JEFF BROAD: MAN WITH A PLAN • NZTC’S EXTREME MAKEOVER • SISTEMA PLASTICS’ EXPORT LESSONS
ISSUE 20>>SEPT/OCT 2011
THE MAGAZINE BEHIND NZ’S EXPORT DRIVE
A beginner’s guide to exporting
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>>>Freight>forwarding>de-mystified > >>>How>to>minimise>risk>on>export>payments> > >>>ROK>On!>Kiwis>opening>doors>to>South>Korea >
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> CONTENTS
> FEATURES
18 > COVER STORY
2 4 FREIGHT FORWARDING DE-MYSTIFIED
Shipping goods to overseas customers requires specialised services and sound knowledge. This guide is designed to de-mystify freight forwarding for the uninitiated. By Mary MacKinven.
2 8 MINIMISING RISK ON EXPORT PAYMENTS
1 8 A BEGINNER’S GUIDE TO EXPORTING 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. By Glenn Baker.
Exporters can free up cashflow by tapping into various trade finance tools provided by the banks and other lending institutions. ByYoke Har Lee.
4 2 EXTREME MAKEOVER, EXPORT EDITION
The newly refurbished New Zealand Trade Centre.
4 4 REGIONAL FOCUS: IT’S ABOUT RELATIONSHIPS
Claire Grant explores the common factors within three different Dunedin export success stories.
4 6 TECH SPACE
Bill Bennett compares the tablet options.
4 8 WHERE BUYERS MEET SELLERS
10
xporter talks to Robert Laing – whose company represents E most of the Germany-based expos.
5 0 FINDING YOUR NICHE IN THE WORLD
Energy Intellect relishes being a small, agile player in a global niche market.
> MARKET INTELLIGENCE
34 > EXPORTER PROFILES
34 INDONESIA: THE END JUSTIFIES THE MEANS
3 8 CHINESE SCRIPT TRADE MARKS
1 0 PLASTICS FANTASTIC
Sistema Plastics is successful on so many levels – not least of which the controlled way it goes about conquering export markets. Co-founder Allin Russell shares some valuable export lessons.
1 4 MAN WITH A (EXPORT) PLAN
eff Broad is under no illusion about how New Zealand’s J economy can recover from its recent lows. It’s all up to our export sector, he says, and his company Autogrow is setting the pace.
he challenges of growing your business in the Indonesian T market are many, but the opportunities truly warrant making the investment. By Cameron Gordon.
aving made a number of strategic readjustments, fine H food manufacturer Wild Appetite is poised to take on additional export markets.
4 0 ROK ON!
Two New Zealand companies are pushing open Korean doors for other Kiwis in very different ways.
5 2 GLOBAL STAGE Innovative Kiwi products seeking a worldwide audience.
5 4 VIEWPOINT
1 6 AN APPETITE FOR NEW MARKETS
Having made a number of strategic readjustments, fine food manufacturer Wild Appetite is poised to take on additional export markets.
1 EXPORTER
NEXT ISSUE: NOV 2011
> EDITOR’S LETTER EDITOR
Early lessons
Glenn Baker. editor@exportermagazine.co.nz ADVERTISING MANAGER Leanne Moss. Leanne@exportermagazine.co.nz
As you may have noticed, there have been a few changes at Exporter magazine. It has new owners, a new editor, new advertising manager and production team. So you’re bound to notice some differences.
ADVERTISING ASSISTANT Rachel Witberg. Rachel@exportermagazine.co.nz DESIGN AND PRODUCTION Hartman Reid. hartman@adrenalin.co.nz
Bear with us as we get up to speed with the export marketplace, and with what you, the reader, is looking to brush up on – our aim is to continue improving this publication with each bi-monthly issue (there will be no Jan/ Feb issue, however).
JOINT PUBLISHERS Cathy Parker. cathy@adrenalin.co.nz Yvonne Carter. yvonnec@xtra.co.nz SUBSCRIPTIONS/ENQUIRIES Hilary Keen. subs@exportermagazine.co.nz
Borrowing from the editorial approach of Exporter’s step-sister publication, NZBusiness, our focus is on short, sharp, easily digestible articles that seek to educate, inform
CIRCULATION MANAGER Kim McIntosh. kim@adrenalin.co.nz
and motivate New Zealand’s established and early-stage exporters. And yes,
CONTRIBUTORS THIS ISSUE
we’re open to suggestions and submissions – we can’t do this alone; there is
Steve Anderson, Cameron Bagne,
a lot of expert advice and viewpoints out there, and we aim to share as much
Catherine Beard, Cameron Gordon, Claire Grant,
information as possible with our readers. Start-up exporters should find our editorial pages especially useful for understanding overseas markets and gaining a foothold. In fact, we’ve aimed our first cover story squarely at these companies. We make no excuses for its simple, basic message – we felt, with so much ground to cover in upcoming issues of Exporter, this was as good a place to start as any. Give us some feedback – we’d like to know if it was useful to you. Nobody reading this magazine needs any reminder that we live in the
Yoke Har Lee, Ruth Le Pla, David Macaskill, Mary MacKinven, Andrew Sayers, Ron Scott, Alice Taylor, John Walley. Adrenalin Publishing Ltd. 14C Vega Place, Mairangi Bay. PO Box 65 092 Mairangi Bay, North Shore, Auckland 0754. Ph: 09 478 4771 Fax: 09 478 4779
toughest of economic times, and exporters are having a tough time coping with global market uncertainty and roller-coaster exchange rates. Just as the New Zealand economy starts to mend, and our export sector gains a little momentum, global economic events threaten to de-stabilise everything. I’m glad to see that New Zealand’s exporters aren’t letting a little bit of uncertainty get in the way of their export plans and initiatives. They’re not holding back – and we have some great examples in this issue for you to get inspired by. So, in the course of preparing this issue, what have I learnt? I’ve learnt that Kiwi exporters are almost spoilt for choice when it comes to available help from private individuals, consultants and from governmentbacked agencies. All they have to do is ask. I’ve learnt that exporting is extremely challenging; it’s unlike anything you’ve ever done before. But when you team up with the right people, and when you stick to the basic fundamentals, you can save yourself a lot of time, money and agony. Patience is the key virtue. And I now have a better appreciation of just how many great New Zealand export success stories fly under the newspaper headlines. There’s a whole
SUBSCRIPTIONS Exporter is a 5 issue magazine. Subscription in New Zealand is $75 (incl GST). Please call us for overseas rates. Copyright: Exporter is copyright and may not be reproduced in whole or in part without the written permission of the publisher. Neither editorial opinions expressed nor facts stated in advertisements are necessarily agreed to by the editor or publisher of Exporter and, whilst all efforts are made to ensure accuracy, no responsibility will be taken by the publishers for inaccurate information, or for any consequences of reliance on this information. Printing: GEON Distribution: Gordon and Gotch ISSN: 2230-6528 ISSUE 20
army of heroes out there quietly fuelling our export drive. The problem is – we just need a bigger army.
Glenn H. Baker editor@exportermagazine.co.nz
2 EXPORTER
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> MAKING NEWS
Recyclable shoe wins design award
A
recyclable shoe designed for barefoot running recently won the coveted James Dyson Award for emerging product design. Nicholas Couch, a 23 year old graduate from Massey University says his shoe is designed to help runners taking up the fast-growing trend of running without footwear, to encourage the foot to move more naturally and reducing injury. He believes his shoe is the only sustainable barefoot-style design that features replaceable and recyclable parts. “Globally 350,000 million sports shoes are purchased and discarded each year. Often, these shoes are discarded when only one part – usually the sole – has worn out while the rest of the shoe remains in good condition but goes to landfill.” The designer says the shoe is made
4 EXPORTER
up of only five parts, each part is designed to be discarded only when required, eliminating the need to discard the entire shoe and extending its usable life. Made without glue adhesives, the discarded part can be broken down into their original material and recycled. While Nicholas has researched the marketplace and produced a prototype, the product is at concept stage only, and he would welcome an opportunity to commercialise his design. Nicholas will travel to the UK with $3,000 travelling expenses and accommodation courtesy of British Council New Zealand, have the opportunity to tour Dyson’s London office and meet with other key members of the UK design community. Plus, he can select an official fee prize package from the Intellectual Property
Office of New Zealand tailored to his design’s intellectual property needs, $3,000 worth of legal advice, a Dyson handheld cleaner and a year’s membership to the Designer’s Institute of New Zealand. Two other finalist designs are the work of Massey University industrial design graduate, Stuart Smith, for a solar-powered lawn mower, and Victoria University graduate, Cameron Lightfoot for his prosthetic leg invention, powered by magnets to allow amputees to walk easier. Ten New Zealand entries progressed to online judging in the international James Dyson Award competition. The global winner will be announced in October and together with their university, they will win a total prize fund equivalent to £20,000. All entries can be viewed at www.jamesdysonaward.org
> MAKING NEWS
Iced teas a hit in Australia
K
iwi beverage company Ti Tonics, has become a huge hit across the Tasman, with Australian sales outstripping those in New Zealand and expansion tipped for Asia, the US and South America. Ti Tonics launched its range of premium iced teas on both side of the Tasman in June last year and Ti Tonics founder Dr Tracey King says signing a deal with Boutique Beverages in Queensland, which services up to 10,000 outlets, has seen Ti Tonics go from strength to strength. “Getting listed with Boutique Beverages was such a coup for us and has meant getting the product out into the Australian market much easier. We were always confident Australian consumers would love Ti Tonics as much as New Zealanders, but
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the fact that sales in Australia are bigger than those at home exceeded our expectations.” On top of its deal with Boutique Beverages, Ti Tonics has achieved listings with 12 other Australian café and route trade distributors in Sydney, Melbourne, Adelaide, Perth and Brisbane and has entered into a sales and marketing agreement with beverage exporter Dion Mortimer to tackle the North American, Asian and MERCOSUR markets. “We’ve also fielded interest from various other distributors around the world, including Korea, Japan, Taiwan, Singapore, Brazil and the United Arab Emirates, meaning consumers in those regions will hopefully be enjoying all of the benefits of Ti Tonics soon too,” says Dr King. www.ti-tonics.com
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EXPORTER 5
> MAKING NEWS
PNG project demonstrates collaborative approach
A
large luxury hotel development in Papua New Guinea is illustrating the value to New Zealand companies of exporting services and aligning their work with that of counterparts in other Pacific nations. On its completion in November, the five-star Grand Papua Hotel in Port Moresby will stand as a premier example of this focused international collaboration: leading Kiwi specialist design company Space Studio worked alongside the architect Cullen Feng Architects of Sydney designing the interiors of the hotel and delivering the interior materials to PNG. Space Studio also leveraged its relationship with a similarly internationally-capable New Zealandbased firm, Fletcher Construction, with which it worked on another hotel development four years ago.
“We were introduced to the PNG project by Fletchers, and I think our collaboration demonstrates the opportunity for New Zealand firms to be more active in helping one another get a foothold in these markets,” says Space Studio director Vee Kessner. “The need for our skills exists – it is simply a matter of the opportunity and the capacity. Our firms can do a lot for one another in terms of networking, endorsing New Zealand consultants and keeping an ear to the ground in their own sectors and related ones. “In our case, projects such as this require us to collaborate fully with our Australian counterparts, and the quality of our performance dictates how our business develops from there.” On the back of the $90 million Grand Papua Hotel project’s success,
Space Studio director Vee Kessner.
Space Studio has been appointed to six more projects with the same client in PNG, ranging from small refurbishments of existing hotels to extensions of existing ones.
Exporter Diary 13-15 OCTOBER NZ FLAIR 2011 Te Kowhai Airfield, Hamilton. The must-visit aviation expo event for enthusiasts and professionals. With more than 5000 products and services designed and built locally, Flair showcases the innovation in aviation within New Zealand. Visit www.nzflair.com 16-18 OCTOBER NZ FOOD INNOVATION SHOWCASE Held at the new Viaduct Events Centre in Auckland. New Zealand’s food science, processing, packaging, safety and innovation expertise goes on display. For further information visit www.nzfoodinnovationshowcase.co.nz 20 OCTOBER THRIVE INTERNATIONAL Aotea Centre, Auckland. Featuring a high calibre line-up of presenters – including Kevin Roberts, Jonathan Ling, Chris Liddell, Roseanne Meo and Rod Duke. This is the day business people come together to celebrate New Zealand’s tall poppies, business leaders, legends and heroes. For details and tickets go to www.thriveinternational.co.nz
6 EXPORTER
26 OCTOBER INNOVEST 2011 Skycity Convention Centre, Auckland. The Australasian Innovation & Investment Summit is an opportunity for entrepreneurs, investors and advisors to examine issues and share insights. InnoVest provides information on trends, challenges for innovation, access to capital and pathways to international markets. Register at www.innovest2011.co.nz 8 NOVEMBER LEADERSHIP CONFERENCE: LEADING TEAMS TO PEAK PERFORMANCE 8.50am-4.15pm Intercontinental Hotel, Grey Street, Wellington. For more information or to register visit www.emacentral.org.nz Let us promote your export business event. Email the details to editor@exportermagazine.co.nz
> MAKING NEWS
Export success for Silverdale company
A
Silverdale-based engineering and manufacturing company has claimed the major exporting award at the Westpac Auckland North Business Awards 2011. Modtec Industries took home the EasiYo Excellence in Exporting Award impressing judges with its potential for further growth on the back of its 41 percent sales export increase in the past three years. Modtec provides design and quality solutions in zinc pressure
die cast components, steel tube and powder coating products. The company designs and manufacturers Integ monitor arms and Apollo mounting solutions. The judges liked Modtec’s well designed and constructed product that serves a growing need in a huge market. They predict the company will become even more successful as it expands its export sales in Australia, North America, Singapore, China, India and the UK.
George Fernandes, Wade Brownlee, Abhijit Roy, Bruce Davies and Ian Cooper of Modtec Industries, with Sandra Sweetman and Paul O’Brien from sponsor EasiYo.
Wine industry progresses in tough times
N
ew Zealand’s wine industry is making progress despite the tough economic times, according to the June year end 2011 Annual Report of New Zealand Winegrowers. “Three years ago, our wine sector was reeling from the combined effects of the 2008 supply shock and the GFC. Today excess inventory has been sold through and we have the confidence to take in a record harvest based on anticipated demand,” says Stuart Smith, chair of New Zealand Winegrowers. Smith adds that total New Zealand sales (export and domestic) rose 11
percent to 221 million litres for the June year end 2011 while export value rose five percent to $1.1 billion. “These achievements represent real progress against a background of increased uncertainty in the global economy.” Smith is clear, however, that significant challenges still remain. “Profitability is a key concern for wineries and growers, as many still struggle with the legacy effects of the past three years. The wild gyrations of the Kiwi dollar are a major problem for exporters, and threaten to de-rail the recovery that we are starting to see.
Domestically, annual excise increases impact winery financial returns because those increases cannot be passed onto consumers.” Smith noted there is a need for a clear path forward for the sector and New Zealand Winegrowers. “For this reason we have commissioned a major independent strategic review of the sector and our own activities. PwC has been appointed to conduct the review which we believe represents an exciting opportunity to build on the progress of the industry to date, and to position New Zealand wine for greater success in the future.”
Cryogenics pioneer chooses Jade
A
A free software trial had the ultimate pay-off for New Zealand’s Jade Software when it signed hi-tech Silicon Valley cryogenics company MMR Technologies as a partner. The in-house team of the cryogenics pioneer will be using Jade Software to create a bespoke control solution that will be rolled out to thousands of research projects around the world, says Craig
Richardson, Jade’s MD. “This is an important recognition of our technology in a significant market. Our technology solves hard business problems and cryogenics is an example of Jade software being used in the most demanding of environments.” Originally a spinout from research conducted at Stanford University, MMR has a proud history of innovation and is a world leader in its field of cryogenics R&D.
“Jade was selected based on a number of factors including high performance, reliability and ease of development,” says Richardson. The company recently showcased at Microsoft Tech Ed Atlanta and, following the success of JOOB Mobile as a finalist in the mobile/wireless category, has established an office in San Francisco to be closer to customers and the market.
EXPORTER 7
> MAKING NEWS
Kiwi campervans make inroads in US
K
iwi campervan rental company Escape Campervans now has 100 vehicles on the highways of California, just two years after introducing its graffiti art-styled vans to the US market. One of the company’s original founders, Andrew McGregor, now based in San Francisco, says the company’s unique hand-painted campervans and simplified ‘no-hidden costs’ rental agreements are proving to be a winner. “When we first started Escape in 2003 in New Zealand, there was nothing like our product on the market and, after some investigation, we discovered the same opportunity existed in the US. It was also a positive for our customers – they could continue their New Zealand experience with Escape in the US, and vice-versa.” “When we first hit the ground in LA in 2009, it was a terrifying, crazy place. We had no contacts or knowledge of how we were going to pull it off. “It’s a lot harder to start a business here in California so we had to quickly learn all about insurance, business licenses, legal pitfalls and the US way of doing business. We were very fortunate
to have a US-based Kiwi friend and partner guide us through the choppy waters. “We also had a job convincing locals who were skeptical about the compact size of our campervans, but they were never our target customers. They thought we were crazy as we tried to explain how there was a bed, foldaway table, fridge and kitchen in a small van and that travellers rented these for months at a time. It was a classic case of our Kiwi Minibago versus their US Winnebago. “But we are in fact targeting the same market as we do in New Zealand: mainly discerning backpackers from Holland, Germany, Switzerland and the UK who want a bit more adventure and freedom on their travels. Now we’re also seeing an increasing number of Kiwis taking advantage of the high New Zealand dollar.” He says that when they launched in the US they also realised there was an advantage in keeping pricing and rental
agreements simple. “We were baffled by the archaic language, ambiguous terms and conditions, insurances and all the hidden costs of the traditional operators. It took us a while to figure out how much people were actually paying.” McGregor says the key to the company’s success has been its low, transparent pricing and its unique hand-painted campervans. “Our next goal is to have 200 campervans on the ground in the US by 2013, and we’re feeling confident we’ll pull it off.” www.escapecampervans.com
New Bill creates trade mark rush
A
New Zealand intellectual property practice is advising Kiwi exporters to protect their IP before new legislation making trade mark registration here easier for overseas companies comes into force. The Trade Marks Amendment Bill, brings New Zealand in line with many countries around the world through the Madrid Protocol. The Protocol allows international organisations to register a trade mark in any country which uses the Protocol in one single procedure.
8 EXPORTER
Philip Thoreau, partner at Baldwins Intellectual Property, says that Kiwi businesses need to be prepared and should protect their brands before the new legislation comes into force, expected to be mid-2012. “Companies need to take proactive steps in response to the new legislation and ensure they have protected their trade marks by registration before the legislation comes into force. We are expecting there will be a significant increase in the number of trade mark applications filed in New Zealand by offshore
competitors who are already members of the Madrid Protocol. “At the touch of a button, large international corporates could severely inhibit future economic growth, from local startup companies to established exporters, blocking access to key markets,” he says. Other countries in the Madrid Protocol include Australia, China, the US, the UK, Japan, Switzerland, Korea, Singapore, the Russia Federation and members of the European Union. www.baldwins.com
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> EXPORTER PROFILE
Plastics fantastic
Sistema Plastics is successful on so many levels – not least of which the controlled way it goes about conquering export markets. And it takes great pride in maintaining its world-class manufacturing base on these shores. Co-founder and marketing director Allin Russell shares some valuable export lessons.
