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So you have a product or service you think the world will buy? But you’re
a bit in the dark as to how, or where to get started? Best you step back and identify your market first. Better still, read this guide and see what else you should be doing first – if, indeed, you’re ready at all.
Take a deep breath. This could be an information overload. The purpose of this story is to arm intending and fledgling exporters (I assume you are in that category) with as much information as possible, so you’ll make the least mistakes and maximise your chances of success on entering the big, wide and somewhat scary world of exporting.
Are you up for it?
Let’s get started then. First stop NZTE. That’s New Zealand Trade and Enterprise if you’re really new to the game – the agency charged with helping to realise the Government’s Economic Growth Agenda of doubling New Zealand’s exports to $120 billion a year by 2025.
NZTE is responsible for, or associated with, more export-related programmes in this country than any other organisation by far and receives 2000-plus enquiries a year, many from early-stage exporters.
Carole Wright, director Business Services, kindly agreed to address my rather long list of questions. They begin, quite logically, with the issue of preparation. How do businesses prepare for export? What are some of the common oversights?
“For a start they need to have a good business structure. In our initial discussions with businesses we want to find out how ready they are, in order to take that next step,” says Wright. “We like to manage their expectations about what it’s going to take to get to where they want to be and encourage them to take one step at a time. In most cases, they need a firm foundation in this country from which to launch their internationalisation journey. Or, in the case of an IT company, they’ll probably need some good reference sites in New Zealand.
“In our experience, through talking to exporters, it generally takes them three times the expected timeframe and cost twice as much as expected to break into a market,” she says. “The need to have a coherent plan is the biggest issue with these businesses – they want to run before they can walk. It’s important they step back and consider the bigger picture – where they want their business to be and how they’re going to get there. They might be looking at Australia, for example, but that might not be where the best opportunity lies for their product. Validation is crucial – don’t necessarily just go by a friend or family member’s suggestion.
“We get a lot of ‘product push’ without any quality research on fundamentals. Is the product the right fit for the market, is it the right format? Just replicating what they’re doing in New Zealand may not be the best way to approach other markets.”
A lack of financial resources is another potential stumbling block. Wright says it’s important to have a plan and allocated budget rather than try and fund things just from normal cashflow. And be mindful that it could be a long time before there’s any return on investment. Can they manage during that period? Do they have enough people resources?
“It’s an added stress on the business. It’s not just planning around your market entry; it’s planning around the broad fundamentals of your business.”
Wright says NZTE’s role is to help provide guidance and information. “We’re here to ask some hard questions. To make sure they’ve thought about their approach and they’re taking good advice. They may, for example, need to look at an advisory board or take on a mentor to guide them through the next phase.”
Wright says many early-stage exporters are directed towards one of its 14 Regional Business Partners around the country. The Regional Business Partner programme is a nationwide network of organisations that delivers capability and R&D support to smaller businesses. The network was set up about a year ago by NZTE and the Ministry of Science and Innovation to support business growth and innovation in New Zealand’s regions. For example, “businesses can access vouchers up to $5000 to offset the cost of training and buying expertise into their business,” says Wright. “The Regional Business Partner will assess the business for any capability gaps and recommend options to help that company through the next steps, perhaps through some specialised training; perhaps to address some productivity, management or leadership issues.
“The Regional Business Partner can also put businesses in touch with Business Mentors New Zealand or the Tech NZ research and development programme.”
Wright says they’ll sometimes share support responsibility with a regional partner in terms of assistance. “We might do some desk research, for example, to help the exporter select markets.
“There’s no one size fits all. Generally it’s about networking the early-stage exporter into a broader range of services. Our aim is to help apply the right set of support and services, people and information at the right stage of the business’s lifecycle – it’s about doing the right things at the right time.”
Wright says there is an extensive range of help on offer from her Business Services team for both established exporters and businesses new to export.
“In recent years NZTE has applied more resource to companies that really have that capability to deliver economic benefit to New Zealand. It’s not about scale and size it’s about focusing on high growth potential businesses with high-value, high-margin products.
“That said, we still service and support all businesses out there.”
And don’t discount the great web-based resources for exporting either, adds Wright. NZTE can help you through the online maze to get to the good practical advice, she says. Plus, there are some great guides and a pragmatic ‘Are You Ready?’ assessment on the NZTE website for businesses to work through. “At the end, they can press a button and learn from the information provided whether they are under prepared or ready to go to the next step.”
And in case you’re wondering, most of NZTE’s services are free of charge. Charges may apply to any commissioned market research through its International Office Teams. “But this is for customised service information covering, for example, regulatory information, or an analysis of the distribution channels for a specific product, or partner identification, says Wright. But there’s a lot of help NZTE can provide on strategy before they get to that point, she adds.
Don’t jump the gun
Of course, there are those start-up exporters who want to leapfrog the process when accessing markets. Wright warns when a business is unprepared, for example pitching too early to customers, they risk “burning” their contacts. This can have a flow on effect if they assisted with the introductions, potentially damaging NZTE’s market credibility, and its future ability to network them to other NZ exporters.
