With Trump’s recent “reciprocal” 10% tariffs on imported Australia products in the US, all eyes are on exporting businesses and the impact it will have on the Australian economy.
For small businesses in a relatively small market like Australia, to reach their full potential, founders and owners often want to expand overseas. The rewards for successful businesses are immense, but the journey is often laden with unexpected challenges, as the Trump tariffs show.
My experience of entering export markets was during my time as CEO of Sealite. It’s a company that designs and manufactures marine aids to navigation equipment (products such as marine lighting and navigation buoys). Sealite was started by my father in our garage. I joined him in 2001 when the lighting technology was transitioning from incandescent bulbs to LEDs and we saw new market opportunities, which eventually led to us diversifying into aviation lighting.
As the Australian market is limited in size, our growth path lay overseas. I led the business through rapid international expansion, acquiring a US distributor in 2010 and a UK distributor in 2012. In 2021, we sold the business to SPX Corporation (NYSE:SPX).
The experience of growing Sealite into an international business helped me uncover critical factors for successfully entering and thriving in new markets overseas.
Fix company foundations
In a new market, it’s vital to ensure a strong product market fit, backed by operational efficiency. Leverage early opportunities such as trade shows to test the market before making major moves. For example, in the early days, when my father still worked his day job as an accountant, he was spending evenings and weekends making aquaculture lights in his garage and then selling them through trade shows and small distributors. Feedback from customers at the trade shows accelerated product development in Australia before constraints in local market size encouraged us to go international.
When you first decide to go overseas, it’s vital to identify and enter the right market. In Sealite’s case, cultural and regulatory similarities with New Zealand made it our ideal test market. Austrade gave us some introductions in New Zealand, which led us to our first overseas distributor. This helped “road test” the product and strategy internationally in a friendly market before we stepped into new countries.
Another important stride was obtaining the right expertise in our company and engaging with other successful entrepreneurs who’d gone down the same path. For example, completing the Australian Centre for Business Growth’s program at UniSA helped us crystallise a strategy, develop a growth plan and identify where to focus our efforts – all with the support of growth experts who’d done it before.
Choose the right strategy for global growth
Understanding market demand and researching addressable markets is essential before you commit company resources to a new country. A local presence is vital. It’s how you build trust and gain deeper knowledge about the market and local culture. At first, we tried using a third-party distributor channel, but we found it was far more effective to recruit local sales teams in the US, UK and Europe.
Above all, it’s critical to adhere to country-specific regulatory requirements. When we originally entered the US, we thought we could simply transfer the product and tooling and start manufacturing over there. But we realised that the regulations were completely different, affecting vital aspects such as the shape, size and colour of our products.
We had to redesign our product range to suit the regulatory requirements of each US state. With a maritime or aviation navigation aid, there were different standards based on the specific aviation authority or Ministry of Defence. And it took much longer than we had originally anticipated to meet these local standards and regulations.
Overcome the challenges of expansion – one-by-one
Certain markets, such as the US and EU, can be difficult to penetrate due to strong domestic competitors and customer loyalty. At the same time, expanding too fast or customising too much for specific clients can strain resources. It’s therefore important to have the right information to guide decision-making and balance effort and reward. So having the right supporting technology, such as a robust enterprise requirements planning (ERP) platform that can handle international conditions, is a core requirement.
Take time to understand the different cultural nuances and how to conduct business in different markets. Logistics requirements, for example, vary greatly depending on each location. Simply setting up an online shop window for overseas customers won’t be enough to bring your product to market.
Local labour costs also vary considerably. On the face, employment costs may seem low, but be aware of hidden costs. For example, in the US add almost 100% loading for health and benefits and other entitlements. The way competition behaves is also very different in each market, it may be much more aggressive, and customer culture and interaction and expectations vary. Add to this the new tariffs and a shifting regulatory environment, which means agility is needed to respond appropriately when challenges arise.
Embed your company in the new market
International expansion is not just about selling abroad but embedding a business into a new ecosystem. You need to be strategic, not reactive, build relationships before selling and stay adaptable. Above all, start with the customers’ needs and wants then ensure the product or service accurately meets them.
The challenges and rewards of international expansion are considerable and not to be taken lightly. But when you succeed, your company can grow faster and stronger than you ever expected.
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