Most Australian entrepreneurs claim to think big from the outset. But you need more than a good idea and a broad Aussie smile to conquer the world. Bi-lateral free trade agreements are tearing down barriers, but exporters must still negotiate the vestiges of international protectionism and the rollercoaster Aussie dollar.
Has it really been 18 years since Treasurer Paul Keating warned that Australia was on the road to becoming a “banana republic”? A glance at our current accounts deficit would suggest that not much has changed.
However, Australia was a very different place in 1986 to the country we know today. Back then, the Hawke government had just embarked on liberal economic reforms, the internet was an esoteric pastime for a handful of computer geeks, and the Australian economy was more dependant than ever before (or after) on primary sector exports.
While globalisation has caused some growing pains for the Australian economy, it has also brought great opportunity and wealth for those who are able to adapt. The internet has empowered individuals. Telecommunications are sophisticated and cheap, drawing us together across a remote continent.
In fact, our tyranny is no longer distance, but an inability to market our imagination and commercial creativity. Knowledge-based sectors constitute the new boom economy and Australians, always strong on ingenuity, now have the tools to take their concepts and products directly to the world.
LEAPING WITH EYES WIDE SHUT
If you’ve ever had a good idea, you know how intoxicating it can be.
“I know people who have jumped on a plane to go and look at an overseas market without making any appointments or doing any research first,” says Christine Gibbs Stewart, General Manager of International Trade at Australian Business Limited (ABL).
“Entrepreneurs are very passionate about developing their businesses and often fall into the trap of leaping before they look.”
It’s a common problem. A good business idea generates its own momentum. Having surveyed the domestic Australian market, many entrepreneurs look offshore in search of more significant returns. But there is far more to exporting than finding an international market and shipping your product.
Business laws, cultures and expectations vary greatly between countries and regions.
DO YOU HAVE PROTECTION?
The inconsistencies in international intellectual property (IP) protection are reason enough to seek advice before exporting. The case of the humble Aussie Ugg boot presents a cautionary tale.
The ugg boot has been an Australian icon for 45 years. However, US company Deckers Outdoor Corporation recently registered the trademark ‘Ugg’ in 25 countries and is threatening to sue Australian manufacturers if they continue to market their boots with the label ‘Ugg’.
Frank Mortel, who founded the name ‘ugg boots’ in 1958, considered registering the trademark many years ago but decided that was unnecessary because ‘ugg’ had become a generic term. Now he and other Australian ugg boot retailers are losing business at a time when the ugg boot is finally finding a global market.
Many Australian companies refuse to export to developing countries, particularly in Asia, where legislation protecting copyright is either deficient or simply ignored.
Christine Gibbs Stewart says it is amazing how many people don’t have their trademarks or patents registered.
“You need some kind of legal recourse to fall back onto,” she says. “It is critical that you register your trademark in the market in which you are intending to trade. It might cost $30,000, but it will cost far more than that to fight an international patent infringement.”
Gibbs Stewart regularly counsels clients to retain a portion of vital IP here in Australia, so all the IP is not left in foreign hands.
Ian Murray, Chief Executive of the Australian Institute of Export, believes access to education on IP protection needs to be improved. “IP is a really difficult issue. Educating entrepreneurs is one of our primary functions. We conducted more than a thousand student days in NSW alone last year. IP is a very complicated and expensive area.”
YOU’RE NOT ALONE
“Everyone thinks their idea is the best,” says Tim Harcourt, Chief Economist for Austrade, the Commonwealth Government’s export advisory body.
“But you still have to convince the financier, venture capitalist or bank. There is a big step between having a great idea and seeing it to commercial viability. Austrade now looks after many start-up businesses. We brief them on their likely competition in the market, suitable distributor networks and the steps necessary to protect intellectual property.
Austrade runs TradeStart, a national network of export assistance offices, which offers mentoring to start-up and small businesses through the New Exporter Development Program (NEDP). It is free for participating companies and provides advice, coaching and assistance on the ground in foreign markets, with the goal of securing companies their first export sale.
Earl Woolley, CEO of Redmap Networks, a Queensland-based ICT exporter and winner of the Queensland Premier’s Award for ICT exporting at the 2003 Australian Export Awards, agrees. According to Wooley, “The export market is extremely tough to crack. No matter how individual you think your offering is, in most cases there is a similar product somewhere in the world. Very few products are unique. You need all the assistance you can get.”
ABL also works with companies of all sizes at different stages of export development. Christine Gibbs Stewart says many Australian companies new to exporting do not have a strong enough understanding of the international markets they are trying to penetrate. She often meets with excited entrepreneurs who believe their offering is unique in a foreign market. “If it is a truly unique product, what are the barriers to entering that market? There is often a reason why that gap exists.”
IT TAKES TWO TO TANGO
Building relationships with partners inside the target market is one of the most important elements of a successful exporting strategy.
Gary Cronin is Managing Director of Exportise, a private company offering advice and support for budding Australian exporters. He encourages his clients to balance their enthusiasm with thorough preparation. “Generally, people underestimate the time and cost it takes to be successful in export. It usually takes them twice as long to succeed and costs twice as much as they expect.”
