Advice on export planning

If you’re thinking of tackling the international market, you’ll need to have some experience growing your business in the domestic market. This means having refined business practices that deliver your products or services to market as efficiently as possible.

Ideally, you’ll also have a good grasp of your target market and what marketing strategies work best for your business type. You should also have a healthy cash flow, which you’ll need to rely on until your overseas venture becomes profitable.

On the basis of your industry knowledge, you’re likely to know where your core markets are, be aware of trends in the market likely to shape demand, and have a gut feeling about which markets hold the greatest potential for you.

Personal considerations will also play a part in making the decision – after all, you'll be required to visit the country frequently. But this shouldn't be the main driver behind your decision. Thorough market research should tell you where your best exporting opportunities lay.

Australia is the logical first choice for many New Zealand exporters because it’s close, English-speaking, politically stable, easy to reach and culturally similar. For many, Australia offers a test market before heading further abroad. Additionally, under Closer Economic Relations (CER), New Zealand-made goods are duty-free and highly competitive.

Distribution in the foreign market is greatly influenced by market size, the type of good or service, the desired amount of control and the wider export strategy. The different options to consider are:

• Initially, agents or distributors can be the easiest form of market representation.
  • An agent is employed or contracted to work for you (so you know who the customers are.)
  • A distributor buys your products and sells them on - giving you less control over the market.
• For greater efficiency and control, some businesses establish an office overseas. This can be expensive and should only be undertaken by a reasonably experienced exporter.
• Some businesses, depending on the type of products or services they offer, do most of their exporting over the internet using a website and an email address. However, for many it’s essential that the business has a local address and possibly warehousing too, to supply the markets quickly.
• Catalogues and infomercials are other methods successfully used, particularly for specialised products. However, every business considering exporting should have a website.

Also worth considering:

• Contract manufacturing involves another firm making your product or part of your product under a contractual agreement. However, it’s still your responsibility to sell the finished product. The advantage of this kind of arrangement is that you can gain substantial cost and distribution reductions. You might also be able to take advantage of tax incentives in the target country. Many countries, for example, offer tax breaks of various kinds for overseas businesses that help support the local economy.
• Franchising requires the sale of your product or service and the systems and training practices to make that product or service work. Franchising allows you to expand your business at minimal capital cost because it’s usually the franchisee who bears most of the costs. However, franchising only works if you have a well-developed business system with a proven track record. You’ll also need to provide ongoing support and training to your franchisees if you want them to flourish. The commitment is often greater than business people initially realise.
• A joint venture with a company in your targeted overseas market can be a good way to overcome trade barriers. A joint venture involves you both committing funds and resources to developing a market for your products or services. However, experience shows that it’s very difficult to establish a joint venture that benefits both parties equally.
• Licensing your products or services is another possibility worth investigating, along with royalties (the sale of intellectual property in return for an agreed amount for each sale). In both cases, you will need to get good advice from lawyers or consultants who have experience in these kinds of transactions.
• Strategic alliances offer another possibility. They are similar to joint ventures, but are entered on a less formal basis for a shorter period of time, and often focus on a niche part of the market.

If you export goods and services, you may face hurdles doing business with overseas customers, eg cancelling contracts or defaulting on payments, along with day-to-day issues, like managing working capital, securing bank guarantees or funding growth.

The New Zealand Export Credit Office (NZECO) provides a range of trade credit insurance and financial guarantees backed by the New Zealand Government to help businesses secure export sales, manage payment risk and access finance via your bank.

Find out more about available products on the NZECO website.

Solutions for exporters (external link) — NZECO