A
BY G L EN N B A K E R
llin Russell greets me in the reception area of Sistema Plastics modern Penrose factory and ushers me into a display room of his company’s products. As I look around the four walls I see that their food storage containers and drink bottles come in almost every shape, size and colour imaginable. You probably have their ‘Klip-It’ plastic containers in your cupboard or fridge right now – I do, and I wonder how many people know they are made in New Zealand. Russell explains how Sistema first came about. It was the early 90s. His business partner Brendan Lindsay, who was (and still is) making plastic coat-hangers, had just returned from the US where, at a football match, he noticed just about everybody drinking from cups with pictures on. “I can do that,” he said to Russell. “Do you want to give me a hand?” The partnership was to prove incredibly successful – Russell especially has an uncanny knack for coming up
10 EXPORTER
with smart ideas – developing clever new products for food storage. Even their latest product – the world’s first dedicated microwave range for cooking and re-heating food – was his brainchild. It was the middle of launch week in New Zealand the day of our interview and Russell informs me that it’s already selling extremely well via the home shopping TV network in the US. Sistema started out manufacturing and marketing a range of children’s drink bottles and lunch boxes in 1993. “The big thing was that we introduced colour to the market,” recalls Russell. “While everybody else was still stuck on white.” Lindsay and Russell went to a fair in Milan, Italy, the home of cuttingedge design, and Russell admits that, surprisingly, they learnt nothing from what they saw design-wise. “But what we did realise was that our competitors around the world were industrial in their thinking. We set Sistema up as a marketing company that makes its own product, and this
still differentiates us in the market today. Most of our competitors are manufacturers who employ marketers; that’s a huge difference. “Brendan and I still sit down in front of our customers too, which is unusual for a company our size. My upcoming road trip in the US will involve calling on 19 retailers.” In order to expand quickly, Australia was the first export market on the radar. “It’s close, has a similar business model, and if something goes wrong we can get there quickly,” says Russell. He says their initial plan was to take [export] steps every three years. “But everything happened so quickly, we were taking the next step before we’d finished the previous one. “We’ve had to keep ourselves in check because if you have a relationship with a large overseas retailer and you don’t perform, there’s no second chance. “As it turned out, 18 months after entering the Australian market we spent $75K we didn’t have and went
to Chicago – the world’s premium housewares fair. “We had a tiny stand and nine products – sat there for four days and never took an order. Then on the last day we met a guy from the UK who was just starting out and held the Pokemon licence. He liked our lunchbox and asked us if we could in-mould label. We said ‘of course’, even though we didn’t know what that meant. “So we came home and learnt all about it, and ended up selling hundreds of thousands of Pokemon product via that one client – at a time when the exchange rate was very favourable. “Where we were clever, I believe, was that we poured all that money into developing our capabilities further. We’ve gone from one cavity dies, because that’s all we could afford at the time, up to around 60 cavities. If you’re serious about exporting, you just have to invest.” MADE RIGHT HERE While many Kiwi manufacturers switched production to China, Sistema dug its toes in and remains committed to its ‘Made in
New Zealand’ philosophy. “It’s about control. Daily there might be 30 or 40 reasonably major production decisions. If that’s going on in China; somebody else will make those decisions for you. Will they be the right ones? Plus you don’t get to participate in the solution. “Everything is about our brand standard, that’s what drives our success,” says Russell. Being ‘Made in New Zealand’ has its advantages, he adds, particularly in America where New Zealand is seen as a clean, green, easy-to-deal-with country that invests heavily in new technology and upholds high standards of production. “Don’t forget we were the first people to produce lead-free BPA product in the world.” New Zealand undersells itself as a manufacturer, Russell believes. “Manufacturing-wise we’re a lot better than we think we are. The emphasis in this country is on the likes of tourism, wine dairying and forestry. But there’re a lot of other things being made here and if people got the encouragement and
help NZ Inc could become much more of an exporter.” The ongoing debate of taking manufacturing offshore is not just about profit, as most claim it to be, says Russell. It’s about peoples’ lives and livelihoods. “We have 300 people working here and every single person has bought into the Sistema dream,” he says. “They love the product and the fact that it’s sold overseas. They take great pride in it.” Staff even wear their Sistema tops with pride outside of work hours, says Russell. It’s almost like an All Blacks jersey, it means something to them he says, adding that more than half of Sistema’s employees have been with the company ten years. “The fact that we can go anywhere in the world and say that this product is made in New Zealand really means something.” UNIQUE MARKET APPROACH Sistema has a unique approach to the market with its products. “Our point of difference is functionality and simplicity – two clips, not four – people find them extremely easy to use,” says
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KEY TAKEAWAYS > Be market-ready. You’ve got to know that your product will sell and go on selling. And that there is future development potential. > Source local distributors who can provide thorough local market knowledge. > Expect the little trips and stumbles – and be realistic in your expectations.
Russell. “And the quality assurances are paramount – all our products are thoroughly tested as required by retailers of course. A lot of thought also goes into the labelling – for which we have won numerous awards.” Russell says many people thought they were crazy when they first started out. “But it would be no different if we were starting Sistema today – the same elements are still against us. “Our strengths are innovation, flexibility, our response to market trends, and the fact that we still front up to buyers in person.” Another key to their success has been a thoroughly market-tested product. “You’ve got to know that it will sell and go on selling and that there is future development potential,” says Russell. Another hard lesson learnt was don’t just head off to international trade fairs and expect that big customer to turn up and answer all your distribution prayers. “You must source local distributors who can provide thorough local market knowledge. “We now own most of our overseas operations, but in all of them we’ve employed local people. They understand local demands, seasonal and ethnicity aspects, and so on.” The global recession has helped fuel demand for food storage containers as people look to save money, says Russell. “Obviously we’ve been challenged with exchange rates. Swings and roundabouts is the only way to look at the market. When things are good you grow well and invest in technology. In a recession you may not develop quite so quickly. Developing eight to ten new products a year is not cheap.” The reason why they are so successful, Russell firmly believes, is that they first come up with the idea for a product,
12 EXPORTER
Cargo Auckland Export Awards. It make that product, then extend it into currently exports to 19 countries, a range. “Retailers often get offered and the next big push is continental products, but seldom a whole range of Europe – a complicated series of smaller products. It all makes sense to them.” sub-markets, Russell says. “We’re Russell isn’t sure exactly where currently identifying distributors that Sistema sits in terms of size in their successfully cover all of Europe. There’re market niche – but thinks it’s around only a few and there’re many factors to number three, four, or five in the world. take into account – so we’re taking our That makes them a significant business. time to select partners. We’re still in the So has Sistema received any assistance learning phase. The key is to know where over the years to reach world markets? to enter continental Europe in order to Russell says in the early days it best serve the market.” was too much hard work to apply for Brazil is also on Sistema’s radar. “Brazil government grants, and he eventually has a higher GDP than Australia and gave up trying. But there has been a strong currency. It’s a complicated assistance through NZTE in more market – there are some powerful recent times. Russell acknowledges retailers and a huge licensing structure how daunting it is for many fledgling that discourages importing.” exporters to break into markets, and As for China, Russell admits there are believes there’s a requirement for much IP-related issues, but they intend to crack more funding assistance on things like that market eventually too. “We’ve learnt travel and attending trade shows. that if your product is being copied, He says they use a consultancy to you threaten the retailer with litigation. liaise with funding agencies, but believes a lot of small businesses would love any easier connection between BE MARKET-READY BEFORE themselves and NZTE.
“
YOU MAKE THAT MOVE. THE ONLY TIMES WE’VE HAD TO TAKE CORRECTIVE ACTION IS WHEN WE’VE TAKEN A STEP BEFORE WE WERE READY.
THE ROAD AHEAD Lindsay and Russell still drive most product development. But nowadays there’s a major contribution from ‘a team of clever technical people’. “We’re much better at analysing the outcome these days,” Russell admits. “People can get frustrated with us because they think we over-analyse. We thrash things out mercilessly – sometimes for months. And if we can’t see a way forward, we’ll park the idea and wait until it’s appropriate to resume work on it. It might be frustrating, but if you get things wrong it’ll cost you a lot of money.” Looking back over Sistema’s 18-year journey, Russell describes it as “a fantastic ride, and we’d do it all again in a heartbeat.” His advice for other exporters is to not make the same mistakes twice. Expect the little trips and stumbles – and be realistic in your expectations. “Be market-ready before you make that move,” he says. “The only times we’ve had to take corrective action is when we’ve taken a step before we were ready.” Sistema was named Westpac Exporter of the Year with total sales over $35 million at the 2011 Air New Zealand
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The offending product is very quickly removed.” Has there been a stand-out export milestone over the years? “Securing The Container Store in the States was incredibly satisfying,” says Russell. “We battled away to break into that market for a long time. The major retailers already stocked recognised competitor brands, so why would they take on an unknown? “So we went to The Container Store about six years ago and offered them exclusivity for 12 months. They agreed to trial us on that basis. Well, after just two months the retailers who had turned us down came back asking for product. We had the satisfaction of telling them, sorry, they would have to wait. “That was a defining moment for us. We had the belief that we would be successful in the States if we learnt the local dynamics of product.” Glenn Baker is editor of Exporter.
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The business of studying ships and super-yachts Lessons learned from a South Korean ship-yard have relevance for New Zealand exports, according to MBA graduate and super-yacht project manager Warren Angland.
Five years and 100,000 nautical miles on someone elseÕ s super-yacht did a lot for the young, tanned and astute AnglandÕ s perspective on how to design and build one. But two years of executive MBA study on home soil was a Ò mind-alteringÓ experience that has given him confidence to apply his skills for New ZealandÕ s benefit - beyond building really flash boats. Angland, a Westie by birth (but more salty by nature) was like any kid growing up around boats. He saw them coming in and out of the marinas, and wanted a job that got him closer. An apprenticeship with a super-yacht manufacturer saw him training towards an engineering qualification until he left for an unique OE. For five years, he was an engineer on super-yachts, where he soaked up valuable insight into design. Ò It gave me a lot of experience to bring back, a different perspective,Ó Angland says. That was 2005, and he slipped into a project coordinator role with the same employer. Until he started to wonder what was next. Ò I started thinking about formalising my experience and was looking to do something that validated what I already knew, like a degree.Ó But a smart friend told Angland he was barking up the wrong mast. And the University of Auckland executive MBA
came up. The 36-year-old says he was one of the youngest and least-experienced in the class. Ò It was a lot more than just the qualification for me. It was about the diversity of the people I would be studying alongside and learning from. I knew it was going to be a lot of workÉ and I underestimated that. For two years, I proceeded to work as hard as I could.Ó AnglandÕ s cohort was fortunate to take a mind-altering trip of the business-kind to South Korea, where with the added help of New Zealand Trade and Enterprise, he visited some of the worldÕ s largest ship-builders, including Samsung Heavy Industries. Ò When you look at the vision and investment the Koreans have made in manufacturing, itÕ s incredible.Ó Korean ship-building is thriving on a grand scale Ð Samsung floats out 60 ships a year. But theyÕ re specialising in LNGcarriers and mega-container ships, recognizing bulk-carriers and small tankers can be manufactured adequately and more cheaply by the Chinese. He says niche is New ZealandÕ s ticket for manufacturing success, particularly in boat-building. But New Zealand business must adopt a Ò global mindsetÓ from the outset to succeed. AnglandÕ s employer is a Ò significant contributorÓ to New ZealandÕ s export
economy, with two multi-million-dollar yachts completed and exported each year, on average. His role is complex, responsible for contract management, client liaison, project scheduling, assessing expectations and ensuring theyÕ re met. After 17 years, Angland says it would make sense for his future to be with the industry, although the MBA has given him confidence he could apply skills and knowledge elsewhere. And while heÕ s surrounded by luxurious boats, he doesnÕ t own one and says his goals go far beyond the Ò boat, bach and Beamer.Ó Ò IÕ ve been motivated by the MBA to try and contribute more, significantly, to New Zealand business. And I would be surprised if many of the people in my MBA cohort didnÕ t end up as recognised leaders in the future.Ó AnglandÕ s desire to influence is grounded at home. He is passionate about young people, a mentor for Project K. He has been a volunteer Coastguard skipper. He is on the board of Foundation for Youth Development Waitakere. He has just become a father. And who knows, perhaps that will alter his mind-set again. WhatÕ s certain is the MBA has solidified AnglandÕ s views that New ZealandÕ s export industry needs to alter its collective thinking to succeed globally. Ò Right from the top you need the vision, you need people who believe weÕ re capable of it.Ó The University of Auckland Master of Business Administration (MBA) has an intake in January each year, and welcomes applications from business leaders. Find out more at www.gse.auckland.ac.nz.
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Man with a (export) plan Jeff Broad is under no illusion about how New Zealand’s economy can recover from its recent lows. It’s all up to our export sector, he says, and with his company Autogrow, he’s determined to set the pace. Exporter magazine was there when Broad was awarded the Export Assistance Prize in the recent ANZ Flying Start Business Plan Competition.
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he founder of Autogrow Systems, Jeff Broad believes the only way forward for our economy is to increase exports and he’s excited that his small company is part of this wealthgenerating activity. Although Autogrow has been exporting in a small way for some years the North Shore company is now on the brink of a significant growth phase and most of this will be in export markets. Autogrow designs, manufactures and markets electronic controllers for greenhouses. These automatically control all routine activities such as opening and closing vents, shade screens, foggers, heaters, fans, dehumidifiers, lights, CO2 and the irrigation process – which involves mixing in the correct amount of fertilisers, correcting the pH and switching on pumps and valves to water each section of the farm in sequence. What makes Autogrow different is that they have built-in some of the science of horticulture into their controllers. “This makes them easier to set up to achieve excellent results both in crop yield and quality,” says Broad, a scientist turned businessman. Autogrow’s controllers are easy to
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Jeff Broad (right) with Beekist tomato grower and director of Horticulture New Zealand, Tony Ivicevich.
translate into any language and font, ranging from Arabic to Mandarin. This decision was taken with exporting in mind; especially emerging markets such as Turkey, Mexico and China, where greenhouse development is still very strong. “Autogrow’s mantra is easy to use, easy to install, easy to service and easy to upgrade,” says Broad. “In fact, everything about our Multi system has been designed to be easy.” Broad says that many growers are excellent with their plants but are not really control system savvy and are often heard complaining bitterly about how difficult most systems are to set up. Jeff identified this as a great opportunity – Autogrow has a lot of experience in simplifying the user interface. Autogrow’s new control system is
flexible and modular. One controller can operate up to eight greenhouses, a full ‘fertigation’ system, up to eight hydroponic dose tanks and eight full monitoring stations. Being modular the customer only pays for what they use and so the system is economical for both small and large growers. This is also great for export markets as the distributor only needs to import the relatively low cost hardware. Only when they sell the equipment do they need to buy the appropriate software modules over the Internet. Having a centralized control system with sensors spread out through the farm presents other issues. For instance, to calibrate a sensor you need to be close to the sensor as well as close to the controller. Autogrow solved this problem by making a Wi-Fi tablet a primary user interface.
Jeff toasts his Award win with Wayne Percival, ANZ’s senior regional manager.
“The grower can wander through the greenhouse with his iPad performing calibrations and settings reviews on the spot,” says Broad. “Besides providing a new level of grower convenience and control, the iPad interface also provides a bit of a ‘wow’ factor. Ours is the only system in the world that utilizes the iPad.” With the new Multi system about to launch Autogrow expects a tenfold or greater increase in exports over the next few years. It’s not wishful thinking. The judges of the recent ANZ Flying Start Business Plan Competition named Autogrow the Exporter prize winner for having the best export potential. (For a complete list of winners go to www.business.govt.nz) A delighted Broad says the prize money of $10,000 will go a long way to helping fund a couple of planned market trips. He believes that if enough Kiwi companies both large and small could boost their exports receipts it would go a long way towards solving many of the issues we face in this country – including the exodus of people across the Tasman to live. “With all the extra money coming into the country we could afford to have the best health care, best education system, best transport system and definitely the best environment in the world. With full employment and challenging job opportunities why would anyone want to leave?” ADVISORY BOARD So how did Autogrow win the export award? Well, for a start, there was a certain business plan that needed some work on. “About a year ago I decided to set up
“Everything about our Multi system has been designed to be easy!”
Taking the initiative The wisdom of taking the initiative is well demonstrated through one of Jeff Broad’s early market trips, which was sparked during a sales call to a US wholesaler. “The wholesaler didn’t think she knew enough about greenhouse climate control to be able to successfully sell it in the US,” recalls Broad. “But when she said she would attempt to test the market during a sales trip to California the following week, I cheekily asked if I could go with her. It just seemed like
an advisory board. I invited three local business leaders who ran successful businesses much larger than my own, and who were all extremely passionate about exporting, to join me. To my surprise they all agreed!” he says. “These people were selected for particular skills – namely, export market development, management and financial management. The first thing they wanted to see was my business plan. Their verdict wasn’t great. ‘Jeff,’ they said. ‘This is a good start but it needs a lot of work’. “Over the months they forced me to really focus on issues and develop a level of clarity that I otherwise would not have achieved.” www.autogrow.com
a great opportunity. “To my surprise she agreed, and I immediately booked my flight to the US. Well, after hearing my sales patter repeated so many times during that trip, and seeing the interest in the product, the wholesaler said she was more than confident enough to sell the controller. “That particular product now represents around $400,000 in annual sales.”
JEFF’S TAKEAWAYS > Start with a good product that really does fit a niche in the market and has some “wow” factor. > Research and select one or two markets to focus on. Avoid a scatter-gun approach. > Make sure the market is large and your product/service is scalable. > Get yourself an advisory board. > Develop an excellent business and financial model. > Then export, export, export.
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An appetite for new markets Having made a number of strategic ‘readjustments’ to their product, pricing and positioning, fine food manufacturer Wild Appetite is poised to take on additional export markets.
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BY G L EN N B A K E R
he origins of the Wild Appetite brand date back to 1989, when Gerald and Virginia O’Leary began making gourmet preserves and conserves on their blueberry farm at Matakana, north of Auckland. Gourmet sauces and dressings were added to the range four years later. Export orders started at the turn of the century, with Denmark becoming the first, and subsequently to this day, the ‘flagship’ market, thanks to the Danish distributor having strong ties with this country. Exports have since expanded to Australia, Germany, Austria, UK, Norway and Dubai. Today, Wild Appetite is a very different company to the one that started out all those years ago. The two new owners have spent the past two years masterminding an intensive restructuring and repositioning programme for the company and its products. As a result they are now in a much better position to launch the brand into additional export markets. Executive directors Peter McCracken and Mark Tasker purchased the business in early 2009, right in the middle of the economic slowdown. They had previously met socially – Tasker was originally from Zimbabwe and had a corporate background; McCracken was a food technologist with extensive food industry and export experience. It was to prove a well-matched partnership.
