effective governance. I’m sure he is a lovely guy, but your ‘local accountant’ is unlikely to be experienced in growing an international business. Good governance will assist you to make the right decision and avoid pitfalls. Look to get people who have been there, done that, with a diverse range of skills. Don’t see governance as equalling oversight and restrictions, see it as getting a group of focused people who know you and what you need to be successful, providing advice at different phases of growth. It may even mean you aren’t relying on the advice of an agony aunt columnist in a magazine!

3. Failure to utilise the right people. The odds of a guy you met on holiday being the perfect partner for you in the market are very slim. He may have talked a good game over the Mai-Tais by the pool, but if you are serious about getting into another market you also need to be serious about finding the right people to help you. Recognise this for what it was – a holiday fling – and move on.

***

Dear David

We’ve been exporting high-end ice-cream products around South East Asia for a couple of years. Indonesia, Thailand, Philippines, Vietnam … It’s being going okay, but not stellar. Our products are fantastic – not sure why the locals aren’t lining up for them. Our hokey pokey is the best in New Zealand!  We’ve got them into a couple of supermarkets and a few restaurants. What can I do to let everyone know how great our ice cream is? - Neil Polatin

Dear Neil

It appears to be SEA month this edition! Good to hear you’ve had some success with your products and are looking to grow further, although I detect a few more of the common mistakes we see in exporting firms.

1. An international strategy that’s too broad. Growing internationally is hard. Growing into multiple countries at the same time is really hard. South East Asia is a big place, why not choose just one country to concentrate on? Maybe even one region of one country? It will make marketing, packaging, sales management and perhaps even logistics a lot easier, and allow you to concentrate your resources for maximum effect. Unless there is a good reason to go to all those markets at the same time, perhaps your breadth more indicates a lack of clear go-to-market strategy.

2. Lack of a clear go-to-market strategy. Selling internationally is not like selling in New Zealand but with different fonts on the packaging. It requires a knowledge of channel selling and management that is not common here, and a different way of thinking about business models. Direct selling might not be the right strategy, you might have to be an Original Equipment Manufacturer (OEM) or need to white label your products. Each market might need a different approach and partnership model. Developing a clear and concise go-to-market approach will be the first step to success and well worth the effort. 

3. Focusing on product instead of market. I wonder if your pride and obsession with the quality of your products might be getting in the way of your objectivity when it comes to what will sell well in foreign markets. New Zealand's taste for hokey pokey is reflective of our own national sweet tooth, but probably a flavour like red bean or even sweet corn might sell better into some of those markets. Yes, sweet corn ice cream is big in South East Asia and while you probably can’t source the ingredients for it, Durian ice cream is also a big hit.

Sorry to teach you Marketing 101, but the right way to think about this is, ‘What does the customer want, what is the market telling me, and have I got the products that fit that need?’ Often that means admitting that our product – much as we like its chunks of sticky honeycombed goodness – might not be right for our target customer.

Viet ma’am and Neil, don’t be despondent or give up hope. Growing internationally is a great and worthy aspiration, and New Zealand needs you to do it. We just want you to be successful when you do. Good luck!

By day (and the occasional night) David Downs is general manager, services, at NZTE. He also authors books (No.8 Re-Wired is the latest), presents on radio and TV, and plays the ukulele (we can’t all be perfect).