Dynamic Business Logo
Home Button
Bookmark Button

Exporting to an existing market? Tips for success

Selling the proverbial tea to China sounds like a marketing dream, but what are some of the realities of competing in a product’s country of origin? Here’s how to avoid a bloodbath when exporting in a red ocean market.

Will Italians buy Australian gelato? Will the French buy our truffles? Will the Arabs buy our sand? The answer is ‘yes’, and for reasons you may not expect. The concept of entering the most competitive market of all, the market of the product’s origin, may seem like a counterintuitive move but as our export successes prove, it can—and has—been done.

Gelatissimo sells into Italy because it makes gelato like the Italians do, but is more open to experimenting with new flavours; Varona Fine Foods supplies Australian truffles to French restaurants in the local off season so connoisseurs can enjoy the delicacy all year round; and GMA Garnet provides heavy mineral sand to the Middle East that is cleaner and more effective for use in sandblasting and waterjet cutting than desert sand.

Less risky business

Contrary to most people’s initial thoughts, entering a red ocean market—so-called after the blood stains one would expect in shark-infested waters—can actually be less risky than pioneering a blue ocean or non-competitive one. For starters, you already know that the market wants what you have to offer because it is buying those products or services from your competitors.

“With blue ocean you need to do a lot more research because you’re trying to create new demand in a new market, so there are two variables,” says Jill Brennan, director of Harbren Advertising. “When you’re going into an existing market, you already know people are buying those products and that your competition is making money. You’re taking away a big variable.”

Scott Koslow, Professor of Marketing and Management in the Faculty of Business and Economics at Macquarie University, points out that US figures clearly favour of red ocean ventures. “If you have a red ocean strategy, the returns work out to be about a seven percent return on investment. If, on the other hand, you try to do a blue ocean strategy, the rate of return of new issues is about three percent. So a well thought out red ocean strategy can often make twice what a blue ocean strategy can make.”

Blue ocean strategies are just inherently more risky, he notes. “Blue ocean strategies are a lottery ticket: you put down your money and you take your chances, whereas a red ocean strategy is far more predictable. The net effect of a blue ocean strategy is actually not a great return on investment because it’s so risky.”

But entering a red ocean market doesn’t come without its own risks. One is “that you do everything that your competitors do but do none of them better,” says Koslow. “You have to offer something new, something different, something of value to the consumer. You have to do something better than the existing market if there are already strong established competitors and consumers who are loyal to them.”

Finding your red ocean niche

The key to success in a red ocean is to find out what your competitors aren’t providing in order to serve the gap in the market. Highly competitive markets can be profitable if they’re big enough and you can find your niche, says leadership specialist Philip Owens, director of Resourced Leaders. “If the market size is sustainable there are often positions within a red ocean. There are thousands of cars out there—why would anybody introduce a new car? Because there is the capacity to enter the market and find a position within that space.”

Realise first that you won’t have the clout to enter as the big player, but know that you can still make money, he says. “Depending on how you frame success and depending on how you build and structure your business planning and business model, there might still be a significant opportunity to take a position knowing that having done your sums you can get a reasonable return.”

Exporters should consider going through the ‘four Ps’ to find where they can leverage the market, Koslow says: offering a genuinely different product, placing the product in different distribution channels, attractive pricing, conveying its unique selling proposition in promotion. Unique selling proposition is of paramount importance if you don’t want to grab market share by fighting on price, he believes. “Sometimes you’re able to go into a country to where the players all seem particularly strong but they’ve all ignored a particular segment of the market and then that’s an opportunity for you. Find an underserved group and serve them.”

If you can’t differentiate your product or service, you’ll find that competing on price may be your only strategy, he explains. “It’s always dangerous to go in with a me too product. If for some reason you’re bringing in some kind of expertise or manufacturing skills that allow you to produce something cheaper, you can undercut everybody on price. But, if you’re genuinely trying to differentiate yourself, and do a good job of it, and find a particular market that has been underserved, then you don’t have to rely on lowering the prices as much.”
Owens agrees. “One of the things that happens in a red ocean is that people find the only place to differentiate is on price. It can really impact upon margins, and that can really impact upon your ability to enter a business profitably.” And in a climate where the Australian dollar is still comparably high, this is not a sustainable strategy, he notes.

Made in Australia

One differentiating factor that the product’s country of origin does not have is a ‘Made in Australia’ cachet, which you may need to develop to assist your promotion and unique selling proposition. “In a way there’s no such thing as a true red ocean because there are never two players who are identical,” says Owens. “You always come with different experiences, different skills, different mindsets. You might say, ‘we’re an Australian company and they’re a German company, or they’re an Indian company.'”

Koslow agrees that country of origin can be one way to leverage difference. “People have good feelings about Australian products, especially food, so that’s a plus,” he reports. “And you know the wonderful thing about Australia? We don’t have revolutions like third world countries. If you make a long term supply contract with an Australian mining company you’re probably not going to be subject to any kind of political risk.”

Australian businesses also often forget that we already come from a fairly competitive environment here, says Owens. “If you’ve been able to establish a business model in Australia you probably had a lot of competition.” And, he adds, our upright behaviour will stand us in good stead in the long term. “We have really good levels of ethical practice in businesses in terms of codes of conduct, and compliance and things like that. Even though in some markets it might appear like a disadvantage, where there’s a lot of grey money and you might lose a tender because you haven’t paid someone off, the fact that Australia is fairly high up on the scale in terms of ethics in business is quite a good thing in the long term because we’re used to doing business in professional ways.”

Researching the red ocean

The best part about conducting market research in a red ocean market is that it’s likely your competitors can already provide half of what you’re looking for. “It gives you a really good opportunity to study the market dynamic,” says Owens. “A red ocean allows you to view what’s already going on in that market. The other thing is it allows you to look at where you have supply chain structures and things like that.”