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Peter McCracken and Mark Tasker
“Despite the tough economic times, Mark and I were confident we had the skills and nous to take the business to a new level here in New Zealand and overseas,” says McCracken. “The business had a strong brand image and excellent range of products positioned at the top end of the sauce, condiment and gift categories.” But there was a lot of work to be done if Wild Appetite was to tackle new markets – and much of that work involved fundamental changes to the
business strategy. One of the first jobs was to change the packaging from a 375ml bottle to a new 250ml signature embossed bottle owned by Wild Appetite – complete with refreshed labels and branding. This process took a year to execute. It allowed the retail price to be lowered and the re-aligning of pricing in each export market. “We realised that with the previous larger sized bottle we had become uncompetitive,” explains McCracken.
“So the change was critical; as was the market pricing strategy.” On the export front there were a number of other adjustments made. A UK distributor was appointed in October 2010, but it was across the ditch where the biggest change was to happen. “This was our most immediate challenge when we took over the business,” recalls McCracken. The previous owners had run a single distribution warehouse in Sydney serving the whole of Australia. Wild
KEY TAKEAWAYS > Follow the 4Ps marketing principles (Product, Price, Promotion, Positioning) when breaking into new export markets – although you might want to add Profit, Passion and Perseverance. > The key to export success is to provide price stability to overseas distributors by selling in the currency of the market.
Appetite’s new owners now had to take charge of that stock and set up independent distributors in each State, using Sydney as a hub with ‘buffer stock’. “Third parties seldom represent your products as well as yourself in markets, but at this stage of our export strategy, this direction was seen as the only feasible option,” says McCracken. “Needless to say there were many hours spent talking with potential distributors.” Other achievements since 2009 have included the development and launch of the Urban Appetite brand in the New Zealand and Australian grocery markets and the launch of a new range of cooking sauces (Sauté Sauces). Summing up the targeting of their brands in Australasia, McCracken says the Urban Appetite products are aimed at retail grocery (“in the deli or ‘down the aisle’”) – while Wild Appetite targets the gift and deli markets. CHANGING PERCEPTIONS McCracken explains the positioning strategy of their brands to me which, again, was critical to sales growth. He says the brand Wild Appetite was
traditionally just seen as a specialty ‘gift’ product. “We had to change that perception. We wanted to keep the gift segment of the market, but it’s important that we also moved the brand into the everyday retail grocery market – which is already the case in Denmark, Germany and the UK.” One of the key benefits of repositioning the brand was the better use of production capacity at Wild Appetite’s manufacturing facility in Albany. “Now that export sales are on the rebound in Denmark, Germany and the UK, their peak sales are in the June to September period,” says McCracken. “This allows us to produce for Northern Hemisphere requirements during our slower sales and production periods here in New Zealand.” And speaking of production capacity, Mark Tasker says they have worked to eliminate the peaks and troughs in production and optimise staff utilisation. “We had spare factory capacity during the year, so we instigated a new, very flexible working hour week with our staff. Employment contracts were re-negotiated to allow the flexibility for us to remain viable in the slower selling periods.” He says it also means that when the growth comes in export markets, they’ll easily accommodate the extra production required. BREAKING NEW MARKETS McCracken follows the 4Ps marketing principles (Product, Price, Promotion, Positioning) when breaking into new export markets – although he tags on another three Ps: profit, passion and perseverance. He knows all about perseverance through the “market legwork” required to access the UK. “Much research and three visits, including trips to the Anuga and Sial Food Fairs, were necessary before appointing our distributor. “Due to the nature of the UK retail market and logistical spread of customers, we decided it was better to run with a larger organisation,” says McCracken. One of the upsides with Europe, he says, is that many of the distributors have a marketing philosophy in regard to positioning, selling and promoting products to consumers. “We work closely with their marketing departments to ensure we maximise the resources available. “Yes, it is relatively easy to get our products to the front of the big, dark
IT IS RELATIVELY EASY TO GET PRODUCTS TO THE FRONT OF THE BIG, DARK TUNNEL. BUT TO GET CONSUMERS PAYING AND RETURNING TO THE LIGHT OF THE TUNNEL WILL ALWAYS BE A CHALLENGE – BECAUSE THERE’RE ALWAYS NEW COMPETITORS TRYING TO DISLODGE YOU FROM THAT TUNNEL EXIT.
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tunnel. But to get consumers paying and returning to the light of the tunnel will always be a challenge – because there are always new competitors trying to dislodge you from that tunnel exit,” says McCracken. “We’ve stuck to our principles on quality, which will never be compromised. We’ve adjusted to market conditions by providing a facelift to our key products and reduced the selling prices,” he says. Another key to success has been their policy of providing price stability to overseas distributors by selling in the currency of the market – the Krone, Euro, Pound and Australian dollar. “This means we’re taking on the currency exchange risk,” says McCracken. “But we believe this is necessary to provide price stability ‘in market’.” He admits that with the high Kiwi dollar this has been somewhat painful. In the short term, the objective is to build on the base established within Australia. “We have a favourable exchange rate against the Australian dollar – so this provides expansion opportunities across the Tasman,” says McCracken. It’s certainly easier to expand sales in an established export market than open up a new region, he adds. Long term, the US and Northern Asian markets are on their radar – but they’d rather wait until the US economy is under control before venturing into that market. Meanwhile, Wild Appetite products continue to gain recognition through winning awards overseas. At this year’s prestigious Great Taste Awards in London, known as the Oscars of the food world, Wild Appetite was awarded seven gold medals over seven categories. That’s marketing mileage that money simply cannot buy. Glenn Baker is editor of Exporter.
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18 EXPORTER
A beginner’s guide to exporting 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.
BY G L E N N B A K E R
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ake 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 2000plus enquiries a year, many from earlystage 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
Carole Wright, director Business Services, NZTE. “NZTE is refocusing on the way we operate so we are even more client-centric and ‘user-friendly’.”
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
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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,
20 EXPORTER
5 ways to grow your exports 1. Understand the business culture
3. Ask yourself ‘Am I invisible?’
of your target market so that
Imagine yourself as a customer
you don’t turn people off - even
trying to find what you have to sell
before you open your mouth!
– how difficult or even impossible
For example, the ‘we’ll just give
do you make it for customers
it a go’ approach is a major turn
to buy from you? Do you have
off in many countries where it
web-based sales?
comes across as amateurism or
How do customers find you?
even a lack of respect. Do your
4. People will buy from people
homework before you go and
they like. How likeable are you
change your approach, just as
and your company or do you insist
they do when they come here!
on such nonsense as ‘24-month
2. Find out what your customers want to buy, not what you want to
contracts’ and hidden charges or fees on top of the price quoted?
sell. For example, Indians like to
5. If you think training is
cook with ghee (clarified butter)
expensive, you should try the
so Fonterra now produces ghee
alternative. When was the last
for that market.
time you used an amateur dentist?
Supplied by The New Zealand School of Export (www.export.ac.nz) – now registered to accept NZTE Capability Development Vouchers. All eligible companies get 50 percent off the cost of the distance-education Diploma of International Trade. To see if your company is eligible go to: www.business.govt.nz/growing
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.
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.
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
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 clientcentric 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
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f 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 faceto-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
THE 3-STAGE VALIDATION PROCESS 1. Identify the pain – make sure your product or service directly addresses a need or pain point for your customer. 2. Assess the pain – call potential customers, channel partners and distributors and ask them if you can produce a product or service to solve their pain. 3. Validate the pain – go back to those customers and tell them you’re working on a product and ask them how much they’d be prepared to pay for a solution that solves their pain. Only once you’ve validated your product or service should you then develop it or at the very least launch it in to that international market.
what your intuition is telling you! 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.
EXPORTER 21
> COV E R STO RY
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
22 EXPORTER
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 JC
: Where do companies let themselves down the most?
: 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 JC
: Do you have a good example of a market entry strategy?
: 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
Checklist for new exporters • Is there a demand for our product or service? • Is this demand sustainable? • What are the relevant business and import regulations and compliance? • How is the market structured? • What are the industry/consumer trends? • What competition will we face? • Are we competitive (product and price wise)? • What can we charge for our product/service? • Is there a potential profit? • What are the normal retail, industry or distribution markups/margins? • What areas of our target country should we concentrate on? • What are the key distribution channels for our product/service? • Are we (IP) protected e.g. patents, trademarks, registered designs? Source: Jacinta Clark, Oystershell Ltd
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
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.
WEBSITES TO VISIT: > www.nzte.govt.nz > www.businessnz.org.nz
: How do you go about identifying the right markets for your products?
> www.business.govt.nz
JC
> www.nzeco.govt.nz
: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.
> www.nzmea.org.nz
> www.export.ac.nz > www.mfat.govt.nz > www.kea.org.nz > www.theicehouse.co.nz
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> F E AT U R E
Freight forwarding de-mystified Shipping goods to overseas customers requires specialised services and sound knowledge. It’s a job best left to the experts. This guide is designed to de-mystify freight forwarding for the uninitiated.
BY M A RY M AC K I N V E N
L
anding a precious cargo on the other side of the world in one piece and on time is complex and risky for exporters, but it is the daily bread of freight forwarders. Exporters can dial up a freight forwarder to book transport from their own door to their customer’s and to sort out compliance documentation, insurance and border clearance – or just a part of the conveyance. Airlines and shipping lines tend not to be interested in dealing directly with exporters and importers unless these traders have large volumes and/ or regular cargo – so freight forwarders are the answer, says Rosemarie Dawson, the executive director of the Customs Brokers and Freight Forwarders
24 EXPORTER
Federation of New Zealand (CBAFF). Freight forwarders can pool product from multiple exporters into a container load, for example, and negotiate a better price and service than each exporter could alone. They arrange a mix of land transport, air and sea freight, knowing the best routes, carriers and rates to find the best deal. Customs brokers, logistics solutions providers and freight forwarders can all offer full logistic services. It’s a matter of checking websites and asking companies what they do. The paperwork for banking/finance, transport and compliance associated with any export is often completed electronically but must be appropriate,
accurate and on time. A typical shipment by sea or air requires eight to 15 documents. “It’s all very well to understand the processes but it’s not an exporter’s core business, so they should use a professional to help them do the job,” Dawson advises. But freight forwarders are not miracle workers. “There are many external influences that cause changes to schedules, such as decisions by shipping lines and airlines, which we have little or no influence on.” Furthermore, reports of Fonterra and the huge meat industry possibly sharing shipping space have implications for little Joe Exporter’s access to space on ships for his (lower
value) one container a year. Looking at the bigger picture, a general lack of international security still bubbles around unresolved, and on the radar is the US possibly requiring all air cargo to be screened, maybe as soon as the end of the year. And where the US goes, the EU will be fairly close behind, Dawson says. Two significant and ongoing logistics developments in New Zealand aimed to help exporters are the Trade Single Window electronic sharing of information between the New Zealand Customs Service and the Ministry of Agriculture and Forestry, and the Productivity Commission’s International Freight Transport Services Inquiry. The latter is investigating the effectiveness of infrastructure and regulatory regimes in promoting accessibility to, and efficiency in, international transport services. Dawson has written a detailed ‘how to’ guide to freight forwarding and customs broking in the New Zealand Export and Trade Handbook 2011 (published by Adrenalin Publishing, the new owner of Exporter magazine). And the CBAFF website lists members located around New Zealand. She recommends exporters write a list of questions or shipping requirements, then get quotes from freight forwarding companies to find one that suits. Each has different strengths. Larger freight forwarders might be able to get better prices on carriers for large volumes, but smaller forwarders might provide more personal service. Some specialise in sea freight, others in air or mail and courier deliveries, or, in particular, geographic locations or product categories. Some also offer ‘urgent services’ at a higher cost. NO HOLDS BARRED TNT Express Worldwide (NZ) moves goods by air and land only, including documents (for example, where originals are still needed), parcels and freight – which can weigh tonnes. The company offers a range of time and day definite services globally. For even faster shipping, TNT’s special services division is on call 24/7 to secure the next flight out, charter or do whatever it takes to meet a special logistical need (for example, flying in parts for surgery or urgent installations). National sales and marketing manager Brent Carter weighs up
detailed list of charges that includes the freight rate port-to-port, fuel surcharge, handling at the terminal/port and customs clearance. detailed list of
Service trumps price Spare parts for Moffat’s commercial kitchens are airfreighted to overseas customers, and components are imported for manufacture. Spare parts manager Tim Sutherland says it’s simpler and quicker to use a freight forwarder. “If we don’t provide [the necessary information on documentation] they say ‘this is missing’. We don’t have to worry about every step in the process.” Christchurch-based Moffat sends four to five international shipments a day weighing one kilogram or less, and less frequently, crates of several hundred kilograms. “They negotiate the best rates
“
for us. But you don’t just go for the best price. Customers don’t mind paying the price if we can back up with service. Getting parts there fast, safely and in one piece is the main thing for us. “A good relationship with your freight forwarder helps, so they will react quickly to any issues.” Sutherland advises choosing a company that has a good presence in New Zealand to back up its services. “Even if they are in a different city it can be a problem. It helps that ours has an office in Christchurch. They know our business and our customers and the markets we sell to.”
A GOOD REPUTABLE FREIGHT FORWARDER IS TRULY AN EXTENSION OF YOUR BUSINESS. the benefits of air: “We are more flexible and fast which increases speed to market. There is no need for warehousing with small consignments and fast turnaround.” TNT coaches new exporters through the process to help them find the right solution. DB Schenker is available for every mode of transportation as well as warehousing. Managing director Oliver Bohm stresses buyers and sellers of goods should be aware of their responsibilities and the rules in international trade, and should therefore make themselves familiar with ‘Incoterms 2010’ when signing contracts with overseas suppliers or customers. He explains freight forwarders generally act as a service broker, dealing on behalf of the shipper/ importer with parties such as shipping lines, customs brokers, road transport providers and quarantine officers. They generally offer exporters two charging options: a quote for a full door-to-door rate that includes all services from pick-up to delivery; or a
”
detailed list of charges that includes the freight rate port-to-port, fuel surcharge, handling at the terminal/port and customs clearance. JUST ASK Hemisphere Freight Services specialises in packing LCL (Less than a Container Load) cargo, even just a few pallets or boxes – and while avoiding empty space, ships the goods as scheduled whether the container is full or not. The company also manages full containers. Hemisphere Freight Services has offices in Auckland and Sydney, as well as alliances with agents worldwide. It can manage trans-Tasman shipments with a single transaction for handling at both ends, says founder/director John Crook. He advises exporters to look for a freight forwarder who can provide information on the country they are shipping to. “Sometimes the importer will cater, but not if communication between seller and buyer is less than great. There’s a raft of information needed
EXPORTER 25
Total reliance Douglas Pharmaceuticals relies on its freight forwarders (one for small daily parcels and one for less frequent pallet loads) for information on the required documentation in each country, when investigating a potential market. “We know what the Food and Drug Administration and Therapeutic Goods Association require, for example, but not the importer itself,” says logistics and procurement manager Karen Johnson. “We don’t want our pharmaceuticals stuck in store. “We might ask them to find out if we have to pay an export bond that can be required if you are not a known supplier,
and that’s one of the main areas we can help for a smooth transmission.” Timing is critical in goods movement. Booking airfreight can be done closer to departure because turnaround is faster, but sea freight needs notice for packing/consolidating and delivery to port perhaps a day before the ship comes in. There is no room for deviation as shipments must fit in with security requirements, and documents take time to prepare. The client account application will spell out where the freight forwarder’s liability ends (for example, for loss or damage) and the exporter’s begins – maybe it’s for ‘X’ amount of dollars per package. The company might do a credit check and limit its liability until the exporter proves reliable. Insurance quotes can be arranged for clients. A BUSINESS EXTENSION No cargo is too big or small for Gateway Cargo Systems to handle, says director Stephen Kirkham. “A good reputable freight forwarder is truly an extension of your business. Shippers get the benefit of multi-level shipping options and costs to fit their business requirements, timeframes and costs. “I’m a great believer that shippers should take control of their supply chain. If it is handled poorly, even
26 EXPORTER
for example.” Having goods delivered by a known freight forwarder in the export market helps too, she says. Douglas Pharmaceuticals chooses its freight forwarders through Requests for Proposals looking for full service providers and contracts for several years. Johnson values a provider who replies fast to collection forms or emails and keeps her informed on the movement of goods. “It’s great not having to chase them up when you have urgent deliveries and people at work breathing down your neck!”
though the sale may have been made, generally the result is lost sales and revenue. “We also have the ability to collect payment from the consignee before releasing the goods. Most importantly ensure you are going to be paid!” A good forwarder will have flexibility, strong partnerships with their international agency network and the shipping companies, airlines and truck, van and rail operators. Clear and concise communication with all parties is paramount. But if exporters get the paperwork wrong, Gateway Cargo will tidy it up. Pengelly’s Group of Companies is a family firm with offices around New Zealand as well as five in Australia and one employee in China (Shanghai). The bi-lingual Chinese employee in Shanghai previously worked in Auckland but by being on the ground can chase up manufacturers and organise logistics at the China end, says Warren Pengelly, son of the founder. The phone numbers of Warren and his brother Trevor are the only two listed for after hours inquiries: “That’s how personal our service is.” The full service freight forwarders cover all cargo except perishables and personal effects. All freight forwarders stressed the need for exporters to be insured.
KEY TAKEAWAYS > Write a list of questions or shipping requirements, then get quotes from freight forwarders to find one that suits. > Make yourself familiar with Incoterms 2010 (International Commercial Terms) when signing contracts with overseas suppliers or customers. > Look for a freight forwarder who can provide information on the country you are shipping to. > Clear and concise communication with all parties is paramount.
MARY MACKINVEN / WRITER
Mary MacKinven is an Auckland-based business writer. Email marymackinven@orcon.net.nz
n o i s r e V l a t i g i D ! w o N e l b a l i a Av s k c a b t a h t k o The bo . . . e v i r d t r o p ou r ex
In difficult trading times it is more important than ever to avoid making expensive mistakes. The NZ Export & Trade Handbook continues to provide exporters with a wealth of up-todate information that is invaluable in making the right decisions to achieve success in overseas markets. Rom Rudzki, Founder New Zealand School of Export.
Newly updated for 2011, the New Zealand Export and Trade Handbook continues to be a vital reference guide for Kiwi exporters and importers. Purchase on-line at www.exportandtrade.co.nz/zinio
www.exportandtrade.co.nz For advertising enquires contact Leanne Moss: email leanne@adrenalin.co.nz or phone (09) 477 0368
> F E AT U R E
Minimising risk on export payments Exporters can free up cashflow by tapping into various trade finance tools provided by the banks and other lending institutions.