Much of that time and cost is consumed by establishing relationships, which have to be carefully cultivated over time.
Redmap Networks began exporting two years ago, but their preparation started in 1998. Redmap now services clients in Asia, the US and UK. “To get any exposure overseas,” says Earl Woolley, “you must do an apprenticeship. There are very few short cuts in exporting, no matter how entrepreneurial you are. You need to build up trust with your international business partners before they will view your offering as a serious market contender. That courtship can take years depending on the strength of the product and the frequency of contact.”
THE MIDDLE KINGDOM – WATCH YOUR STEP
More than any other foreign market, China has the capacity to rouse simultaneous excitement and terror in Australian exporters. With a population of 1.3 billion, it is tempting for growing businesses to speculate that China presents an endless opportunity for wealth creation — if they can secure just one percent of the emerging Chinese market.
The reality of China is far more complicated. Most economists assume it will surpass the US to become the biggest economy in the world within a generation. Only a fool would turn their back on this emerging economic superpower. But it can be a siren song and entrepreneurs need to exercise caution when exporting to China.
“If you are a first-up exporter, China is a very difficult place to cut your teeth,” says Ian Murray, Chief Executive of the Australian Institute of Export. “It is a rapidly developing economy, but the Chinese are very skilful negotiators and it takes time to build up relationships and to understand the dangers and opportunities.”
Gary Cronin agrees. “China needs commodities to fuel their economy and that’s where a lot of the volume and value of exports from Australia are going. People must be very careful to manage their expectations when dealing in China. Often there will be an indication of a large number of sales, even when they can never eventuate.”
One of the main concerns is IP protection. Tim Harcourt of Austrade says China has improved its record on IP protection, but more needs to be done to assure international traders. “One condition of entering the World Trade Organisation was that China strengthened its IP ratio. It’s fair to say a lot of exporters have been burned in the past, but protection is better and improving all the time. There are a large number of Australian entrepreneurs trading successfully in Shanghai. You simply have to do your homework.”
LEARNING TO SWIM
Overall, entrepreneurs are a pro-active bunch. It’s that ‘can do’ attitude, that get-up-and-go, that separates them from the rest of society.
The unfortunate downside to this enterprising spirit is a tendency toward impetuousness, even recklessness. Most successful entrepreneurs can attribute a large part of their success to risk-taking. But this approach can also yield spectacular failures.
Exporting is a tough game. It requires a unique blend of enthusiasm, meticulous planning and patience to succeed in the international market. In addition to concerns over disparate trading cultures and regulations, IP protection and funding complications; fluctuations in exchange rates and fickle market trends can sink even the most stoic exporter.
The international knowledge economy rewards innovative companies that think big and prepare well before leaping into the fray. We have a small population but our inventiveness and dedication to quality go a long way in foreign markets.
With such a strong support network available to budding Australian exporters, there is no reason why companies should commence international trading unprepared. In the ultra-competitive global market, knowledge is power. With so many variables beyond the exporter’s control, one shared insight can often prove the difference between success and failure.
An intriguing international partnership between two Australian companies and a US technology firm is helping to restart hearts in the US and UK.
Melbourne-based industrial design firm Cobalt Niche Design has teamed up with Australian specialist plastics compounding company Orica Chemnet Polymers and US based HeartSine Technologies Inc to produce the HeartSine Samaritan automated external defibrillator (AED).
The ‘Samaritan’ project began after HeartSine developed the technology for a portable AED and sought capable partners to develop a light and durable casing. HeartSine approached Cobalt Niche to undertake industrial design. When Orica introduced its Santoprene™ soft touch thermoplastic elastomer to the project, a truly global consortium was formed.
A few years ago, the US passed legislation called the Samaritan law, meaning that you could not be sued for trying to re-start someone else’s heart with a defibrillator. As a result, people began suing sports stadiums, buildings and companies for not having defibrillators. This resulted in a boom in demand for defibrillators. Many US sports stadiums now have nearly as many defibrillators as they have fire extinguishers.
Cobalt Niche Design director Jack Magree says that when the company began working with HeartSine, the Australian dollar was at US55c. As the Aussie dollar rose, he made sure that Cobalt Niche maintained a superior relationship and service compared to potential competitors. “We’re an integral force in the HeartSine development program now. The second defibrillator we have developed with them is just being released in the US now.”
HeartSine has used its network to help Cobalt Niche develop relationships with other US companies. “We are a small company with 12 staff,” says Magree. ”To get a better international response, you have to build a co-operative relationship with suppliers, designers and manufacturers, and present that offshore. Most buyers want to know where you fit in, who is part of your support network. That is where someone like Orica gets you credentials beyond your own capacity.”
Magree believes that initially Cobalt Niche made the same mistake that many Australian exporters make. “Businesses overseas, and especially in the US, don’t want to know that you’re Australian. There is no advantage in highlighting that you are from the other side of the world. In fact, it’s a disincentive. They want to know they can rely on you and you have someone on the ground in the US to support them. They’re going to get that you’re Australian. You don’t need to be riding a kangaroo.”