Wright, who was instrumental in getting the ‘Path to Market’ programme established in 2006 (a successful planned and structured approach to the Australian market that’s still running today), says it’s easy to underestimate the impact of some of the small pieces of advice they give new exporters. She remembers one smart exporter that constantly applied the advice they received, and this proved pivotal to their success. A recommendation by an NZTE agent to enter an international design award was acted on, which resulted in several wins, and subsequent international credibility. It’s an example like this, says Wright, that gives them real satisfaction.
Integrated service suite
Going forward, Wright says NZTE has identified a number of key challenges. “One is the opportunity to deliver an integrated service suite. We’re looking at any gaps in our products and services from a client’s perspective. It’s really an audit to further improve on our overall service.
“NZTE is refocusing on the way we operate so we are even more client-centric and ‘user-friendly’, adds Wright. “The focus for my team is to get out there and improve our networks and linkages into organisations, and to identify business that we should be working with and demonstrate the
value of what we can offer and engage with them.”
Fast tracking the export process
If you’re looking to accelerate your entry into foreign markets, but still keep costs and resources to a minimum, you might want to talk to KATABOLT CEO Christopher Boys.
“We help early stage businesses and entrepreneurs fast track into export markets and turn the revenue on in those markets,” explains Boys, whose business (www.katabolt.com) is a joint venture with The ICEHOUSE Business Growth Centre in Auckland and works in partnership with other exporter support organisations around the country.
“I refer to it as an ‘end-to-end’ process – clients can use us for the first stage or for all three stages. Our key driver is speed.”
The stages Boys refers to are, first – the selection and validation of markets; second – implementing the commercial and distribution plan; and third – market entry and sales (engaging with business partners and entering those target markets).
“We provide the information, skills, support and the introductions exporters need to win early customers,” he explains. “We utilise our global KATABOLT Associate Network, which I affectionately refer to as ‘the associate mafia’ – which includes The ICEHOUSE’s connections, the network of Kea World Class New Zealanders and my own business relationships from ten years in London and working around the world. The in-market feedback from these associates is invaluable for exporters who want to quickly validate a market, says Boys, and to ensure a win/win on these relationships, the associates can be ‘incentivised’ on revenue sales.
“The key message I get is that people love to help business. However, Kiwis don’t like to accept help. One of my key messages to exporters is – you’ve got to ask for help. And our in-market associates are passionate about helping Kiwi exporters.”
When it comes taking your first export steps, that famous slogan springs to mind – ‘just do it!’
“Many businesses hold back because they don’t feel they can do it,” says Boys. “It’s a DNA thing – they don’t feel comfortable.
“Trouble is, when they do it – they absolutely go in all guns blazing! That’s when they need to take a step back. Don’t take on a whole country; break it down into segments – think California. Or in the case of Australia, think New South Wales perhaps.
Another mistake, he says, is assuming that the rest of the world is like us – the cultures are very different. “Even if you’re going just into Australia, my advice is to ‘Australianise’ your product or service a lot in terms of branding, marketing and communications to ensure that they don’t perceive you as being a Kiwi. Look what happened with our apples.
“If you’re smart you wouldn’t push the Kiwi-made aspect as the be all and end all. You’d tone it back a bit, and localise your product’s look and feel perhaps. If it was Germany say, no problem, push 100 percent pure and put as many waterfalls and ferns on the packaging as you like!”
If it’s China you’re targeting, don’t expect to ‘seagull’ the market, adds Boys – that’s fly in, do the deal and fly out. It could take several meetings, and finally a lunch or two, while trust is built up, as ultimately it could be a family decision.
Boys says KATABOLT’s market validation process through its Associate Network means that exporters can have their first customers committed before they’ve even left the country. “No expensive ‘seagull’ flights – you can do a lot of the groundwork via phone and Skype.
“There’s a Kiwi perception that you’ve always got to go overseas and go face-to-face with potential distributors. My argument is, no you don’t in the first instance. Qualify it hard at first, and get referrals, then utilize the face to face to further your relationship or cement a deal.”
You may also want to test their commitment by getting them to propose how they think the distribution/partnership could work, he adds. And see if they follow through on what they say they will do – listen to what your intuition is telling you!
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On the subject of advice, a lot of people don’t realise the tax implications of a market either, says Boys. A great example is accessing the China market through Hong Kong or Singapore, which avoids tax penalties of up to 66 percent. Which just goes to show there is a lot you can learn from people with vast experience in these markets.
KATABOLT has a number of clients under its worldwide wings, with some exciting, innovative products – such as TravelQuote, a web-based lead management system tailored for the travel industry; EODData, a leading provider of quality end of day stock market data and historical quotes for many of the worlds top exchanges; and 1Above, the world’s first Aerotonic Flight Beverage.