F
BY YO KE H AR L E E
rom the time of the ancient Babylonians, promissory notes or the ‘promise to pay’ has been a powerful tool for leveraging cashflow. New Zealand exporters can free up vital cashflow for their business by tapping into various forms of trade finance tools offered by the banks and other lending institutions. Whether they are letters of credit, factoring arrangements, export credit guarantees or trade credit insurance, an exporter can do well to explore the range of international trade financing facilities on offer. An exporter should always be mindful not to rush into pricing a substantial export order without securing the input of their bankers. This is to ensure the exporter can have the benefit of their bank’s expertise to help mitigate risks associated with pricing the order. CASHFLOW CYCLE One issue often underestimated by businesses when they begin exporting is the impact on their cashflow cycle, according to Gavin Haworth, ANZ New Zealand’s head of trade and supply chain. An extended timeframe for
28 EXPORTER
delivery, additional costs for warehousing, shipping and customs; new relationships with suppliers or customers and different currencies are just some of the issues that can cause an exporter’s existing cashflow cycle to unravel, he says. Once the sale has been made, the fundamental issue for all businesses – that of either not being paid or not receiving goods – is exacerbated when operating internationally, Haworth adds. The most secured form of international trade financing tool used is the letter of credit (LOC). The LOC has been used for more than 100 years and historians believe its origins date as far back as ancient Egypt. An exporter with access to a LOC has a secured form of payment (from the buyer’s bank). There are various types of LOC which carry their own terms and conditions. An irrevocable LOC gives the best protection – it means neither the exporter nor the buyer can alter the terms without prior agreement.
POWER OF LETTER OF CREDIT Gary Cross, head of trade and supply chain at HSBC New Zealand, says the LOC is as relevant today as it was 100 years ago, allowing an exporter to manage risk of non-payment by the buyer, manage political risks and associated business risks. The LOC provides a useful trade finance tool without affecting an exporter’s risk profile, Cross says, adding that exporters work with various pressure points on their working capital requirements. It costs, typically, between 0.5 percent to five percent of the trade to use the LOC facility. Some exporters sell their products or services on an Open Account basis, meaning their goods are shipped to the buyers with a 30-, 60- or 90-day payment cycle. Open Account trading carries the risk of payment default. In New Zealand, exporters selling on Open Account terms often seek trade credit insurance to protect against potential payment defaults. The global financial crisis has
Renmenbi: the new international currency If you are trading with China, pricing your goods in renmenbi (RMB) or having an RMB account can add a real competitive edge to your business. China’s RMB is going through gradual internalisation – which means it has become more readily tradeable outside of China. ANZ New Zealand’s managing director, institutional, David Green, advises exporters to position themselves to take advantage of the new opportunities associated with the RMB’s internationalisation. There has been a 10-fold increase within six months in cross border trade settlements between Hong Kong and China, with trade valued at nearly $20 billion, Green says. HSBC’s head of trade and supply chain Gary Cross says within the next five to six years, one third of China’s trade will be settled in RMB and within the next 12 to 16 years, the RMB will be a globally relevant reserve currency. Cross says exporters who are not already having RMB as a settlement option, should be having discussions with their buyers in China on doing so. Offering RMB pricing and payment solutions as an option can help open up new
caused trade insurers to shrink their appetite for new risks, although this year has seen trade insurers returning to the market. Deputy treasurer at Kiwibank Nigel Gaudin’s advice is for exporters to avoid the potential trap of having goods sitting half way around the other side of the world with no prospect of money arriving in the bank. “We think exporters should take the time to understand the end-to-end process and not be shy about talking to experts if their knowledge of an area isn’t that good,” says Gaudin. “The classic insight ‘any sale is a gift until you have been paid!’ holds true.” EXPORT CREDIT OFFICE The government-run Export Credit Office is another useful resource for exporters – they can tap into the ECO’s various products: pre-credit guarantee, short-term credit guarantee, contract bond guarantee and working capital guarantee. The ECO has been stepping in to provide co-cover with private trade credit insurers when the latter shrunk back business; or when banks have reached their risk limits on a certain client, country or industry. The ECO’s manager Carmen Moana says there has been a notable increase
opportunities. In New Zealand, local banks have already been positioning themselves as key providers for exporters of RMB account services. ANZ’s Green says exporters should also think about the expanded opportunities to pro-actively manage their RMB currency exposure. “This partial internationalisation of the RMB should help firms hedge exchange rate risk, and allow importers and exporters to find ‘natural hedges’ in their balance sheets if they hold RMB accounts,” he adds. Kiwibank is also getting an increased number of enquiries from customers around trade finance receipts in RMB. The wider global trading environment and what is the new normal is still being defined after the global financial crisis and Euro zone issues, says Nigel Gaudin, Kiwibank’s deputy treasurer. This makes managing country and bank risks more challenging for exporters, he adds.
in demand for performance guarantees, for instance, due to cautious overseas buyers still experiencing tough domestic economic conditions. Exporters, she says, should tap into the ECO’s products as a means to offer better terms to keenly-contested projects or products and services. So far, the ECO has provided funding of $1.16 billion to local businesses of which $466.83 million went to export credit guarantees, and $455.10 million to short-term trade credit guarantees. For exporters with large transTasman business dealings, having a unified cash management platform to manage two currencies can be useful. The ANZ has introduced a web-based cash management product called ANZ Transactive. This platform allows an exporter to transact both the Australian domiciled and New Zealand domiciled accounts using a single platform. According to ANZ’s Gavin Haworth this product helps simplify and streamline exporters’ cash payments and cash management operations. Around 20 percent of all international trades from New Zealand are with Australia, and of those trades, about 80 percent are paid for through open accounts – that is, the same invoicing payment system that is used for domestic accounts, Haworth says. “One of the most significant
KEY TAKEAWAYS > Never underestimate the impact an export order can have on your cashflow. > A letter of credit facility gives you the most secure form of trade. > The Export Credit Office can help small- to medium-sized exporters secure export credit guarantees. > When dealing with foreign currencies, make sure you are sufficiently hedged.
cost-saving features within ANZ Transactive is the ability to transfer funds between your Australian domiciled accounts and New Zealand domiciled accounts as an account transfer, rather than as an international funds transfer. This significantly reduces the cost associated with international transfers and makes it much more cost-effective to maintain trans-Tasman account balances,” he adds. The ANZ Transactive allows exporters to configure their own approval options
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TOOLS TO BACK UP YOUR INTERNATIONAL TRADE TYPE OF INTERNATIONAL TRADE FINANCE FACILITIES
BENEFITS
MORE INFORMATION
Letter of Credit/Documentary Credit
Helps exporter manage risks as payment is secured against a purchase order. Payment made from bank to bank.
Costs can range from 0.5% to 5% of value of trade. Standards set by International Chambers of Commerce.
Open Account
Buyer pays for goods shipped with credit terms. Exporters offer either 30-, 60- or 90-day terms.
Risk of non-payment is high unless the value of the trade is insured.
Advance Payments
Exporters get paid in advance by buyer.
Seller may have to meet buyer requirements.
Export Collection
Banks handle and process documents related to the shipment.
Advantage: Documents for access to shipments can be retained by banks until buyer has paid, or has scheduled to pay.
Packing Credit
Helps free up working capital by getting credit for manufacturing costs such as raw materials and employee wages, among others.
Provided by banks on per case basis based on existing relationship with an exporter.
Performance Guarantee Bonds
Exporters get banks to underwrite a guarantee (sometimes buyer ask for such a guarantee as terms of the contract) to ensure the exporter meets his obligations.
Facility offered by banks. Export Credit Office also has product on offer. Exporters’ bank may refer exporters to ECO once a customer’s risk limit is reached.
Factoring/Invoice Financing
Helps exporter frees up vital cashflow. An exporter surrenders his invoice and gets cash upfront.
Provided by Factoring companies or Finance companies. You lose a portion of the value of the invoice as “fees”.
Foreign Currency Accounts
Allows exporters to hold foreign currencies in these accounts until they are ready to be converted into NZ dollars. Facilitates receipts/payments of non-NZ dollar trades.
Bank charges apply.
Foreign Currency Hedging/ Forward Contracts, Options
Allows exporters to hedge against a currency’s volatility. A forward contract allows exporter/importer to buy or sell a currency at a predetermined timeline based on a predetermined price.
Helps mitigate currency loses in a fluctuating market. Protects the value of an exporter’s receipts based on foreign currencies.
that are aligned with the company’s processes. FINANCING OFFSHORE WORK For most Kiwi companies exporting their services, raising financing for their overseas projects remains a huge challenge. Ian Mellsop, managing director of Marinescape, a world leader in large aquarium concepts, says: “Because of the small size of the New Zealand finance market [in global terms] and our remoteness, getting Kiwi finance for overseas projects is almost impossible for small private companies’ projects.
30 EXPORTER
“We were particularly fortunate in our Thailand project where we persuaded a very large Singapore company to join with us and invest in Thailand. Their banking connections enabled them to provide the bank funding. “In another example, our Malaysian partners were so impressed with our service they joined us in Vietnam [in a project] and got backing from the Malaysian version of the export credit scheme,” Mellsop says. Depending on where you are trying to raise money, up to five percent of a project’s cost can be spent on getting a proposal on the table of a local bank,
Mellsop says, adding that, for example, Korea and Japan have very high thresholds for approving financing. Marinescape was able to gain the ECO’s credit guarantee to help an aquarium buyer to raise debt funding for 17 million Euros (NZD$29.32 million) to build a 120 metre-long ‘SeaTube’ in Istanbul, Turkey. YOKE HAR LEE / WRITER
Yoke Har Lee is an Auckland-based business writer. Email yokeharlee@yahoo.co.nz
Wine company savours trade credit insurance When Tim Lightbourne
to back its deals as it had not
co-founded boutique wine
built up any trading history as a
company Invivo in 2008, he was
wine company.
so excited about exporting, he
Lucky for Lightbourne, the
forgot about the risk of foreign
company had a business mentor
exchange losses.
who hooked it up with the
“Our first order to the US was in 2008 – as a new exporter, we were just happy to get an order. We sold in US dollars. When the payment came, I think it was 90 days later, we had lost about 20 percent on the exchange rate,” Lightbourne says. And, as a young company,
National Bank. The bank took up the company’s case with a private trade credit insurer. “The National Bank introduced us to trade credit insurance, which for us is one of the most important trade credit finance tools. Today nine out of 10 of our
Invivo found it difficult to
international trade customers and
gain backing for trade credit
about 85 percent of our orders
insurance. The company could
are insured, so we are covered if
not get the Export Credit Office
payment falls over.”
Declined trade credit insurance? NZECO can assist exporters and banks to: + MITIGATE REPAYMENT RISK + SECURE EXPORT SALES + ACCESS TRADE FINANCE Contact us for a discussion on how we can support your export trade:
www.nzeco.govt.nz | 04-917-6060 The New Zealand Export Credit Office (NZECO) provides financial guarantee products for New Zealand exporters that compliment the private sector. Our products help these exporters manage risk and capitalise on trade opportunities around the globe. NZECO is currently located in the Treasury and obligations to third parties are guaranteed by the New Zealand Government.
www.nzeco.govt.nz +64 4 917 6060 eco@treasury.govt.nz
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We put our creative caps on and had an idea to help Kiwis save money Chris and Tom were friends at Uni, now they’re business partners. They’re a good team, one is the ideas guy and the other gets things done, although it’s hard to tell which is which. They both do both. Chris might have the word ‘Doctor’ in front of his name but it was Tom who started thinking about how much energy (and money) could be saved if people changed lightbulbs, from old-fashioned energy-sapping incandescent bulbs to modern energy-efficient ones. As well as coming up with the big creative idea, Energy Mad is now behind the manufacturing of the energy efficient eco-bulbs – yes, the ones you probably have in your home. So what started as a bright idea is rapidly turning into a dazzling Kiwi business success story.
Kiwibank Limited.
Ditto
We could see this was one creative company definitely worth backing. That’s what made us their perfect banking partner. While Energy Mad is helping people save money on their power, Kiwibank is busy coming up with clever ideas to help Energy Mad save money on their business banking. “They get quite creative” says Chris “and they’ve got great relationships with international banks.” Something he’s rather grateful for as they spread their business wings across nine new countries. Energy Mad is out to save the world one light bulb at a time. And we’re right there with them. Because nobody knows what a Kiwi business needs, better than a Kiwi business.
If there’s a bit of Chris and Tom in you, then there’ll be a bit of Kiwibank too. Call one of our Business Banking Specialists today on 0800 601 601 or visit www.kiwibank.co.nz/business-banking to hear more from Chris and Tom.
Ogilvy/KB1247/EM
> MARKET INTELLIGENCE
Indonesia: the end justifies the means The challenges of growing your business in the Indonesian market are many, but the opportunities truly warrant making the investment.
BY C A M E RO N GO R DO N
N
ew Zealand export statistics with Indonesia tell a tale of success and speak of future opportunities for our exporters. In the four years between December 2006 and December 2010 New Zealand exports to Indonesia increased significantly from NZ$613.2 million to NZ$930.4 million. We hit a peak in the December 2008 year when exports
34 EXPORTER
to Indonesia broke the billion-dollar mark. When you drill down into the detail it becomes clear that our trade with Indonesia is predominantly commodity driven. Currently, our top five Indonesian export sectors include milk powder, frozen beef, malt extract, butter and chemical wood pulp. Although these industries are not
the sexiest, the hard work that has gone into building the Indonesian export market from these sectors should not be forgotten as it is thanks to these sectors that we have earned a reputation for producing safe, quality products that offer real value for money. It is these industries that have set the stage for New Zealand suppliers of innovative valueadded products and services that will
KEY TAKEAWAYS > If you are a food and beverage exporter, once you have signed a deal with a buyer, it can take approximately three to six months to register your product with the Indonesian authorities. > Indonesian importers and distributers are open to partnering with suppliers of quality international products. There is no reason why New Zealand can’t take advantage of this demand. > An FTA with Indonesia should be further incentive for New Zealand exporters to acknowledge the significant opportunity that Indonesia presents.
LIBERAL USE OF RED TAPE BY THE BORDER AUTHORITIES MEANS THAT PROCESSES SUCH AS PRODUCT REGISTRATION AND CLEARANCE OF GOODS ACROSS THE BORDER CAN TAKE A CONSIDERABLE AMOUNT OF TIME, AND PATIENCE.
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enter the market at a critical point in the development of the Indonesian economy and its consumer base. If you have spent time in the capital Jakarta you will be all too familiar with the city’s horrendous traffic and hazy sky. But if you are business-minded you will also recognise that the shiny European cars that occupy the quieter toll roads carry wealthy young
professionals back and forth from their offices where business is conducted on a global scale. When they are not working hard in their day jobs, wealthy young consumers spend their leisure hours in magnificent shopping malls where luxury brands, restaurants and wine bars offer relief from the oppressive heat and chaos outside. A Friday night out uncovers
well-heeled 20-somethings dancing the night away in trendy nightclubs. Despite the gridlocks, Jakarta truly is a global city. JAKARTA THE HUB Indonesia’s thirst for international goods is immense and Jakarta is the cornerstone of its international trade links. The city’s busy trade ports redistribute imported goods to the
EXPORTER 35
a buyer, it can take approximately three to six months to register your product with the Indonesian authorities, with the support of your local buyer. All imported products require a registration code (ML Number) and to obtain the ML number detailed documentation needs to be provided to The Food and Drug Monitoring Agency (BPOM), which is the body that administers the registration process. Many imported food and beverage products also require a lab test that is valid for six months. If, for whatever reason, there is a delay during the registration process, your lab test can expire and you need to start the whole process again. THE RIGHT PARTNER The critical success factor when doing business in Indonesia is to
INDONESIAN IMPORTERS AND DISTRIBUTERS ARE OPEN TO PARTNERING WITH SUPPLIERS OF QUALITY INTERNATIONAL PRODUCTS AND THERE IS NO REASON WHY NEW ZEALAND CAN’T TAKE ADVANTAGE OF THIS DEMAND.
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other major centres in Indonesia such as Surabaya, Bandung, Medan and Bali. High-end supermarkets are lined with foreign delicacies that cater to expats and locals alike. And yet, with all this activity very few companies are flying the New Zealand flag in Indonesia. As a country we produce some of the world’s best food and beverage products. However, it seems as if many of us are discounting the opportunities in Indonesia in favour of markets that are far more congested with domestic and international competitors. Granted, entering the market in Indonesia is challenging. Liberal use of red tape by the border authorities means that processes such as product registration and clearance of goods across the border can take a considerable amount of time, and patience. To give you some indication, if you are a food and beverage exporter, once you have signed a deal with
36 EXPORTER
find the right partner. Given the challenges involved in getting goods registered and across the border, your partner needs to act in strict compliance with the large number of import regulations that exist, as well as have the relationships to be able to deal with challenges swiftly as they arise. On the bright side, those that persevere with Indonesian regulatory compliance are rewarded with a very large and rapidly expanding consumer base of wealthy individuals with appetites for quality international products. According to David Taylor, New Zealand ambassador to Indonesia and ASEAN, “Indonesia is a market of 250 million people. The middle class (those with living standards akin to New Zealand) is thought to be around 25 million and growing; the economy grows at 6.5 percent per year and by 2014 will be bigger than South Korea”. Furthermore, the Indonesian
market is not yet completely saturated with competing international brands. Indonesian importers and distributers are open to partnering with suppliers of quality international products and there is no reason why New Zealand can’t take advantage of this demand. FTA STILL ON THE CARDS In January 2010, the ASEANAustralia-New Zealand Free Trade Agreement (AANZFTA) entered into force. Indonesia is the only country out of the other AANZFTA partner countries – which include Australia, Brunei Darussalam, Cambodia, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, Thailand and Vietnam, that has yet to ratify this FTA. Although commercial and industry sources in Indonesia have expressed hesitation about the AANZFTA (resulting from what they regard as commercial downsides from the Free Trade Agreement that was entered into between ASEAN and China in January 2010), the New Zealand Government is confident that Indonesia will ratify AANZFTA shortly. An FTA with Indonesia in the form of AANZFTA should be further incentive for New Zealand exporters to acknowledge the significant opportunity that Indonesia presents. This FTA will not only reduce the tariffs payable on the importation of New Zealand goods into Indonesia, thus making us more competitive, but it will also provide macro-level Indonesian support for confirming New Zealand as a great partner to do business with. The challenges in growing your business in the Indonesian market are clear and, in some cases more worryingly, unclear. But if you are willing to invest in ticking the boxes to make entry into the market a possibility, the opportunities available truly warrant the investment.
CAMERON GORDON / WRITER
Cameron Gordon is Asia market manager at Incite, an international trade services firm based in market in Asia that connects New Zealand food and beverage suppliers with partners in the high growth markets of South East Asia and Taiwan. For more information visit www.exportincite.com
>MARKET INTELLIGENCE
China: no longer lost in translation Anne Cao is a Chinese New Zealander using her extensive language and business skills to help Kiwi companies better communicate with partners in China. BY G L E N N B A K E R
A
Anne Cao knows firsthand how different the New Zealand and Chinese cultures are, and how those differences can be major roadblocks for Kiwi businesses seeking to develop new business in China. Cao was born and raised in China. As a 15 year old she played professional basketball in Beijing, and later went on to work in the capital, most notably as a journalist for a large newsgroup, and as a sales, marketing and project manager for a publicly listed Chinese technology company. Cao also has extensive experience of New Zealand culture. She originally settled in Invercargill to learn English where she quickly became closely involved in local voluntary community work, teaching and basketball coaching, joined the Southland Multicultural Council and, later, after moving to Auckland, joined the New Zealand Federation of Multicultural Councils. To ingrain herself even further into the Kiwi psyche, she has been vice-president of public relations at her local Toastmasters, is currently a committee member for Massey University’s Auckland alumni chapter (she holds a Masters degree in International Business) and a mentor with Business Mentors New Zealand. Bilingual in both Mandarin and English and with business experience in both New Zealand and China, Cao is in a unique position to understand where businesses let themselves down in trying to forge relationships with Chinese companies. She also has good connections in China and knows how to build relationships with Chinese government agencies, as well as consumers.
