Leigh Paulden highlights the five key factors firms must correctly address if they are to succeed in international markets.
Not all exporters are equal. While 40 percent of our country’s wealth depends on exporting, only a small number of exporters are responsible for a very large chunk of that figure.
Statistics show that in 2011, 59 percent of exporters traded with just one country, while our top 100 exporting companies contributed 71 percent of our total export value.
Why are so many New Zealand exporters contributing such a minimal amount – and why do even more of our producers fail to contribute at all?
Time and again I have seen the same barriers getting in the way of exporting success – or even stopping a company from exporting at all. Get over these barriers, and you are much more likely to excel.
But first, you have to go back to the beginning – why are you exporting at all?
Expansion for expansion’s sake is the wrong reason to export. Deciding to export because you want to grow by 14 or 20 percent a year means you’re chasing numbers, instead of chasing your core purpose. Chances are you’ll jump into markets without doing your homework, without really understanding what it’s going to take to succeed.
Exporting gives you the opportunity to do more of what you do well – that will lead to growth, but the growth is the outcome, not the reason. The reason is to be the best you can be. Growth will happen as a result of getting the right things right. And the following are five of the most important ‘right things’.
1. Know your market
It sounds obvious: you need to export to the right market at the right time. But so many would-be exporters get this wrong.
There is a good reason Australia is known as the graveyard of New Zealand companies – too many decide to export there by default. It’s close; it’s a similar society so it must be the best place to start, right? Wrong.
Australia is like any export market – it is different from the New Zealand market. Unless you know that Australia is ready for your product, and ready now, it is the wrong place to go.
Kelford Cams (www.kelford.co.nz) understands that. The company specialises in custom-made high-performance camshafts for multi-valve engines. When it began exporting, its first market was the US, followed by Russia, then the rest of Europe, the Middle East, Asia and finally Australia.
For many years, Australia’s multi-valve fleet comprised entirely new or nearly new vehicles, unlike New Zealand’s, which is dominated by used Japanese imports. Owners of new or nearly new vehicles don’t buy new camshafts. So when the time came to export, the first country Kelford Cams chose was one with a similar fleet of older multi-valve cars. It was only when Australia’s market had matured, that the decision was made to cross the Tasman.
2. Keep abreast of changing trends
It’s not good enough just to research your market before you begin exporting – you must continue once you’re there. All markets change, and you have to keep up.
Another client, a primary sector company, began exporting to Taiwan after doing the research. But within three months it realised things weren’t going quite as planned – the premium market was demanding something slightly different to what it was providing.
The product was not the problem, the packaging was. By changing the packaging the company shifted into a premium sector of the market with a much higher profit margin.
You don’t get this sort of insight without going right into the heart of your market. Visiting the overseas office now and then is not enough. Your key people need to do what this company did – visit regularly, get out and meet the customers, agents and everyone concerned with the product. They are the ones who can alert you to trends you need to know about.
3. Understand what it takes to grow sustainably
If you export, you will grow. But can you grow sustainably? If a company grows at 15 percent per annum, it will double in size every five years; at 25 percent it will quadruple in size in six years. A $10 million company that grows at 25 percent per annum for 12 years will have turnover of $144 million. That’s a massively different company. Do you have the right methodologies and disciplines in place to consistently grow at the rate you are forecasting?
What will you need to handle that growth that you don’t have now? If you don’t have it now, how will you get it? Think about this before you start growing, not after the fact.
4. Are your people ready?
This is really a subset of the point above, but it’s so important it needs space of its own. Your people are the right people for your company now – but will they be the right people for a much bigger company in two, three or five years?
Can these people operate at the level required? If they can’t, your export success will come to a grinding halt.
As you grow, you may need specialist skills you haven’t needed until now – how are you going to get them into the organisation? Are you going to hire staff or outsource? As you plan your exporting strategy, it is vital to address these people questions.
5. Don’t overanalyse
Once you have done all the research and got everything in place for the growth you want to achieve, you actually have to go and do it!
While it’s vital to do the research, some companies then sabotage themselves by analysing why not to do it, rather than how to make the most of the opportunity.
No company, whether it’s an exporter or not, is going to get it 100 percent right. Successful exporters learn from the failures but also act when there is an opportunity. They don’t get everything right, but they get enough right to be successful.
Do enough research to make sure you have accounted for the major risks, get the right people skills into the company, plan for sustainable growth, and go for it.