Over the next few issues, Dynamic Export will take you through the export process, ensuring you get the most from your export experience. We begin with an overview of the benefits and risks.
Getting into export makes good business sense for many Australian businesses. The free trade agreements have opened up the domestic markets, providing opportunities for SMEs to compete not only in the global market, but against international players in the Australian market.
A well thought out strategy and help from the many agencies set up to increase Australia’s export capacity can see your business flourish. We’ve identified some of the benefits of getting your wares exposed to the international arena as well as the risks involved with any new venture.
Export Benefits
• Economies of scale: by spreading fixed and variable costs across a greater volume of sales you will increase your profitability. And with increased sales you will have more flexibility to reduce prices. Compare the number of customers in Australia with potential customers worldwide; it’s a number too big to ignore.
• Seasonal advantages: sell out of (our) season and open up new markets. For example, northern hemisphere markets will be more responsive to purchasing seasonal fresh products when their climate doesn’t allow them to be grown locally. Additionally, if the sales of your products or services fluctuate seasonally, you can use exporting as a means to avoid a downturn in business. One of our recent case studies exported kayaks to the northern hemisphere during the winter months to keep cash coming into the business on a more regular basis.
• Extending the life of a product: goods or services relying on local trends and fads will have a shelf-life and your business may be struck by a decrease in demand. You can find a new market overseas where demand is still strong or the product is new.
• New opportunities for growth: exporting your goods or services is a good way to deal with a drop in sales, whether from a downturn in the economy or increased competition. And if you have a niche product or service, the local market may be too restrictive and narrow, and overseas markets offer another way to expand.
• Using excess production capacity: if your business has the capability to produce more products or services than can be sold locally, you can use that capacity in an international expansion.
• Improving performance: competing in international markets often increases the efficiency and performance of your business. According to the Western Australian Small Business Development Corporation’s (SBDC) Exporters Network, exporting broadens your skill base through exposure to new ideas, management, and marketing techniques, as well increasing your level of competition, efficiency and productivity. And according to Austrade, businesses who export have better growth prospects, highly skilled and productive staff, and tend to adapt technology and best practice techniques faster.
Export Risks
Although there are significant advantages in exporting, there are also risks associated, as with any new business venture. Some to consider are:
• Political: instability in an international market can be a concern in how business is to be conducted overseas. Keep abreast of what’s happening in your chosen destination through Austrade, and the Department of Foreign Affairs and Trade’s Smart Traveller website (www.smartraveller.com.au), which provides a list of government travel advisories.
• Legal: each country has a different legal system and legal requirements, including for import procedures, taxation, employment, intellectual property, currency and contracts. Get advice from respected legal experts in your chosen destination, or local experts familiar with your market, to ensure you follow all the correct procedures.
• Financial: ensure you understand all the financial risks (such as credit, transfer and exchange risks) before exporting to another country.
• Transport and logistics: be prepared for the risk of damage, loss, or theft of exporting your products and thoroughly research the best distribution channels, packaging and storage, and insurance to protect against risks.
• Regulation and quarantine requirements: find out what requirements you need for your market. You don’t want to send a shipment and then discover it has been refused entry.
Successful exporters will be those who identify the benefits of exporting, have full commitment to the venture (across all staff), competitive strength in their offering, are aware of and prepared for any risks, and have the internal capabilities to support expansion through exporting.
Fast Facts
Austrade research shows that, on average, exporting companies are more profitable than their non-exporting counterparts. Research has shown exporters:
• pay their staff, on average, $14,700 a year more than non-exporters
• provide a safer and healthier workplace
• offer more training and career development opportunities
• tend to be more in tune with new and changing technologies than their domestic counterparts.
The Australian community also reaps rewards from international trade as exports:
• increase the standard of living for every Australian
• account for around 20 percent of gross domestic product
• create employment opportunities—1.7 million jobs (one in five) depend on international trade (one in four in rural Australia).
Source: Austrade www.austrade.gov.au
