With Australia accounting for only 2% of the global economy and a population of 24 million, many businesses are left wondering if international presents a good opportunity for growth. According to the Australian Bureau of Statistics, in 2014 Australian goods and services exports was A$330B, with 45,306 goods exporters and 2,788 services exporters.
The U.S. has been identified as the top market which Australian businesses are considering for export in the next two years (Australian International Business Survey, 2015). As the U.S. accounts for 22.5% of the world’s GDP with a population of 321 million, this market presents significant opportunity for many. However, before flying the nest to the U.S. or any other country, Australian businesses should ask themselves the following five key questions:
Have we maximised opportunity domestically?
Many small to medium businesses in Australia still have under-developed opportunities in their own backyard. Growing sales domestically allows the business to build client references, export-ready product/service and cashflow, which are discussed below.
Do we have solid client references?
To prepare for success overseas, the business needs strong reference capability domestically. Client references build confidence and credibility with new prospects, alleviating any fear of buying from an unknown brand.
Is the product or service export ready?
Maximising sales domestically before elsewhere provides the opportunity for product development based on market feedback. Depending on the product or service, development may be required to comply with local legislation and standards in the new market. If the offering is not compliant, it’s critical to understand what modification is needed as well as associated cost and timescales for this development. For businesses with many product lines, or who regularly provide customised products, it’s often essential to identify a subset of standardised products which you can lead with. This will also assist with potential supply chain bottlenecks that large customised portfolios often present.
Will domestic cashflow support international?
Entering a new market may require investment across the business, including additional employees, inventory, and supply chain resourcing, marketing, and potentially new premises. Domestic growth can often be utilised to generate cashflow to fund international expansion. The Australian Government provides funding schemes such as the Export Market Development Grant (EMDG), which can assist eligible businesses with the costs of marketing, overseas visits and much more.
Do we understand the market?
While international markets offer significant opportunities for growth, they also often demand a degree of vertical specialisation or regional focus. Undertaking market research and validation in the new market prior to launch will greatly reduce mismatching your product with the market and therefore save time and money.
The starting point should always be market research. Market research will establish which market has the highest propensity to buy your product or service, the opportunity that each market presents, and where you are going to get best ‘bang for buck’. Even regions such as California, for example, which have a population larger than Australia at 38.8 million residents, needs to be further segmented to identify hotspots of opportunity.
Once a shortlist is established, the business should consider other factors such as ease of access and cultural differences. Identifying which market is the right size for the business is imperative for success, as the supply chain must be able to meet the potential demands of the new market and potential contractual obligations of new agents and distributors.
The Australian International Business Survey 2015 identified the most significant barrier to doing business internationally as ‘local language and culture and/or business practices’ with 29% of respondents citing this barrier. Speed of entry is essential to gain traction and market share therefore the cost of time and money that barriers such as these present should be considered when shortlisting export markets.
International markets provide Australian businesses with the opportunity to grow sales and profits and benefit from economies of scale. They also provide an opportunity to reduce the risks that are inherent in selling to a single market.
Connect with experts to take your business to new markets.