“It’s important to carry out thorough marketing research before you do business in China. Relationships and trust must come first,” she says. “When you meet with a potential Chinese business partner or client, they may ask general questions about you which you may think is not business related. For example, ‘How many people are there in your family? How many children do you have? What did you do before starting your business? “They simply want to get to know you, and when the trust has been built, the Chinese will start to talk business.” Finding the right agent, distributor or partner in China is essential, advises Cao. “But you need to be very patient. Doing business with Chinese takes longer than you think.” The language and cultural barrier can be a major problem for New Zealand exporters. “Although Chinese companies can have staff who speak English, the cultural difference means they may interpret words differently. “It’s easier for New Zealand exporters to have their own Chinese person who understands business on the phone to communicate with China-based buyers and distributors. Use your own translator, who will work better on your behalf – do not use the Chinese buyer’s or distributor’s translator.” Cao knows of at least one project between the two countries that was forced to cease operation due to the language issue – the two companies concerned simply could not communicate with each other. Thorough research and planning is necessary in order to save a lot of time and frustration entering the
China market. “You need so much information. Where in China will your product sell the best? What volumes should you plan for? Who are the best people to talk to? Who are your competitors? “You must have a thorough market strategy so you know exactly what you’re aiming for in China, and to help you with your research it really is an advantage to have someone proficient in both languages working with you,” says Cao. “Above all, be patient. Establishing yourself in the China market will take time, but you will find your efforts are well rewarded in the end.” Cao believes the NZ-China Free Trade Agreement has made a significant difference to the relationship between the two countries. “Trust has been built up at government level. There is a lot of cross-promotion going on, and so many Chinese companies are now keen to do business with New Zealand. “Thanks to the FTA, tariffs in various areas will decrease every year – which gives New Zealand exporters price advantages in the market. “The FTA also means more young Chinese have the opportunity to visit New Zealand for travel or study, and they will take a lot of positive feedback on Kiwis back home.” Anne Cao helps Kiwi companies build good relationships with China business partners, She specializes in market research, communication and negotiation. Email anne@redbridgeconsulting.co.nz
EXPORTER 37
> MARKET INTELLIGENCE
Chinese script trade marks Developing a Chinese script trade mark is an important part of doing business in China and other Asian countries. However, there are issues to consider and mistakes to avoid.
BY DAV I D M AC AS K I L L
C
hina and its protectorate states Hong Kong and Macau are increasingly important markets for New Zealand exporters. The recent free trade agreement between New Zealand and China has drastically improved access for New Zealand businesses to the Chinese market. In addition, Chinese consumers’ hunger for quality products and safe food is increasing the demand for our exports. Developing a Chinese script trade mark is an important part of doing business in that region of the world, and this requires careful consideration. First, think about where you will use the trade mark. Cantonese and Mandarin are dialects of the Chinese language. They share the same base alphabet, being represented through identical symbols. However, Cantonese and Mandarin differ as spoken languages and are not
38 EXPORTER
interchangeable. Different regions speak either Cantonese or Mandarin. Mandarin is the official language of China and is spoken throughout most of the country. In contrast, Cantonese is spoken in Hong Kong, Macau, and Guangdong Province, although Mandarin is gradually gaining the upper hand. Therefore it is important to consider where you will use the trade mark. You can then address the translation and phonetic issues appropriate to your customers’ dialect (discussed below). WHICH SYMBOLS TO CHOOSE A trade mark is generally formed from a combination of symbols. Most businesses have an existing trade mark and want to convert that mark into a Chinese script. Some businesses are developing a new mark specifically for a Chinese speaking market. Either way, the important issue is deciding on which
symbols to choose. There is an unlimited combination of symbols in the Chinese alphabet for use in translating an English language mark into Chinese script. Each symbol in the Chinese alphabet has an intrinsic meaning. The meanings of the symbols in your trade mark will be your customers’ first impression of your business. Therefore, the symbols you choose need to convey the core aspects of your business. However, to function as a trade mark the symbols must distinguish you from your competitors. For example, if you choose a trade mark for a health supplement, being the characters for tasty, beautiful appearance, and long life, then you are very likely to end up with a problem. Words of this type are likely to already be in use by various existing Chinese herbal remedy manufacturers. Regardless of infringement problems, it would
version of a trade mark. This allows you to have consistency in pronunciation across several markets. In addition, it is important that the mark can be easily pronounced by your customers. Therefore feedback from both a native Mandarin and a Cantonese speaker is important to help identify any issues. The sheer number of Chinese script symbols also affects pronunciation as you can achieve a desired sound through a whole range of appropriately chosen symbols. Therefore, selecting symbols to form your Chinese script trade mark involves balancing several different considerations.
Free Trade Agreements and World Trade Organisation negotiations are increasing the appreciation of, and therefore enforceability of, intellectual property rights in China. It would be short-sighted and naive to simply disregard the importance of protecting your intellectual property rights in that country. China places importance on being first to file on the trade mark register and does not recognise rights
CLEARANCE SEARCHES ESSENTIAL It is important to ensure that a Chinese script trade mark is available for use. Accordingly, clearance searches need to be selected of the trade mark registers in the countries in which you will use your trade mark.
IT WOULD BE SHORT-SIGHTED AND NAIVE TO SIMPLY DISREGARD THE IMPORTANCE OF PROTECTING YOUR INTELLECTUAL PROPERTY RIGHTS IN THAT COUNTRY.
be very difficult to stop a competitor using a very similar combination, as your mark is effectively a description of what your product achieves. Therefore, although you may want your trade mark to relate to the desirable features of your product, choosing characters which are commonly used in your field will stop you from being able to distinguish your products from your competitors. PRONUNCIATION OF YOUR TRADE MARK Your Chinese script trade mark will determine how people pronounce your trade mark. Accordingly, the pronunciation of the symbols in the trade mark should be considered. This is referred to as ‘transliteration’. For example, the transliteration of the symbols forming the mark is GU DE HUAI. It can be important for there to be phonetic similarities between the English version and the Chinese
There is no one trade mark register which covers all Chinese speaking countries. Hong Kong is a Chinese protectorate but it maintains its own trade mark register. Taiwan also maintains its own trade mark register. Accordingly, separate searches may need to be completed of several different trade mark registers. Each search should be designed to disclose registrations or prior applications: for trade marks that are phonetically, visually or conceptually similar to your proposed mark, and; that cover goods and/or services which are similar to your own. Searching needs to be completed as soon as possible, and preferably before committing to use of a mark through developing advertising materials or packaging.
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acquired through use. This means that an early filing date is very important. OPPORTUNTIES FOR KIWI BUSINESSES The Chinese speaking markets hold exciting potential for New Zealand businesses. There are massive opportunities for our goods and services due to substantial demand. However, it is important to take a strategic approach to identify any problems, and to protect your business against competitors. Consideration of the issues discussed above should put you in a good position to succeed. David Macaskill is an associate of James & Wells Intellectual Property (www.jaws.co.nz). Email davidm@ jaws.co.nz or phone 07 928 4470.
PROTECTING YOUR IP RIGHTS IN CHINA China has a reputation for disregarding intellectual property rights. However, that is fast changing. The implementation of
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> MARKET INTELLIGENCE
ROK
On! PHOTOS BY RUTH LE PLA.
It’s not easy to get a toehold in the booming South Korean market. But two New Zealand companies are pushing open doors for other Kiwis in very different ways. Ruth Le Pla filed this report from Seoul. RUT H L E P L A
S
imon Walsh nibbles on Whittaker’s chocolate in his air-conditioned slice of Kiwiland in sticky Seoul. US soldiers from the nearby military base stroll past the window in search of their mid-morning caffeine fix. To Walsh, it’s just business as usual. His two companies Tiwi Trade and Tiwi Trade Corp are the eyes and ears of Kiwi companies back home. While they import and trade in their own right, they also do business contract negotiations for Kiwi companies. Unlike other market entry firms, they work entirely on commission for this, carrying all the costs until the Korean and Kiwi partners sign a deal. They get paid when product leaves New Zealand shores. Walsh has teamed up with
40 EXPORTER
Korea-born business partner Sunny Myung. Their imaginary ‘tiwi’ is a hybrid tiger-kiwi: the national animals of South Korea and New Zealand. They run the two companies in tandem. Tiwi Trade manages alcohol imports while Tiwi Trade Corp handles the non-alcoholic stuff. So far, they’ve fixed their sights on food and beverages, ensuring Kiwi produce is munched and sipped in Seoul’s top international hotel chains and high-end restaurants. Luxury yachts are on their horizon. They reason that South Korea’s blossoming economy is ripe for New Zealand’s leisure culture and its boatbuilding expertise. Certainly, luxury is in the air in the capital of the Republic of Korea [ROK] where Maserati showrooms nestle up against Ferrari, where Rolls-Royce and Mercedes-Benz limos hurtle through the streets, and Prada handbags and Chanel suits jostle on the pavements. Walsh’s relaxed manner belies the nitpicking attention to detail needed to set up shop in Korea. Because he’s licenced to trade alcohol, for example, his office had to be of a certain size and at a certain distance from the road, which had to be a certain number of lanes wide. No matter that he outsources
distribution and doesn’t physically handle the stock on these premises, his offices had to be in a basement or on the first floor [which means ground floor in New Zealand]. A second floor option was out. He could have been on a third or fourth floor but only if the building had an industrial elevator. To Kiwi ears, it sounds fiendishly bureaucratic. But there’s method in the authorities’ madness. Seoul’s regulations stymie cowboy companies whose back-room businesses literally block the paths of commerce for others. The underlying message: if you want to do business here, you’d better play by the rules. The Tiwi Trade business model means Walsh and Myung pick their contract negotiation partners very carefully. They’ve already aligned Sanitarium and Hubbards with some of Korea’s largest distribution networks and, when I visited, had just signed Sanitarium with CJ O Shopping, Korea’s largest home shopping network. In essence, Tiwi Trade Corp acts as the companies’ brand managers in Korea. “Rather than them signing up with a Korean company over here, seeing their stock disappear overseas on a ship and not knowing what happens
to it, we report back on what’s going on in the market, where their product ends up, how it’s being marketed, and, if there’s dual marketing, what it is being marketed with,” says Walsh. As a native Korean, Myung can also tease out the full meaning behind the statements that some local companies make in English. “Sometimes the English department’s vocabulary might be limited,” says Walsh, “and it tends to be limited to very positive words. “They may say ‘yes’ or ‘no’ in English when ‘maybe’ comes out in Korean,” he says. “It’s very hard for them to say, ‘We’re thinking about it’, ‘We could do something’, or ‘There are some boxes we need to tick first’.” PLAY THE GAME LONG If Walsh and Myung make a good team in Korea, then pay heed to Kiwi Lewis Patterson who first visited the country back in 1999, fell in love with the language and has been enamoured with it ever since. Now impressively fluent in Korean, Patterson provides in-market representation to a number of Kiwi companies through his own organisation, Latitude 45. For Patterson – and therefore for his clients who include the New Zealand Berryfruit Group, Berryfruit Export NZ Ltd and the New Zealand Buttercup Squash Council – business home base is now on the 21st floor of a tower block in Seoul’s central Jongno-gu district. Patterson can look out across the city to the Seoul Tower and the hills beyond. One window serves as a see-through whiteboard. If the Tiwi Trade companies are the eyes and ears of Kiwi companies back home, Latitude 45 is their very own walking-talking branch arm. Patterson’s driving motivation is a desire to help fix some of the most frustratingly common problems that Kiwi companies face in-market. Unaware of the complexities of the local market, they often leap at the first offer they receive from Korean agents, ship off their goods and wait… and... wait. Patterson knows that, even with the best will in the world, import agents must juggle demands from competing suppliers and focus on price. Patterson’s objective as an in-market rep is to present and nurture a long-lasting premium brand for the
Simon Walsh and Sunny Myung
A Korean kind of miracle The Republic of Korea [ROK] has undergone an economic transformation in the space of a generation – maybe two, if you’re a fast breeder. • When Dr Jong Nam Oh was a student in 1973, like the rest of his generation he dreamt of being able to afford three meals a day. • Now Dr Oh is a senior adviser to top Korean law firm Kim & Chang. Like many others of his generation, sometimes these days he restricts himself to two meals a day just to keep his weight down. • In 1960, life expectancy in Korea was 52. Now it’s 81. • In Korea, you’ll hear people refer to the global financial crisis [GFC] as the IMF. • Only about 40 kilometres separates downtown Seoul from the border with North Korea. That’s about the same distance as downtown Manhattan to John F Kennedy International Airport.
Kiwi firm. “New Zealand companies,” he says, “have a great history of trading but not necessarily of building brands.” He’s built up his own market nous through a series of posts, including time with Zespri and a stint in Korea’s tough and traditional oriental medicine sector where he once fronted up to an accuser after receiving threats that
Lewis Patterson
he’d end up floating in the harbour. Patterson has seen several Kiwi companies ditch their smaller in-market contacts when more muscular players offer them a deal. When the big opportunity runs cold, the initial contacts refuse to pick up the pieces and the Kiwi company is left high and dry. Patterson urges Kiwi companies to play a long game. Business in this part of the world, he says, is as much about taking time to hook up with the right partner as it is to actually work with that person or group in-market. “So, in a sense, anyone can be the right partner if you work closely with them and give them the support they need.” Ruth Le Pla travelled to the Republic of Korea on an Asia New Zealand Foundation Media Advisory Grant.
RUTH LE PLA / WRITER
Ruth Le Pla is an Auckland based freelance writer. Email ruth.lepla@xtra.co.nz
EXPORTER 41
NZ TRADE CENTRE
Extreme makeover, export edition Established 17 years ago as a showcase for Kiwi exporters, The New Zealand Trade Centre has been revitalised into a world-class facility just in time for the Rugby World Cup. Exporter magazine caught up with MD Alister Gates just prior to the reopening.
J
BY G L EN N B A K E R
ust like the ‘Makeover’ shows on TV, if you compared the ‘before’ and ‘after’ photos of the New Zealand Trade Centre’s refurbishment, you’d wonder if you’re looking at the same place. Located in Auckland’s Albert Street by the Stamford Plaza hotel, the primary focus of the centre over the years has been to match local exporters with potential agents, distributors and importers offshore. Alister Gates had been steadily developing the websites for the business when an opportunity came up in January 2011 to purchase the Centre with a couple of business partners. “The Trade Centre had become a bit tired over the past decade and was in desperate need of an upgrade to attract new visitors,” says Gates. “And with the Rugby World Cup on our doorstep it is an amazing opportunity to demonstrate some great Kiwi products to the world. “Our vision for the New Zealand Trade Centre is for it to become a worldclass facility showcasing the best of New Zealand products. As well as the showroom we will also have a large conference room in which to meet trade delegations and make available
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Wendy Mo and Frank Li, directors of the NZTrade Centre.
to trade associations for meetings. “The other half of our floor has been converted into a business centre aptly named the Ingenuity Business Centre where exporters can rent desk-space for a day, week or month. It allows them to establish a presence in Auckland at a moderate cost and to meet clients.”
Gates is clearly excited about the potential of the new-look Trade Centre and its impact on New Zealand’s export drive. “Our passion is to grow export business from the grass roots up. We work with every kind of exporter from small home businesses right up to large multinationals.
More than destiny Destiny Bay Wines’ association
Asian market focus with the
with the New Zealand Trade
Centre’s new owners, particularly
Centre began through an enquiry
with China, a prime target market
from a Chinese distributor which
for the high end wines Destiny
the Centre had passed on to the
Bay produces.
director of global distribution, Brett Taylor. “We then realised that a display
Taylor appreciates the Centre for the extra business and contacts it generates – plus the assistance
booth at the Centre, which we
on services such as translation,
took up about a year ago, was a
promotions and advertising.
good way to promote our wine to overseas markets, without leaving the country,” says Taylor. “And since Alister, Wendy and Frank took over the Centre earlier this year, business through the Centre has increased substantially – we’ve had more business generated in the past two months than the entire year through the New Zealand Trade Centre!” Taylor says the leads generated through the Trade Centre are genuine, qualified leads that have
“The New Zealand Trade Centres’ sales and marketing service represents very good value when compared to other advertising mediums.” As a concept, Taylor believes the Trade Centre is a “fantastic idea”, especially for smaller exporters that are often off the radar of Government support agencies. “It’s a private entity, so its focus is naturally on the smaller
been thoroughly vetted by the
guys, and it’s a great direct link
Centre’s staff.
between suppliers and distributors,
“They know our brand and product very well. The whole
marketers and buyers. “I’ve seen the Centre’s
team has visited our vineyard and
refurbishment plans, and the office
winery, and they take a real interest
and meeting facilities are a fantastic
in promoting our wine to overseas
idea for business people wanting to
importers,” says Taylor. “It’s like
set up meetings in the CBD.
having an extended sales team working for you.” He says there is an even greater
“We build strong networks matching up the right people using our extensive database of overseas contacts and New Zealanders. We utilise all the latest new marketing methods including our websites, Facebook, Twitter and LinkedIn,” explains Gates. “We are a private organisation rolling up our sleeves to make this country’s export business happen.” Gates says that as a private organisation the Centre is funded by its members to market their companies and products. “We work on an annual subscription basis and undertake specific export consultancy services.” Gates also knows through personal experience how incredibly difficult
Alister Gates welcomes guests to the reopening.
With Destiny Bay Winery located on Waiheke Island, I plan to make full use of those facilities too.”
it can be to establish footholds in overseas export markets. “My background is in exporting technology and I well remember the challenges we faced sitting in New Zealand with the best piece of software in the world, but having no idea how to take on the big global market. It’s hard just knowing where to start and how to go about finding the right leads. “In the end our success came down to meeting the right people and leveraging the networks of industry specialists. My father was diplomat and I spent half my young life growing up overseas where he promoted our country. It was a great lesson in humbleness and the understanding of cultures different to ours.”
OUR ULTIMATE GOAL IS TO BECOME A CENTRE OF EXCELLENCE FOR EXPORTERS, OFFERING FULL MARKETING, COUNTRY CONSULTING AND TRAINING SERVICES – A ONE STOP SHOP FOR ANY ORGANISATION LOOKING FOR NEW MARKETS.
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DISPLAY PLUS Gates is keen to dispel misconceptions about the Trade Centre – perhaps the biggest one being that they only do trade displays. “We are much more than an export trade display centre. We actively promote our exporters through all our marketing channels. Our success is when an exporter gets an order through a lead we have created. “And the best way to tap into our services is to come and meet us at the Centre or start with a visit to our website, www.newzealandtradecentre. com. “Our ultimate goal is to become a centre of excellence for exporters, offering full marketing, country consulting and training services – a one stop shop for any organisation looking for new markets,” says Gates. “We are also in negotiation with partners in Malaysia, China and Korea to open the New Zealand Trade Centre up in other countries with a retail/wholesale operation. We hope to open five overseas operations by the end of 2012.”
