Australian companies are missing out on potential billion-dollar markets because they are too focused on local ones. Instead of taking on the world, they're letting foreign competitors fill critical gaps while they "play it safe" and focus on sales in Australia.
The problem is, all too often, fear. Behavioural economists tell us that the fear of loss is twice as strong as the joy of gain. It's no wonder that entrepreneurs fear expanding into a foreign country where people speak a different language, operate under a different set of rules, and where there's no certainty they'll get paid – even if they can find customers who want their products. Exporting is a business risk – but then so is starting a company.
This fear of loss is holding back many Australian companies from achieving their growth potential, and that's impacting the national economy. But there's a huge global opportunity for Australia's small and medium companies – and not just software giants such as Atlassian, Canva and Aconex.
Blonde Robot, a Melbourne-headquartered distributor of high-end photographic and audio-visual equipment employs 13 people. Expanding into Asia enabled the firm to double its size in just six months, and having a wider geographic footprint gave it better bargaining power with suppliers.
Kelly Engineering, the South Australian creators of the Diamond Harrow – an advanced tillage machine that helps farmers plough shallow soil, took the leap into the Americas. Today, its largest market is the US, and it is rapidly making inroads into South America.
Here are four steps chief executives can take to mitigate the risks, overcome the fear of loss, and capitalise on the global opportunities that abound.
1. Do your research
Carry out market research and assess where the biggest opportunities exist. There is plenty of valid and reliable market information available for many industries – thanks to the work of state agencies and industry associations. For example, WA's Department of Primary Industries and Regional Development's Asian Market Success project, funded through the Royalties for Regions program, is helping a diverse set of agribusinesses in WA develop sound plans for international expansion.
2. Find reliable contacts
Local contacts in the intended market can provide a critical overview of the "lay of the land", and introduce you to reliable representatives, suppliers, wholesalers or retailers you can trust. Many states, cities, and even banks are organising trade missions to specific cities in certain countries, then identifying and inviting companies they think could benefit. Often the trade mission is the first step in the development of a trusting relationship.
3. Mitigate risk
There is financial risk when doing business in another country, but there are ways to mitigate that risk. Contracts with progress payments, letters of credit from your bank, hedges against currency fluctuations, and frequent communication are a few of the ways to manage the financial risk. Be sure to involve your banker, accountant and lawyer in the development of contracts.
4. Be ready to scale
Doing business in another country requires that your organisation be ready to scale. Efficient operational systems, good tactical delivery, the right people, and capital reserves or lines of credit need to be in place. The company must have the ability to manage different kinds of supply chains and operate in several time zones.
Balance Services Group provides energy solutions to remote communities in Australia and other parts of the world. Rod Hayes, founder and chief executive, discovered that the key to rapid growth was not just the products, but having people who enabled the company to scale rapidly and work globally. This included ensuring that employees had clarity around their roles, responsibilities, and reporting relationships, and team leaders had mastered the disciplines of delegation, accountability and execution.
It's not only Australia's large companies that should export and go global. For the sake of the economy, Australia's 220,000 small and medium companies need to understand how to manage the risks, develop more value-added products and services, and get ready to scale. It benefits the entire economy when Australian companies succeed internationally.
It's not only Australia's large companies that should export and go global.
Professor Jana Matthews is ANZ chair in business growth and director of the Centre for Business Growth at the University of South Australia.
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