Market entry strategies
Jacinta Clark, a marketing strategist and former trade commissioner and diplomat, fields Exporter’s questions on marketing strategy.
Q: From your experience in assisting companies into offshore markets, what aspects have they required the most help with?
JC: Firstly, how to best enter an export market, as there’re more ways than going direct or
appointing offshore distributors or agents. Exporters need to understand the full range of market methods open to them as they grow and evolve (for example, licensing, strategic alliances, joint ventures) and how each method works – it’s advantages and disadvantages, taking into account time, resources and risks involved for best competitive advantage.
Secondly, developing an effective sales pitch or value proposition. An export market entry strategy is not complete without a strong sales pitch to win export business. When Kiwi exporters meet with potential offshore buyers or business partners they need to be able to “tell their story” persuasively and concisely. This is where many fall down despite having fantastic, innovative products or services. Typically, they get bogged down in talk about their product/service features rather than key benefits that matter to their target export market audience. Exporters should never leave home without preparing a world class sales pitch, well rehearsed so it rolls off their tongue with confidence.
Q: Where do companies let themselves down the most?
JC: Rushing into an export market and appointing the first person who shows any kind of interest, then signing them up as their exclusive distributor or agent on a nationwide basis. This is a common scenario for new and experienced exporters alike. Then several months down the track they find that export sales just don’t eventuate or go beyond their initial sample shipment order. Worse still, the exporter is locked into a long term agreement it cannot terminate legally when things go bad and potentially misses out on lucrative export business in the target market. This scenario highlights the importance of strategic market research to fully understand market dynamics, potential, competition and typical distribution channels by key export product/service. If it’s all looking positive, the next step is to research and determine the best market entry strategy. This also includes identifying and quantifying a short list of suitable established business partners for each target market or segment for ‘best partner fit’.
The key is to proactively find and leverage from your offshore partners’ in-market and sector experience, reputation and established client base, matching your ideal customer profile.
Q: Do you have a good example of a market entry strategy?
JC: A fruit grading machine exporter, currently selling successfully to Australia and the US, is experiencing continued low export sales to Europe despite distributors on the ground there. They re-assess their market entry options and undertake market research to determine the key export marketing challenges they face in Europe – namely high duty rates, onerous EC safety regulations, very high, uncompetitive freight costs from New Zealand for heavy machinery, slower delivery times and lack of branding profile in Europe. The exporter then considers a number of different market entry method options to put them in the most advantageous position – including appointing new distributors, manufacturing under licence, the sale of their technology or a joint venture arrangement. They compare key advantages of each method against key criteria, also taking into account costs, resources and risks involved to determine their best entry method that will maximise export sales. Following this analysis they decide on a joint venture arrangement with a complementary fruit bagging manufacturer in Italy – to manufacture and sell their grading machines under license.
This strategy significantly improves delivery times, accesses favourable EC duty rates with quicker safety compliance, and increases the exporter’s leverage by tapping into the partner’s strong brand profile and established customer base for increased sales to Italy and other EC countries.
Q: What are the keys to breaking into the Australian and US markets?
JC: Both are complex, highly competitive and sales savvy – so approach them fully prepared with a world-class sales pitch and loads of stamina. Having a thorough understanding of your market dynamics and potential is essential. You need to know in advance and before talking to potential business partners where your product or service fits into these markets and what your key point of difference is.
Both countries have three levels of government – local, state, and federal – which means more complex business and import laws including safety, health, environmental and packaging compliance regulations (although we’re helped by our CER agreement with Australia).
Both countries are litigious, especially the US, which means adequate product liability insurance cover is essential to protect against the risk of expensive law suits over death, injury or business disruption caused by faulty or unsafe products/services.
Annual budgets need to factor in the added costs of doing business offshore, and supporting off shore distribution channels, including a regular marketing visit programme.
Distribution channels are typically state based so multiple distributors are needed as you grow and expand into other regions. In Australia there are seven discrete markets (by state); in the US there are 52 independent and distinct markets also organised on state lines, so a very focused regional approach is recommended. While both countries are English speaking, marketing terminology and spelling can differ. Imperial measurement is also used in some market segments so marketing collateral and user manuals must be tailored accordingly.
Q: How do you go about identifying the right markets for your products?
JC :To avoid a scatter gun approach exporters need to focus on fewer ‘best prospect’ markets to maximise export sales with limited resources (time and funds.) Start by drawing up a short list (three to six) of attractive export markets based on existing market knowledge and key selection criteria. Then make market comparisons before deciding on your ideal target export market. Also consider the cost of doing business, time and resources needed, and the risks involved. Select an export market where you have the strongest competitive advantage that is easiest to access cost effectively. Attractive market characteristics could include, for example, lower duty rates, easier regulatory compliance, lower competition, attractive market size and growth potential, product and price competitiveness, existing distribution channels, English speaking, strong IP protection, and a stable economy.
by Glenn Baker
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