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> REGIONAL FOCUS
It’s about relationships Dunedin’s export sector is alive and well and thriving. Claire Grant explores the common factors within three very different export success stories.
T
BY C L A I RE GR ANT
he key to successful exporting is successful relationships, keeping communication open and good market intelligence, no matter where you are from or what you are exporting. Building quality relationships in overseas markets from the southern reaches of New Zealand is no more difficult than from any other part of the country. In fact, setting up shop in Dunedin has some distinct advantages; the city is small enough to make logistics and liaison easy, and it has a stable workforce and supportive business community. Dunedin is a thriving commercial centre of mainly small to medium enterprises, and the range of products and services it is exporting is quite diverse. Each exporter and each market has its own challenges and rewards, but the common factor amongst the Dunedin businesses securing overseas markets is definitely having the right person on the ground in the export country, and keeping them onside. And that doesn’t necessarily mean a
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big budget for overseas trips, as some of the smaller exporters from Dunedin know. The key is the quality of the dialogue and being crystal clear about objectives, so the agents feel supported in distribution and market development. It’s all about the relationships. ADAPTING TO MARKET NEEDS One Dunedin business that has cracked the export barrier is Escea (www.escea.com), a producer of luxury gas fires. Director Nigel Bamford was quick to realise that going global was essential in such a niche market. “We’re such a specialist industry, if we didn’t export we’d be just another cottage industry,” he says. Bamford always had the goal of selling internationally. In reality he found it much harder than anticipated. “We thought we could just go to a particular region, spend some time there and work out the market’s needs. It didn’t really work that way. “What Escea found was that a few
weeks spent in a new market were insufficient to gain the enormous depth of market awareness that you need to truly succeed in a different country. It is really only after several years of time spent actually trading in a new market that an exporter can gain their stripes and claim to really understand the needs of that particular market,” he says. “In the end we learnt by creating a product, releasing it, listening to the feedback and customising.” This process has resulted in products which are continually adapting to suit market needs specific to the country, he says. Expanding into different countries each with their own needs was primarily about diversifying risk. New products into new markets meant that if one market was flat, others might be more buoyant. Escea luxury gas fires have become increasingly sort-after in the last couple of years, despite the recession, with the company currently exporting to Australia, the UK, US and Canada. Its strategy of consistently seeking
new markets for products has resulted in a rapid expansion and a brand new factory at their Dunedin base. Escea currently employs 43 staff and is looking to expand their product range further in 2012. SUCCESS IN NICHES Meanwhile, Dunedin-based Scott Technology CEO Chris Hopkins says being so far away from the rest of the world and in a different time zone presents challenges daily, particularly with currency fluctuations. Exporters, therefore, must excel at what they do and how they get it out there. He believes in finding success in niches rather than commodity markets. “It’s all very well saying you produce the best widget in the world, but you have to be able to get it in front of the people that matter, and stay there. You have to have appeal. “People forget you and your product very quickly if you don’t physically get out there. You have to be prepared to wear out the shoe leather; don’t sit back and take
Escea’s Nigel Bamford
many small things well. Obviously doing the homework is vital to developing a new market, researching the market and the competition thoroughly. Exporters have to be aware of how to work
“
THE KEY IS THE QUALITY OF THE DIALOGUE AND BEING CRYSTAL CLEAR ABOUT OBJECTIVES, SO THE AGENTS FEEL SUPPORTED IN DISTRIBUTION AND MARKET DEVELOPMENT.
”
anything for granted.” Scott Technology Limited (www.scott.co.nz) is a publicly-held engineering company with its head office in Dunedin, specialising in the design and manufacture of automated production and process machinery. It is recognised as a world-class builder of advanced automation systems by customers in more than 90 countries, including all the major appliance builders in the US and internationally. Scott Technology’s vision is to be the global innovator in automation. The company is well established internationally, with offices in Australia, the US and Italy, and has agents in many other countries. Its success in capturing markets across so many countries is due to perseverance, and the sum of doing
within different cultures, even in Australia, and adjust to suit. Good relationships are vital when your production is so far away from your consumers. And the company has to be well funded to get into the market and to be able to stay there for the long haul. WORKING SMART A much smaller company that successfully exports to more than 30 countries around the world from Dunedin is Perreaux Ltd (www. perreaux.com), which produces highend audio amplifiers for domestic use. Almost all of Perreaux’s products are exported, and while this industry is a mature one, it has found its niche by very successfully focusing on the high quality end of the global market.
Although the business is not large, it has cornered its market very successfully across many different countries since its inception in 1974. Director Martin Perreaux says the only way to be successful was by working smart. “It’s impossible to visit all the countries we trade in, but because we sell through distributors, having the right person in the job is vital. We could be doing everything right and find the market is not working simply because the distributor is not motivated.” Perreaux’s answer to maintaining existing markets is high quality communication. The Internet gives him the freedom to connect to distributors individually and across all clients in different time zones. The resulting feedback from clients and distributors is then valuable in influencing product development. “We’re reasonably experienced in understanding our market requirements, the real test for a new product in target markets is discussion with key distributors,” says Perreaux.
CLAIRE GRANT / WRITER
Claire Grant is a Dunedin-based communications advisor. Email: claire@clairewords.co.nz
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> T E C H S PA C E
Tablets gain traction Apple’s iPad has been ruling the tablet market – but more recently has come up against stiffer competition. Bill Bennett compares the options.
T
ablets have been a hot ticket item since Apple launched the iPad early last year. The company’s second generation iPad hit the streets in March and was so popular New Zealand outlets had waiting lists. It took until June to catch up with demand. To date no rival has come close to matching the iPad’s popularity. Many technology companies have tried and failed to gain traction. Hewlett-Packard’s ill-fated TouchPad was the most spectacular miss. HP is the world’s largest computer maker. While it is the leading brand with government and corporate IT buyers, it badly misjudged its entry into the tablet market. The reception was so bad the company threw in the towel just 49 days after launch, dumping its stock in a global fire sale. So far Samsung has been the most successful tablet challenger. Apple paid the Korean company the ultimate complement of blocking the Samsung Galaxy Tab 10.1 from going on sale in Australia with a federal court action. The company claims Samsung’s Galaxy Tab 10.1 is a copycat and says the device infringes Apple patents. The legal battle continues. ANDROID Like most non-Apple tablets, Samsung’s Galaxy Tab 10.1 uses a redesigned version of Google’s Android operating system. The same software powers many smartphones. Samsung’s hardware is impressive – physically the Galaxy Tab 10.1 is one of the few tablets to match the iPad. You pick it up and it feels promising.
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However, the moment you start using the Galaxy Tab, you quickly notice Android is not as polished as the iPad operating system. Having a few rough edges wouldn’t matter if the better quality non-Apple tablets were priced significantly below the iPad. They’re not. Rivals typically start by pricing their tablets at the same or slightly above Apple’s level – a basic iPad costs $800 in New Zealand. HP’s fire sale showed there is a pent-up demand for cheaper tablets – its TouchPads went on sale in New Zealand at $140 and they sold out almost immediately. CHEAPER TABLETS There are cheaper tablets but they fall well short of the iPad. For example Telecom offers a $400 V9 Tablet. It has a smaller screen than the iPad with fewer pixels – which means blocky images. The processor is slower, so the tablet feels sluggish. It uses an older version of Android which was never intended to be used in anything other than a phone. It doesn’t cope with tablets as well as the newer version. Another compromise is the touchscreen technology. The V9 Tablet has a resistive touchscreen – the iPad’s touchscreen is capacitive. In practice this makes the V9 less responsive – you have to press much harder and it’s a tad more hit and miss. That’s not to say the V9 is worthless. It’s a great tool for some basic tasks. SONY Apple’s latest challenger is Sony. The company has announced two distinctly different Android tablets. Sony’s Tablet
is aimed mainly at consumers, it’s an entertainment device allowing users to play PlayStation games and use Sony’s music and video service. The foldable Tablet P will just about fit in a pocket. It has two screens, which means it would be a good device for reading electronic books. A nice touch is that one of the two screens can act as a keyboard, which means the Tablet P can be used as a small lightweight laptop. Local prices aren’t fixed at the time of writing, but indications from Australia are they will initially cost more than iPads.
BILL BENNETT / WRITER
Bill Bennett is an Auckland -based technology writer. Email bill@billbennett.co.nz
> T E C H S PA C E
A new class of laptop Earlier this year Intel announced a new category of ultraportable laptops under the heading of ‘Ultrabooks’ that are designed to deliver longer battery life, slim profiles of less than 0.8 inches, and attractive price points. At the Computex 2011 launch, the company said the Ultrabooks merge the performance capabilities of modern laptops with “tablet-like features such as instant-on functionality”. Powered by Intel’s secondgeneration Intel Core processor family – the Ultrabooks are also in line to be upgraded to the third-generation processors, codenamed ‘Ivy Bridge’, due for shipping next year. The
third-generation processors will improve the performance of the laptops even further in a number of areas, such as power consumption, resume times from hibernate or sleep modes, and advanced security and graphical capabilities. Then, in 2013, Intel will release its ‘Haswell’ 22nm processors, which it says will offer “more than a 20x reduction in connected standby power”. In the US the Asus UX21 is expected to lead the Ultrabook charge out – but as Exporter went to print, there was no definitive arrival time for the new class of laptops to arrive on these shores. Hopefully it’ll be before Christmas.
Get ready to open Windows 8 With more than 470 million copies of Windows 7 sold to date, Microsoft must now transition its desktop operating system to the emerging world of tablets and slates. More than two thirds of the world’s PCs today are mobile devices – so it’s not surprising that with Windows
8, Microsoft is going for a complete redesign of the Windows interface to cater for touch screens. Due for release in 2012, Windows 8 will have a similar look and feel to Microsoft’s mobile phone operating system, Phone 7, but users will be able to switch back and forth to the classic
Windows interface if they want. With Windows 8, Microsoft is promising richer security features, faster start-up times and longer battery life – and it will run on a wider choice of devices and chipsets.
And now for some light reading For business travellers reading has taken another step forward with Sony’s new Reader WiFi Touch, which it bills as the world’s lightest six-inch eBook reader. The device is no bigger than a paperback book – at 8.9mm thin and weighing just 168 grams, it’s comfortable to hold. Its gentle curving profile fits naturally in the hand. With a battery life of over one month (up to three weeks with wireless on) and the capacity to hold about 1200 eBooks via the internal memory (expandable to 32GB with an optional microSD card), users should find the Reader WiFi Touch more than up to the task. The glare-free Dual Touch screen and E-Ink Pearl electronic paper delivers a high-contrast image that is easy to
read for hours, even in direct sunlight. Readers can also ‘write’ notes on the page or highlight text with a finger or the supplied stylus. Using the advanced touch screen, book lovers can choose a book, swipe a finger to turn the page, zoom in and out by pinching fingers together or apart and tap on a word and hold to find its meaning from two built-in English dictionaries. Connect to a wireless Internet connection and find extra information on words or phrases with in-text access to Google and Wikipedia. The Reader WiFi Touch handles a wide range of digital formats including the popular ePub eBook standard. It’s available from late October with an SRP of $229.95.
EXPORTER 47
> FA I R F O C U S
Where buyers meet sellers International trade fairs have long been a popular way to market goods to a worldwide audience. Exporter talks to Robert Laing, whose company represents most of the German-based expos.
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obert Laing is a happy man. His company, Messe Reps & Travel has recently taken over the representation of Messe Frankfurt in New Zealand – which now means there is one point of contact in New Zealand for the leading trade show companies in the world’s leading trade show market – Germany. Messe Reps & Travel (www. messereps.co.nz) now assists Kiwi exporters and importers to exhibit at, or visit, all the trade fairs in the cities of Dusseldorf, Frankfurt, Cologne and Munich – as well as the cities around the world in which the relevant organisers stage regional fairs. Acquiring the Frankfurt representation is significant for Laing – with 448.3 million euros in sales, Messe Frankfurt is one of the world’s largest trade fair organisers. In 2010, Messe Frankfurt organised 87 trade fairs, of which 51 took place outside Germany. “It also has extremely high international participation in its events,” says Laing. “Seventy-two percent of exhibitors are from outside Germany; as are 47 percent of visitors. “Most importantly, it is one of the most profitable trade fair organisers. With its worldwide brand strategy of taking events where Messe Frankfurt has competence and leadership in Germany, and holding related industry events around the world in different markets, Messe Frankfurt offers a consistent international business platform to New Zealand exporters. “Kiwi exporters know they can rely on Messe Frankfurt as a fair organiser with consistently high quality standards at all their events,” he says.
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With his many years’ experience in sending business people to trade fairs, what does Laing regard as the major benefits of these events? Are they still as popular? And has there been any impact from the GFC? “Trade fair participation will always remain a part of the marketing mix, but like anything this mix is changing,” he says. “With the increase in Internet marketing, especially social media, in recent years some more traditional aspects of marketing have reduced in importance. But the fundamental aspect of an international trade show in Germany, where companies present themselves to a worldwide buying audience who compare them with their direct competitors often located on the stand right next door, still remains. “No other environment offers this possibility – with everyone in the industry, buyers and sellers, under one roof at one time. “The leading international shows in Germany have not really suffered from the GFC. There are many smaller events around the world that have disappeared, but the ‘brand leaders’ in their respective industries, such as Automechanika (automotive industry) in Frankfurt or bauma (construction industry) in Munich have, in fact, increased in size during the past few years,” says Laing. Also, in recent years, the leading German trade fair organisers have set up subsidiaries in Asia and India to tap into rapidly emerging markets. “What is different about the shows in Asia, China and India especially, is the shows are primarily for those markets. These are significant markets all by
themselves and have great potential. They attract exhibitors looking to sell into that market including the leading multi-nationals in the respective industries. They also attract exhibitors from the market or region who may not participate in the international event in Germany. Visitors get to see the multinationals as well as the local exhibitors they would not see anywhere else,” says Laing. The shows in China and India organised by the German companies and their local subsidiaries offer the same quality of organisation and event management as in Germany, he adds. Importantly, they offer the same international exposure through their network of representatives worldwide. ADVICE FOR ATTENDEES Early planning is the key to making a trip to these events successful, says Laing, and the individual trade fair home pages are an increasingly important source of knowledge. “These portals are no longer just an information source of what you will see at the fair – although, of course, they certainly still contain this information. They are a ‘window to the industry’ as they contain news from exhibitors regarding forthcoming new product releases and news on industry trends and developments. These updates are occurring daily in the build up to a fair and give people here the chance to be completely up to date with industry developments. “Increasingly, social media is another platform for contact and updates on these fairs,” he says.
> FA I R F O C U S
ON THE RADAR: A selection of upcoming international trade fairs.
11-14 January 2012
Heimtextil – International Trade Fair for Home and Contract Textiles – Frankfurt. www.heimtextil.messefrankfurt.com
16-22 January 2012
imm – The international furnishing show – Cologne. www.imm-cologne.com
21-29 January 2012
Boot Düsseldorf – International Boat Show – Düsseldorf. www.boat-duesseldorf.com
27-31 January 2012
Christmasworld – The World of Event Decoration – Frankfurt. www.christmasworld.messefrankfurt.com
29 Jan -01 February 2012
ISM – International Sweets and Biscuits Fair – Cologne. www.ism-cologne.com
01-06 February 2012
Spielwarenmesse – International Toy Fair – Nürnberg. www.spielwarenmesse.de
04-07 February 2012
Reed Gift Fairs – Melbourne Convention & Exhibition Centre. www.reedgiftfairs.com.au
25-29 February 2012
Reed Gift Fairs – Sydney Convention & Exhibition Centre. www.reedgiftfairs.com.au
04-06 March 2012
ProWein – International Trade Fair Wines and Spirits – Düsseldorf. www.prowein.com
06-10 March 2012
CeBIT – Heart of the digital world – Hannover. www.cebit.de
07-11 March 2012
ITB – The World’s leading Travel Trade Show – Berlin. www.itb-berlin.de
11-13 March 2012
Fine Food & Hospitality Queensland – Brisbane Convention & Exhibition Centre. www.finefoodqueensland.com.au
26-30 March 2012
Wire – International Wire and Cable Trade Fair – Düsseldorf. www.wire.de
27-30 March 2012
Anuga FoodTec – International trade fair for food and drink Technology Cologne. www.anugafoodtec.com
15-20 April 2012
Light + Building – Trade fair for architecture and technology – Frankfurt. www.light-building.messefrankfurt.com
17-20 April 2012
PaintExpo – Trade Fair for Industrial Coating Technology – Karlsruhe, Germany. www.paintexpo.com
23-27 April 2012
Hannover Messe – The whole World of Technology at one Place – Hannover. www.hannovermesse.de
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> F E AT U R E
Finding your niche in the world Alice Taylor reports on a Wellington company that relishes being a small, agile player in a global niche market.
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ellington-based Energy Intellect is a leader in the energy management solutions sector both in New Zealand and overseas. The company provides advanced energy management, energy measurement and energy control applications to business organisations including utilities, grid operators, energy retailers and commercial energy users. It has exported electronic hardware and software services for measuring and monitoring energy for well over a decade and export markets make up a large portion of the company’s revenue. Founded in Wellington in the mid-90s, Ei (Energy Intellect) has grown from a small start-up in a self service office on Wellington’s Courtenay Place to an international market leader in energy and environmental monitoring and control technology. Ei designs and builds large-end user metering and energy control systems and then uses its cloud based software to process the information it gathers. It helps major electricity users make the most efficient use of electricity. The company processes about 85 percent of New Zealand’s energy information for large commercial and industrial electricity users in New Zealand, has a well-established business in Australia and clients and projects across South Africa and Asia. Co-founder Dean Gowans believes there are three things New Zealand companies need in order to be
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successful exporters: they need to add value, make the most of good relationships and they must find a niche. Operating in such a niche sector, Gowans knew from the outset that his company would have to look offshore. “Like any business in New Zealand, to be successful we knew we would have to look for bigger markets. But there are some big advantages to starting in a smaller market like New Zealand,” he says. “Being small and agile leads to great customer service. Customers get a different level of attention than they would from large multinationals from, say, Europe. This can pay big dividends for smaller companies. “We had a unique advantage when we went overseas. Starting off in New Zealand we had to provide an end-toend solution – we weren’t just a small part in the chain.” That gave Energy Intellect an edge offshore, according to Gowans, because
there weren’t many other companies out there that could offer both the hardware to measure electricity usage and the software services to go alongside that. “Our other advantage was that like other successful New Zealand technology companies such as Tait Radio Communications, we have added value in New Zealand. The hardware and software is all designed and built here. We’re adding the value here through stitching it together, testing it and shipping it off. All of the components are assembled in Lower Hutt.” FIRST FORAY The company’s first foray into exporting came very early on in the piece: “We put a proposal in to a company in South Africa to design a component product for them – a remote terminal and display. That happened within six months of being in business,” recalls Gowans.