There are some really easy ways to get to know a red ocean market, even before you’ve bought a plane ticket, says Brennan. “The first thing I would look at is an evergreen market, a market that is going to be around for a long time. You don’t want to take something particular to Australia and try to take it overseas, or something around a particular event or a trend unless you can see that that demand is going to be a long term thing.”

Using online resources like Google’s AdWords Keyword Tool will give you a good idea of how ‘red’ the market might be, she suggests. “That’s a good way to find out if people in any country are looking for what you’re offering. Obviously it’s not definitive, but it gives you some idea of the market.”

Another tool Brennan recommends is Google Insights, where you can look at emerging trends for any particular market. “I would look for competition and, in particular, frequent advertisers: what angle are they taking? How often are they advertising? What is the number of ads? If they’re advertising often you know that they’re making money on their ads, or they’re throwing it away. But generally, you would assume they’re only advertising if they’re getting a return.”

To find a position for your product, take a look at forums. This will give you an idea of what people are saying about existing suppliers, Brennan explains. “Is there a common theme for what’s missing? What you’re really looking for is some common problem that you can then come in and solve.”

Above all, vive la difference, she urges. “Be open to people using your product or service in a different way or perceiving it in a different way. That’s one of the important things for Australian exporters.”

Varona Fine Foods – Selling olive oil to Italy and truffles to France

Adam Wilson knows a thing or two about demand. One time, when Italy ran out of olive oil, Varona Fine Foods stepped in to supply its oil to a big UK supermarket chain. The placement was not an accident; Wilson, managing director of Varona, had been dealing with Italy for years gaining trust from Italians for Australian olive oil. “It can be hard, but I speak the language and we supply good quality oil. If you don’t have good quality oil you can forget about it,” he says. “In the end they liked the novelty of having fresh olive oil in their off season. Being a quality supplier in the alternate season gave us a foot in the door.”

This led to their brief partnership with the UK supermarket, which unfortunately couldn’t be sustained because Varona didn’t have the volume it wanted and the price pressure was too great. “Price is 80 percent of why people buy from you, but at the high end it becomes less about price. You have to know what your selling point is,” says Wilson. “For us, because we don’t have big volumes or low prices, supplying fresh oil in the counter season was our niche.”

The West Australian company also supplies other gourmet ingredients to providores and restaurants worldwide including marron, yabby and abalone from their aquaculture department, Australian bush herbs spices, and truffles. The truffles have made their way to France, supplying restaurants when the local providores cannot.

Asked how he managed to crack that discerning market, Wilson is frank. “I sent some truffles to [famous chefs] Alain Ducasse and Ferran Adrià and the chefs of the top 10 Michelin star restaurants. I figured if I sent them my truffles and they liked them, they would then demand it from their suppliers and their suppliers would source it from me. And if Alain Ducasse was ordering it, then other chefs would too.” The gambit paid off and Varona now supplies to a number of French restaurants in the local off-season as well as other markets, such as in Asia, year-round.

According to Wilson, the secret to competing in the market of a product’s origin is threefold: understanding the history and culture of the product, having a quality product to offer, and controlling the supply chain. “We can have our product out of the ground and to a customer in 48 hours,” he says. “That way it’s fresh and they know they can trust us to deliver product to them when they need it.”

GMA Garnet – Selling sand to the Middle East

A windswept desert. Rolling dunes. Parched sand. These images often represent the Middle East, well known for comprising mostly arid countries with a drop of oil in them. These conditions, however, allow GMA Garnet to sell sand to these already sand-drenched markets. “Garnet is a heavy mineral sand mined in Port Gregory in Western Australia, processed in Geraldton and then distributed through our network around the world,” says chief executive Torsten Ketelsen. Better known as a semi-precious stone, garnet is used in sandblasting to clean surfaces such as steel before it undergoes protective coating. “That’s mainly the oil and gas industry,” he explains, hence the foray into the Middle East.

Although garnet did compete with silica in the sandblasting process, Ketelsen says the two materials are very different. “Sand is very brittle and creates a lot of dust when it breaks down; garnet doesn’t. Until some years ago people were using beach or river sand: when you breathe it in it causes silicosis, which is almost identical to asbestostosis.”

While it has been decades since silica sand has been used in Australia, other countries have taken longer so see the health risks. The education process has been instrumental to GMA’s success, giving the exporter a chance to sell its superior product. “Saudi Arabia used sand largely because they have plenty of it,” says Ketelsen. “Nevertheless, when they realised the dangers associated with silicosis they banned it and garnet was selected in its place.”

Beyond the health benefits, garnet is also more efficient, more effective and cleaner than traditional abrasives. The higher initial cost of garnet becomes more palatable when customers take into account the cost of cleaning an offshore rig, for example. It can also be recycled: collected, cleaned and reprocessed for reuse.

GMA started selling to the Gulf countries—Bahrain, Oman, Saudi Arabia and the United Arab Emirates—25 years ago due to their “thriving oil and gas industry,” says Ketelsen. When Iraq invaded Kuwait in 1990, the company branched out into Europe and Asia. Its biggest market in Europe is Germany, where the use of garnet in high-pressure waterjet cutting has manufacturing applications. About 10 years ago, it started operations in the USA.

Due to the known effects of silica, its competitors are no longer sandy deserts but garnet from other countries. “To produce a very high purity product you have to have elaborate processing facilities and high quality standards. In some countries, the standards are not up to that level,” Ketelsen notes. “The quality that GMA produces is seen as the benchmark in the garnet industry.”

Adeline Teoh

Adeline Teoh

Adeline Teoh is a journalist with more than a decade of publishing experience in the fields of business, education, travel, health, and project management. She has specialised in business since 2003.

View all posts