The company dipped in and out of a few other opportunities in Australia and Asia in the following years, which helped it to prepare for its first big export opportunity. “When we formed Total Metering – the forerunner to Ei – the focus at that stage was in the New Zealand market. But then we got an opportunity for our first export. It was a million dollar deal for one of the first independent power companies in Malaysia. We’ve now had them as a customer for more than 10 years.” While Malaysia was a successful step for Energy Intellect, it was its move into Australia that transformed the company. “Going into Australia has been the best thing that’s ever happened to us. We’ve done well over there,” says Gowans. The market across the Tasman now makes up 40 percent of the company’s revenue. Energy Intellect’s latest big move has seen the company return to Asia – this
CUSTOMERS GET A DIFFERENT LEVEL OF ATTENTION THAN THEY WOULD FROM LARGE MULTINATIONALS FROM, SAY, EUROPE. THIS CAN PAY BIG DIVIDENDS FOR SMALLER COMPANIES.
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time Bangladesh – as part of a cluster of Wellington-based energy companies led by Abbey Systems. Energy Intellect‘s real-time energy management, control and reporting technology will be deployed across 34 substations in Bangladesh as part of a $6.5 million dollar deal. “Bangladesh is a unique opportunity for us,” says Gowans. “We’re operating as part of a cluster of five companies that are all incredibly knowledgeable. It was a cluster formed by people who knew each other and each other’s strengths. The product is now due to be shipped over to Bangladesh.” This year, Energy Intellect posted record results. But the company knows it cannot be complacent. It sees some great opportunities ahead, particularly in the field of Green Tech. With energy shortages and environmental
concerns growing, Energy Intellect is transforming its business to supply energy and environmental monitoring and control services. This will lead Energy Intellect into new areas: measuring temperature, flow and other metrics that relate to the efficient use of energy and other valuable resources like water and gas. Ei is hoping to leverage off these developments to help it launch into the United States, where energy issues are high on the agenda. But Gowans admits the US will be the company’s biggest export challenge yet. “We do see the US as the next logical market. The opportunity there is at least 200 times the size of the New Zealand market. But it’s a hard nut to crack. It’s going to take courage and conviction to get there.” www.energyintellect.com
Coming up in the Nov/Dec issue of Exporter: • INTELLECTUAL PROPERTY
• INSURING YOUR EXPORTS
A special feature that examines exporterspecific intellectual property issues. Exporter will present the viewpoint of New Zealand’s leading IP experts on the rules, regulations and laws governing intellectual property – including the issue of brand protection in your target markets. A must-read for exporters keen to protect, exploit and enforce the full portfolio of IP rights.
Insurance for export consignments during transit is vital and often a condition in a sale agreement or letter of credit. This special feature explains the insurance categories and options for cargo and transportation insurance. It shows how exporters can get the best value for their insurance dollar and minimise the risk of goods being damaged in transit.
To discuss advertising opportunities call Leanne Moss on 09 477 0368 E leanne@exportermagazine.co.nz
EXPORTER 51
GLOBAL STAGE EXPORTER LOOKS AT INNOVATIVE NZ PRODUCTS SEEKING A WORLDWIDE AUDIENCE
IF YOU HAVE AN INNOVATIVE PRODUCT YOU WANT TO TAKE TO THE WORLD, EMAIL EDITOR@EXPORTERMAGAZINE.CO.NZ
Scullys Home & Body Products SCULLYS HOME & BODY PRODUCTS manufactures quality New Zealand made, hand finished bath, body and home products, distributed throughout New Zealand and the world. The product range includes soaps, creams, shower gels, massage oils, talcum powder, lotions, waxes, handwash, candles, room sprays, bath salts, bath fizz, bath milk and gift packs to suit any budget. All available in a range of fragrances. In 2012 Scullys Products will be celebrating 20 years of 100 percent New Zealand made, high quality body, bath and home products. Gerry and Judy Scully founded the company in 1992 after a visit to the Yuulong Estate, a commercial lavender farm in Australia, provided the inspiration to set up their own venture. They planted their first seeds on the family farm, now known as Raumai Grange Lavender Farm, situated five kilometres from Bulls. After much hard work and a lot of old-fashioned can-do attitude the Lavender Farm turned into a blossoming business. The essential oil distilled from the two hectares of English Lavender (LavendulaAngustifolia) was used to make their own brand of lavender products including mustard,
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vinegar, lip balm and hand cream. The company has grown from the old farm woolshed to a factory in Bulls, now concentrating on bath, body and home products. Judy is the creative director and Gerry manages the business end. Scullys are a local icon (‘scent-a-bull’) with the gift shop in town and the company supports local kindergarten, schools and businesses. Scullys Products has continued to grow. Other fragrance ranges developed include Bulgarian Rose, Lime & Basil, White Gardenia, Scullywags (baby), Perfection (facial care), the Chefs range, Gardeners Therapy and Moonlit jasmine with fresh mint. The company employs five sales reps visiting 350 stockists nationwide, and distributes to Australia, Japan and England. Gerry and Judy’s products are made as naturally as possible using the finest ingredients available – including 100 percent pure essential oils, cold pressed oils and hand picked flowers and foliage. The hand-finished products are never tested on animals and no animal products are used in the manufacturing process (except beeswax). FOR MORE INFORMATION VISIT WWW.SCULLYS.NET.NZ
Aquaceuticals AQUACEUTICALS NZ LIMITED is a New Zealand registered company focused on “Healthy Choice Beverages”. Its sales and marketing strategies cover both local and international markets. Aquaceuticals is a major shareholder in one of New Zealand’s largest premium water companies. Water is drawn from the Otakiri Aquifer source in the Bay of Plenty, one of the world’s deepest, oldest and most remarkable artesian water sources which has been carbon dated at 1800 years old. The water has a naturally high silica content which has been shown to have significant health
benefits. It’s naturally low dissolved solids content means it is one of the softest waters in the world and it contributes to its taste profile, which consumers remember and look for again. Aquaceuticals utilise custom designed bottles and boxes for both the local and export markets. Products include 10-litre and 5-litre Water in a Box, UNZ 1.5-litre plastic bottled water and UNZ 500ml plastic bottled water. The products are currently featured in New Zealand’s largest supermarket chain. FOR MORE INFORMATION VISIT WWW.AQUACEUTICALS.CO.NZ
ENZO Nutraceuticals ENZO Nutraceuticals Ltd produces and markets Enzogenol pine bark extract as an ingredient and in finished product formulations. Enzogenol is a 100 percent natural extract from the bark of New Zealand grown Radiata pine trees; a broad-spectrum polyphenol extract, high in OPCs, with exceptional antioxidant and natural anti-inflammatory properties. ENZO uses an internationally patented pure-water extraction procedure that is environmentally friendly and delivers the broadest range of healthy polyphenolic compounds from the bark in their unaltered, most active form. ENZO is committed to providing its customers with solid scientific research on Enzogenol and to secure intellectual property around novel uses of the product. In collaboration with New Zealand and international research institutes, ENZO has carried out extensive research on Enzogenol including chemical studies, animal trials and four human clinical trials.
Positive outcomes of these trials have been published in scientific journals, two New Zealand patents for Enzogenol have been granted and other patent applications are pending. ENZO Nutraceuticals Ltd has a strong commitment to New Zealand and its pristine environment, since this is where the
company sources its raw material from. The company is also strongly committed to continuing the scientific research on Enzogenol. These commitments are reflected in the company motto “Fusing science and nature for better health”. FOR MORE INFORMATION VISIT WWW.ENZOGENOL.COM OR WWW.ENZOPROFESSIONAL.COM
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> VIEWPOINT
Harnessing the entrepreneurial spirit Catherine Beard celebrates the new entrepreneurial eco-system in this country that is helping to raise the exporters of tomorrow.
E
ncouraging bright sparks would seem an obvious idea but how do you take that spark and ignite it when it comes to encouraging exporting ventures? Geoff Whitcher, the founder of entrepreneurial training programme ‘Spark’ and the Auckland University Business School commercial director, believes it requires ideas, mentoring and money. He says that without this combination each will come to nothing. Geoff has, with business incubator ICEHOUSE and venture capitalist ICE Angels, united business with students and academics by bringing companies to the Auckland Business School with reallife issues that students can help to solve. The companies get the benefit of sharp, fresh minds and the students get realtime, real-life problems to consider. Spark consists of two challenges – the $100k Challenge and the Ideas Challenge (www.spark.auckland.ac.nz/) The Spark Challenge, which is in its ninth year, is New Zealand’s premier business planning competition. It is a launch pad for students and staff from all disciplines to transform their ideas into real businesses. If entrants make it to the top 12 they are selected to develop business plans to be presented to judges, followed by a Dragon’s Den style pitching session to test their communications skills, before waiting to see if they have won a share of the $80,000 cash and prizes up for grabs. Part of the prize is a six month residency with The ICEHOUSE. Each year Spark has fostered the creation of more than 75 start-up companies which have raised more than $50 million-plus in funding, creating around 230 jobs and between them selling products in 22 countries. “It isn’t enough just to come up with
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a business idea. You need to tap into what we now call ‘angel’ funding,” Geoff explains. “You develop ideas and the people behind them need to know how to attract money.” A range of people who have been through Spark have gone on to start companies with great potential. Power by Proxi, for example, and online bookseller Fishpond came out of the Auckland University business incubator. One of the students is working on a new procedure for wound healing and is in the second stage of testing in the US. Geoff told me that what is particularly noticeable coming through the Business School is the crossing of the bridge from the desire for a knowledge-based economy, to making connections between science knowledge/ideas and money. He says this takes time and some countries have taken 40 years to get to where we are now after ten years. The Technology and Innovation network (TIN) Index clearly illustrates the growth in this area. Back in 2005 as a new network there were 50 companies involved in the technology and innovation area of exporting and now it has 200 companies. Datacom, for example, is now a $700 million company. Home-grown technology businesses are mushrooming. Companies like the Gallagher Group, and Fisher and Paykel Healthcare are bringing a new dimension to the New Zealand economy. It is cutting edge ‘clever’ manufacturing that is starting to give a good return and this return leads to more growth, more ideas, more exporting and, hopefully, more money to invest in other companies. In terms of nurturing potential exporters, I’d like to see Spark taken up in other Universities because
entrepreneurs are the business leaders of the future and we need more of them. Programmes like Spark give potential entrepreneurs the courage and support to take that leap of faith and help make those important connections with other business people. Imagine how much New Zealand’s fortunes would improve and how much more money would be reinvested in New Zealand if we could produce more Sam Morgans, Peter Jacksons, and Jeremy Moons? Sure, New Zealand’s exports are underpinned by our agricultural and commodity exports and that will hopefully be enduring. But with only about 200 companies producing around 80 percent of our exports, we clearly need to spread our risk and develop a more diverse exporting base. New Zealander’s are known to be innovative and have great ideas; but NZTE research has also indicated we are not so good at commercialising our ideas and we are pretty risk averse. Imagine all the talent we could unleash if we empowered young people to consider the entrepreneurial path, with the right, support and mentoring right through the education system. New Zealand now has incubator investors, business schools and ‘Dragon’s Den’ type competitions emerging, including a secondary schools robotics competition. Bring it on! In a globally competitive marketplace we need to be innovative to stay ahead of the competition. Entrepreneurs are good at spotting opportunities and very focused on solving their customer’s next biggest problem, sometimes before the customer. The entrepreneur eco-system is a hub for future growth and where our new successful exporters will emerge. Catherine Beard is executive director of Export NZ. www.exportnz.org.nz
> VIEWPOINT
From the Beachheads
New Zealand Trade and Enterprise’s Beachheads programme is a global public-private partnership designed for high-growth New Zealand businesses looking to succeed internationally. The programme connects participants with expert advisors who have the knowledge and networks to help them achieve international growth. Beachheads advisors are successful private sector executives who are committed to sharing their knowledge and experience by offering pragmatic advice and insights into the realities of doing business internationally. Below, three Beachheads advisors answer questions on doing business in the US, South America and India.
Q1
: How do I develop the right strategy for entering the US market? I know the strategy I used to establish myself in New Zealand won’t be applicable there.
A
: From Bridget Liddell, North America Beachhead chair and general partner Fahrenheit Wellness Fund.
It’s certainly important to customise your strategy, but much depends on your product or service and the area of the US you are focusing on. For example, in the Pacific Northwest, less adjustment may be required than in other areas of the country. A key aspect of your strategy is your choice of business model. Strategies that focus on building a full business, rather than relying on revenue models, typically yield much higher returns. Companies that use a distributor as their primary interface are vulnerable if there is a change in that relationship. Loss of a distributor leaves the company with no embedded knowledge of the market and no deep relationships with local customers or consumers. But companies that have built a team here and established those
relationships have a more robust, sustainable and value-enhancing model. It takes longer to establish, and is more resource-intensive, but should at least be properly evaluated at the outset. Your strategy has to address the size and sophistication of the market and, critically, the people resources required. New Zealand’s most successful companies in the US rely on local people with experience in the industry and overlay good leadership from New Zealand. They transfer the New Zealand culture to the US to retain the company’s unique spirit but access enormous networks by recruiting in-market people. Your reference points for developing your strategy should be other New Zealand companies that have succeeded and the support
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STRATEGIES THAT FOCUS ON BUILDING A FULL BUSINESS, RATHER THAN RELYING ON REVENUE MODELS, TYPICALLY YIELD MUCH HIGHER RETURNS.
”
available from the likes of Beachheads advisors and New Zealand Trade and Enterprise. New Zealanders tend to go it alone, without referencing the people who have gone before them and the networks available to support them. They can waste time, money and opportunities, as well as incur greater risk than is necessary.
Q2
: What are some of the best investment opportunities in India that you think New Zealand companies are well placed to become involved in? How should they explore these further?
A
: From Peter Hassan, India Beachhead advisor, Hon Consul General for the Russian Federation in Hyderabad and consultant on Government Relations Prime Minister John Key’s visit to India in June 2011 set a wonderful roadmap for New Zealand business people to follow. The response from his Indian counterpart has been equally overwhelming, positive and focused. New Zealand can play a role in every conceivable aspect of India including aviation, automotive, animal husbandry, banking, hotel and transport, dairy, drugs, science and IT industries. You need to choose an opportunity where you feel most comfortable and then “date India”. Find the right partner, make a commitment, make your presence felt and then follow up. Treat India like you play rugby
56 EXPORTER
– economic aggression will take everyone towards the goals. You need tenacity and willpower. Suspicion, apprehension and indecisiveness need to be overcome. India’s rules and regulations can surely be addressed and understood. Use the connections of the India Beachhead and the fantastic opportunities New Zealand Trade and Enterprise presents. They should be fully utilised. The structure of New Zealand companies gives hope and promise but many companies need more aggression, speed, focus and decision-making ability. You can’t dot every ‘i’ and cross every ‘t’ in India – it’s not possible, the country is moving too quickly. It is growing at almost nine percent per annum. Sharing the same language allows us to know where we both stand and where we should stand. Both Prime Ministers want us to treble trade. That means more jobs, higher incomes and better opportunity. I will be telling my contacts in India that New Zealand is here to stay.
Q3
: My company has been exporting to Australia for a number of years and we now feel we have the scope to broaden our expertise to new markets. We are looking at South America. How should we go about it?
A
: From Martin Cartwright, South America Beachhead advisor
The market potential can be very large but you should take gradual steps to enter successfully. Travel to the countries you would like to target, and then choose one of them to start with. The challenges are great and the language barriers and cultural differences are marked. All precautions should be taken care of, such as looking for advice from trustworthy sources. Look for possible partners or locals with good knowledge of how things are done in New Zealand and how business should be done locally. It is essential that you have a good and comprehensive business plan. This is the fundamental building block of what your company wants to achieve, how you will achieve it and when it should be achieved by. The company’s strategy is then set out. You must be in it for the long haul, weather the ups and downs of the entry stages and be prepared for surprises and some instability. You must also have the funds and resources – not many things in life are free! It is ‘a must’ to have a comprehensive knowledge of the market and how it works. For example, if a local tells you, “We will meet up in five minutes”, that can usually mean one hour or more. The use of local knowledge and business networks are of great importance. Relationship building, and the building up of trust, will be critical. In Latin America, it is such an important aspect of doing business. Never sign any binding contracts without the once-over of a trusted and knowledgeable lawyer. The market is there – it is a question of doing it right. For more information about NZTE’s Beachheads programme visit www.nzte.govt.nz/beachheads
> VIEWPOINT
A is for Asia
In part one of a two-part article Andrew Sayers outlines the migration of opportunities from Australia to Asia and the help available to exporters wanting to establish a presence in Hong Kong or Mainland China.
T
The global financial crisis (GFC) has had a significant impact on New Zealand. Many sectors have been on the receiving end of this economic slowdown. Spending patterns have changed drastically, and commentators are predicting that these new behaviors are ‘the new normal’ for our economy. With the New Zealand market producing reduced revenue for a significant number of businesses, many are looking for ways to fill the shortfall, or grow their existing operations. We are fielding an increased number of enquiries about export markets and opportunities, with the view to either export to these markets or to establish a presence offshore. While New Zealanders tend to view themselves as savvy exporters, it is interesting to note that we actually export less as a percentage of GDP than most other OECD countries. And
while our largest export market is Australia for a number of good reasons, it will come as no surprise that we are seeing a significant increase in interest in relation to the Asian markets. Over the past few years, we have assisted many New Zealand businesses establish themselves in Australia, which is great destination for a company to commence its international expansion. Kiwis know how similar Australia is to New Zealand: it has few barriers to entry, a familiar legal and corporate framework, and similar customer demands. It is also the closest geographic market, meaning that getting there is easy, and transportation of products between the two countries is quick (although often not that cheap). However, there is a lot of competition to most of our exports from Australian manufacturers, growers and service providers. The
latest economic data has shown a recent slowdown and Australians are a parochial bunch and generally prefer to support the Australian suppliers. For these reasons, Australia may not be suited to some Kiwi exporters and business owners going forward. We have also worked alongside many businesses exporting to or setting up in the Asian markets – in particular Hong Kong, Mainland China and Singapore. These countries are perceived as more difficult markets to enter by many New Zealand business owners for all the reasons that Australia is easy. There is the language barrier, the cultural differences, the different legislative and commercial environment and the geographical distance. But are these fears justified and do they really provide an impediment to doing business? After all, many Asian economies have experienced consistently strong growth
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throughout the GFC, the market is enormous and many economies have a natural love for New Zealand’s produce and our clean, green image. China, in particular, represents the second largest export market for New Zealand, taking over NZ$4 billion of products for the year ended 30 June 2010. Dairy and wood make up half of those exports, and food and beverage are seen as large growth markets. Many commentators are predicting that on current growth rates (in conjunction with the dismal US economic outlook), China will become the world’s largest economy within this decade.
WHETHER CONSIDERING EXPORTING, ENTERING NEW EXPORT MARKETS OR INTERNATIONALISING A BUSINESS, NZTE OFFERS A RANGE OF PROGRAMMES TO HELP YOU SUCCEED, AND ARE WELL ESTABLISHED ACROSS ASIA.
”
HELP IS AVAILABLE So once a New Zealand entrepreneur determines that Asia offers a market for his or her product/service, what next? For the purposes of illustration I’ll focus on Hong Kong/China, but the principles can apply to any market. It is imperative that if you want to establish a presence in the Hong Kong and China markets you don’t try to do it alone. There are too many obstacles and differences between the cultures, and the ‘she’ll be right attitude’ will most likely not work in Asia. Furthermore, it is not necessary to reinvent the wheel. There are a large number of trade organizations and existing businesses with enormous experience operating in this space. Here are just a few of the ones I/my clients have used. A starting point is New Zealand Trade and Enterprise (NZTE) (www. nzte.govt.nz). Whether considering exporting, entering new export markets or internationalising a business, NZTE offers a range of programmes to help you succeed, and are well established across Asia. Their offices in central Auckland have well informed and helpful staff, many of whom have had commercial
58 EXPORTER
experience in particular markets. Their training courses (I have attended the China one) are both relevant and practical. NZTE has offices throughout Asia. I have visited their teams in Hong Kong, Shanghai, Guangzhou and Shenzhen. Each office houses a trade commissioner or consulategeneral who can assist with advice from ‘inside’ the market. I have worked alongside some of these trade officials and can attest to the significant expertise and knowledge they have about their local markets. Not only do they understand how business is done in the market, they also have strong industry knowledge and can provide market intelligence to gauge the market potential of your product/service. I also recommend you consider joining local business councils and associations to network with like minded business owners, professionals, bankers, brokers etc. These associations are passionate and knowledgeable about the opportunities. For example, I am on the executive of the Hong Kong New Zealand Business Association (www. hongkong.org.nz). This Association holds numerous networking functions annually, organises training and trade seminars, and provides direct access to the relevant Hong Kong Government agencies that facilitate trade. The New Zealand China Trade Association www.nzcta.co.nz) also allows you a similar experience, for direct access into China. Whilst there are too many agencies to list, a good example of a Hong Kong Government agency is The Hong Kong Economic and Trade Office (www.hketosydney.gov.hk). The HKETO in Sydney is the representative office of the Government of the Hong Kong Special Administrative Region, and was established to strengthen economic ties with Australia and New Zealand. If your target market is Hong Kong, you can start your exploratory journey by meeting the HKETO staff in their Sydney office (or connect with them here as they often travel to New Zealand). They will arrange meetings for you on your visit to Hong Kong, and assist with establishing an office there, or connecting you with the relevant people. These services are
free and easy to access. Another Hong Kong Government Agency, the Hong Kong Trade Development Council (HKTDC) can connect you with reputable suppliers across Hong Kong and China, and again, in many instances their services are free. Here I have listed a few of the dozens of organizations that I have used to assist my clients to conduct business in Asia. However, there will be dozens, if not hundreds, of others throughout Asia that offer similar products and services. I hope I’ve illustrated the enormous body of knowledge that is available to Kiwi exporters and I recommend you utilise them fully to assist with strategy and direction, and de-risk your offshore trading opportunities. In the next issue, I’ll focus on trading structures available to exporters once it is determined the Hong Kong/Chinese market is right for their offering, and they want to create a legal presence there.
Andrew Sayers is head of Asian Business and principal – tax consulting at WHK. Email andrew. sayers@whk.co.nz
> M A R K E T WAT C H W I T H ANZ’S C AME R O N B AG R I E
Grumpy growth pains Recent global events are a timely reminder that the recovery from the 2008 financial crisis was always going to be a long journey. New Zealand looks better placed than most but welcome to the post-GFC world of grumpy growth.
I
t has been a brutal few weeks for the global economy. We have seen equities drowning in a sea of red ink, commodity prices retreat, measures of risk capitulate, and growing fears of another financial crisis around the corner. Markets have performed more somersaults than a gymnast. If there has been a silver lining it’s been the decline in the NZDUSD, though it remains expensive on our fair value metrics. On some levels, we are hardly surprised by global developments. Why? • Our sovereign risk analysis had been warning of further problems, especially for some big nations such as Italy. • Deleveraging (debt reduction) has always been a precondition to the global economy returning to a sustainable recovery path. However, there is now more debt in the global economy than prior to the 2008 event, with lower private sector debt offset by a massive rise in government debt. • Markets are notorious for ‘tipping’. Throw together the combination of slowing US growth, a credit downgrade for the US, and worrying European sovereign debt concerns that go well beyond Greece, and we seem to have simply ‘tipped’. • Our ‘bathtub with waves’-shaped economic cycle analogy to depict the post-financial crisis economic environment (a long journey with a few ups and downs) still applies. We have never been uber-bullish regarding the global economy. • We are putting some of the volatility down to the market finally ‘getting it’. The post-financial-crisis trend rate of growth for a host of Western nations must by necessity be lower than seen previously. That’s the reality of a deleveraging environment. A different trend growth rate means a different
secular outlook for earnings and asset prices in general. That said, there are some disconcerting signs: • Policymakers’ arsenals have been seriously depleted over the past few years. • There are signs of stress in money markets (though not dislocation such as in 2008). • Political gridlock is not helping things. Markets are looking for solutions. The US Federal Reserve has already stepped up to the plate, promising to keep the Fed Funds Rate low until the middle of 2013. Most now seem to be waiting for the ECB to do its part as well and expand its balance sheet further. This is both logical and illogical. It’s logical because it seems inevitable. The cupboard looks pretty bare otherwise. It is illogical because central banks should not be expected to bail out fiscal irresponsibility, which is effectively what is happening in huge parts of Western society at present (though to be fair, a host of governments have had to ‘socialise’ debts associated with the 2008 financial crisis). Getting the correct balance between the two arguments is one reason we are seeing a game of chicken play out around the globe. Markets are demanding solutions. Central banks know they need to act. But it is not their job to bow to market demands, nor to support fiscal profligacy. Pump priming is hardly the ‘structural’ solution to ensure sustained economic recovery; it has been done in various forms since the 1990s. All it seems to have achieved is to lead to increasing indebtedness in both the private and public sectors, and a larger problem to eventually confront. We now need to see decisive leadership as opposed to populism. We are sure the phones have been running hot in central banks, treasuries and in political circles. Liquidity stresses in the
market can be solved. Policymakers have the tools. However, it is the solvency aspect to various nations’ fiscal positions that ultimately need to be addressed. And you do not address such challenges by minor tinkering and bowing to populism. Of course, not every economy is facing the same challenges. China, for example, continues to see strong growth, as does much of Asia. Exporters must focus on the big picture. It is imperative that the New Zealand economy rebalances and we focus on earning more and keep our spending aspiration in check until we unlock the income story. Pricing signals (the secular trend in commodity prices, the tax system, attitudes to saving, the NZDAUD, etc) are progressively moving into place, though not all are assisting with the NZDUSD – the key frustration. We are witnessing not just a cyclical downturn across the global economy but also massive structural changes. Western society is facing a decade of penance and will underperform. Asia will outperform, though we need to be prepared for the odd bad year: emerging market economies will not expand at exponential rates. The NZD is presenting some challenges. It will continue to do so. However, the long-term pecking order for currencies is simple. Asia is top and their currencies will face continued pressure to rise. The commodity bloc is next, courtesy of direct linkages to Asia. The USD is third and the Euro last. These are the secular trends. The rest is noise. Cameron Bagrie is the chief economist at ANZ New Zealand.
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> VIEWPOINT
Policy change, not handouts With the election looming, John Walley has been looking for policy change from the parties that could help lift the export sector.
T
his years’ election can deliver a change in our economic framework and address an already significant debt problem. Elections over the past couple of decades have tended to be contests of who can give the largest handouts rather than a legitimate policy contest. This one must be different. A debt blowout caused by the Canterbury earthquakes, combined with uncertainty over the debt positions of a number of European nations and the US, make policy decisions made now vital to our economic future. There is still the potential for another Lehman Brothers sort of collapse if one of the European countries defaults on debt payments, and even excluding that possibility, markets in the northern economies are likely to be depressed for a considerable time yet. More borrowing means more upward pressure on the exchange rate and a reduced return for export activity; that means less ability to pay back our debts. There has been no significant reaction to the recession, the earthquakes or global risks in terms of measures to address our debt problem. Politically difficult issues such as the entitlement age for national superannuation, and any meaningful monetary, fiscal or welfare reform have been conspicuous by their absence. Simply increasing debt is unsustainable and hoping for growth to save us is very risky. The optimistic debt path built into the last budget depends on significant growth in the face of a long run contraction in the real economy, and as shown in the following table, Treasury’s growth predictions have been far from reliable. A more conservative debt path is needed to accommodate the likely setbacks as the global crisis plays out.
60 EXPORTER
CHANGING THE BALANCE In spite of a changing world, a lot of rhetoric about rebalancing the economy, and some helpful advice from working groups, we have seen little policy change from Government in this term. When looking at policy change it is useful to think about what sort of activity in the real economy New Zealand needs. The table below shows there are differences in the impact of different activities. It also shows the resource dependence, and obvious expansion limitations of primary production – jobs and growth beyond that constraint depends on the ability of our economy to add value to what we have, be it primary production or a good idea. Draw your own conclusions, but jobs flow mostly from the ‘added value’ sector – to get more of that General Manufacture
activity requires more investment. The contraction of this sector of the economy since 2004 demonstrates a long run disinvestment. To reverse this rundown in the real economy, policy should be targeted at a realistic and stable exchange rate (one we earn, not borrow). The solution is not one single thing, but monetary policy reform targeted at controlling inflation in the domestic economy and lower borrowing is the start of the reform process. Other countries are taking action to control their exchange rate whether through quantitative easing in the US and the UK, capital controls in Canada and Brazil or direct currency management in China and Singapore. While our policy makers ignore this problem the export sector will continue to suffer. We have already seen some movement from political parties with Labour proposing changes to the tax system and making a commitment to rewriting the Reserve Bank Act. We look forward to further announcements. John Walley is Chief Executive of the NZ Manufacturers and Exporters Association.
Dairy Farm
Software Company $1,500,000
Sales
$10,000,000
$850,000
Capital Employed
$3,000,000
$4,500,000
$50,000
R&D Spend
$1,000,000
$0
$300,000
80
2.6
6
5 times
5 times
Not many
Exports
50% - 90%
90% +
95%
Natural Hedge
20% - 50%
Some
Little
10%
2.6%
17%
Negative
~18%*
7%
500m2
1,350,000m2
100m2
Jobs Associated Jobs
Volume Growth 2011 Revenue Growth Footprint
> VIEWPOINT
Governance responsibility: are you up for it? Ron Scott warns company directors not to be complacent about their responsibilities. On more than one occasion I’ve heard directors of small companies comment that they are protected by limited liability and not concerned should their company be sued. The argument is that the company has no or limited assets and will simply go into liquidation. It is clear that many directors are not aware of their responsibilities or indeed their liabilities. WHO IS A DIRECTOR? One does not have to be called the director to be one! According to section 126 of the Companies Act 1993 a person is a director simply if they act like a director “by whatever name called”. So if you have cheekily asked your spouse to be the director while effectively running the show yourself then you might not be in the clear. WHAT DOES A DIRECTOR DO? The board of a company (which might be just one director) “has all the powers necessary for managing, and for directing and supervising the management of, the business and affairs of the company.” (Section 128) If you delegate decisions to an employee you must remember that you are still responsible. If you delegate you must have very clear evidence that it was reasonable for you to expect that person to be capable of doing the job. If the company does anything wrong (for example, builds a leaky home) then the director is liable. The director must act in good faith. The fact that I heard the comments about how they would use the limited liability provisions might be evidence that those directors were not acting in good faith. You must take due care as a director. This includes keeping on top of what you need to know as a director. You
must be able to act as a reasonable director should. Therefore: • Do you read trade news about your industry? • Do you attend networking opportunities to keep aware of external developments? • Do you take the opportunity to attend seminars on changes in policy? • Do you read the company accounts properly and ask questions on things you don’t understand? The Act says that the measurement is what the director knows or ought to know. Just because you didn’t get around to reading the accounts doesn’t mean you’re off the hook. A competent builder might be expected to follow the installation instructions for a product to avoid leaky homes. There is a raft of regulations and laws with which any business must comply. There are some general legislative requirements and many industry specific rules. TAXATION A company is a taxpayer and therefore is treated like any other taxpayer. Where a company acts in such a way that it cannot meet its tax liabilities the IRD may be able to collect those taxes directly from directors. You are responsible for making sure that the company pays taxes including PAYE, GST, FBT, provisional tax, withholding taxes and so on. In practice, this means that you will probably employ an accountant. Notice their statements which let them off the hook! If the accountant does not accept responsibility then who must? The board of directors! The IRD is able to recover taxes from a director when: • The company has entered an
arrangement resulting in the company not being able to meet its tax liabilities, and • The director knew or should have known that a tax liability could have existed. Each director is jointly and severally liable. In other words, if the other directors can’t pay but you can, then you will be deemed liable for the whole liability. If you are invited to join a board then you might want to check the arrangements the other directors have made to protect their assets – and do likewise yourself. So a director has major responsibilities. The liability for getting it wrong can be steep. Here are some examples of penalties: • The directors who vote in favour of a distribution must sign a certificate saying that immediately after the distribution the company will still be solvent. Maximum penalty for not doing so? $5,000. • Forming a cartel. Maximum penalty $500,000 (per director). • Making a false statement about the company or its ability to trade. Maximum $50,000 or up to two years imprisonment. Being a company director, even in your own family business, has significant responsibilities. A limited liability company largely protects against business risk – but only if you do everything to the letter of the law. Hand on heart – who does that? Ron Scott is MD of Stellaris Limited, specialists in business education and management training. Email rscott@ stellaris.co.nz or visit www.stellaris.co.nz
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> WORLD VIEW
New market entry strategy: not for the inflexible Stephen N. Anderson offers a broad-based viewpoint on how to best approach new export markets.
I
t is a seductive logic that plants the seed of replicating successful, current business practices into the plan for entering a new market. It seems to make sense. Why tamper with success? One good reason for challenging this logic is to reduce the risk of expensive failure and eroding the three “Cs� - Confidence, Cash and Customers. A new market entry consideration should start with a blank page and
ask - What is the opportunity? How large is the market? Who are the competitors? Do we have the right product? How much time to success? Determining the opportunity is, of course, the first step, and it requires solid data and some analysis. Let’s consider, for example, what is the opportunity for supplying oilfield equipment or raw cotton or automobiles to China. Zepol Corporation, an industry research
organization, provides a data based window into a variety of sectors. China exported $1.1 billion in oilfield equipment to the US in Q3-2008, a high point, followed by two quarters of similarly high levels. For anyone watching this market growth starting in 2007 when it was $608 million in Q1 of that year, the run up would have drawn a lot of attention and looked like an opportunity for a supplier of replacement parts, services, or transportation for Chinese manufactured oil equipment. Today, however, it has declined over several quarters to $175 million. Down markets are also opportunities. Raw cotton exports from the US to China grew from $466 million in Q3-2008 to $1.2 billion in Q1-2011. Passenger cars, new and used, exported from the US to China grew from $277 million in Q3-2008 to $1.2 billion in Q1-2011. There is opportunity in analyzing facts like these in preparation of anyone developing a new market entry strategy.
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THE FOUNDATION OF A STRATEGY FOR A NEW MARKET STARTS WITH UNDERSTANDING AND MATCHING YOUR BUSINESS TO THE OPPORTUNITIES IN THE MARKET. CASES IN RETAIL: PAYING CLOSE ATTENTION TO CUSTOMERS Retail is a business highly sensitive to market nuances that are more easily and quickly recognized than in other sectors, and it therefore provides good examples of new market entry experiences. The history of British retailer failures in the US stands out because it is counterintuitive. On the face of it, the business and social cultural issues between the two countries are minimized. It should be a “piece of cake”, but it is not. Common language and similar cultures, with “similar” being the operative word here, is the problem. Most companies entering a country where the language and culture are different pay closer attention to, and respect, the differences. US retailers entering the UK find it is more competitive than expected and costs, including commercial rents, are higher. Those facts should not be a surprise. Carrefour, the French foodmarket retailer that today has 9,000 stores worldwide, tried to enter Japan a decade ago and made it known that it would revolutionize retail in that country. They did not succeed in achieving their proclamation and as of September 2011 does not have a presence in Japan. Japan is recognized as a particularly hard market for retailers. Carrefour has been successful in many other foreign markets by reinventing the range on offer at its local stores. Ten years ago, Carrefour was convinced that the Japanese would love a French shopping experience. Japanese shoppers, however, wanted a broad range of fresh produce that they could buy in daily consumption quantities. Acquisition generally has been considered as a risk reduction, foolproof way to enter new markets. Walmart’s acquisition of Asda has been successful primarily, it is thought, due to the fact that local management was kept in decision making positions.
64 EXPORTER
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WHAT TO LOOK FOR IN COMPETITION The foundation of a strategy for a new market starts with understanding and matching your business to the opportunities in the market. The top three topics are: • Internal Capabilities: What are the core strengths and weaknesses of your product and services. • Competitor Financial Health: How healthy is the competition? • Market Information: What are the size, growth, names, products purchased, their customers, their suppliers? Most companies are skilled at doing their own SWOT analysis on ‘Internal Capabilities’. ‘Obtaining Market Information’, depending on the size of an organization, is accomplished by a combination of professional research conducted by firms familiar with the market and first-hand information gathered by the Company itself. ‘Competitors’ Financial Health’ is elusive if it is not a public company, or is a division of a public company. Rapid Ratings International Inc. is an independent source for corporate financial health. It has a blue-chip list of customers who rely on its analysis of their suppliers’, customers’ and competitors’ financial health. Their reports are current and offer more advanced insight than Dun & Bradstreet or Standard & Poors. (Rapid Ratings was founded in New Zealand in 1997 and developed there by economist Dr. Patrick Caragata, executive vice chairman. The business was bought by Dr. Caragata and a New York City based professional financial group. HQ is now in the US with technology remaining in New Zealand, R&D in Australia and Quality Assurance in India.) If a competitor’s financial health is good, and they are in a new product or geographic market under consideration, that information must be included in a new market strategy for two basic reasons: (1) they have sustainability in the new market, and (2) if the market opportunity
information looks positive, the new market may contribute to the competitor’s financial health. If a competitor’s financial health is not good, according to the analysis by Rapid Ratings, it has limited resources and sustainability in the new market. That needs to be put into the new market strategy planning and questions added to market research such as: How long has the competitor been in that market? What is the approximate market penetration? What is wrong with their strategy, according to their customers? When a competitors’ financial health in a market under consideration is not good, it suggests that the market may not be good and more needs to be known about what they have done in the market; size of the market; and what were the product or strategy faults according to their customers. While every industry and every business regards itself as unique, there are more commonalities than differences between companies and industries than anyone cares to admit. When entering a new country or market my advice is to think like a startup. There are limited or no sales, no organizational infrastructure experience and most important, little knowledge of the market.
Stephen N. Anderson is managing partner of the Marquis Advisory Group LLC, based in San Francisco, California. Email steve.anderson@ marquisadvisory.com
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