Thursday, October 27, 2011

New HSBC forecast tool predicts continued International Trade boom for Australia to 2025

Australia will have the fourth largest increase in trade growth in Asia over the next 15 years according to HSBC Trade Connections, the new quarterly global trade forecast tool launched by HSBC. 

HSBC Trade Connections forecasts that Australian trade will increase by 129% by 2025, nearly double the pace of world growth (73%) and exceeding Asia (96%) over this same period. Australia will be the world’s second fastest growing export market (equal to China) and the seventh fastest growing importer (equal to the Czech Republic). 

HSBC Trade Connections predicts how trade is going to develop over the next 5, 10 and 15 years. Spanning 37 countries, it covers the top 10 sectors in each for both export and import goods. It forecasts overall trade growth (exports, imports and total trade) globally, regionally, and in-country. The forecast has a unique approach to understanding the drivers of trade from a business perspective informed by: trade trends, macroeconomic and market influences on trade (for example GDP, oil prices, inflation, foreign direct investment), and business environment influences on trade (including regulation, demographics, access to capital and finance). 

The report found that Australia’s strongest trade growth between now and 2025 will be in the next five years when it will hit 7.7% annually (8.9% in 2012 and 2013), almost four times world growth (2% in those years). The doubling of Australia’s trade will bring merchandise trade volumes to US$702.5 billion from US$347 billion today. 

Commenting on Australia’s immediate trade horizon, James Hogan, Head of Commercial Banking for HSBC Bank Australia said, “HSBC Trade Connections forecasts a strong trade pipeline for Australia with a particular sweet spot in the next two years. This trade growth is consistent with HSBC’s own Australian experience where, despite AUD/USD appreciation, our trade export turnover saw strong double digit growth year-on-year to June 2011. It sends an encouraging message to Australian companies to seize the opportunities now to establish overseas trade relationships for short-term and future growth.” 

Australian trade flows steady in immediate future
Within the HSBC Trade Connections report, the HSBC Trade Confidence Index shows a dip in the short-term confidence amongst Australian traders who expect global economic headwinds to impact global trade over the next six months. However, the sentiment amongst traders is that Australia will be relatively protected with the index revealing that 85% of Australian traders predict that their trade volume will either be maintained or will increase over the next six months, citing Asia as their most promising market for trade growth. 

Australian traders falling behind in Chinese reminbi
The forecast predicts that China’s share of world trade will reach 13% by 2025, overtaking the US as the top exporting nation, driven both by commodities trading and by an increase in manufacturing in China. According to HSBC Trade Connections, China will remain Australia’s largest trade partner with total trade between the two countries estimated to reach US$148 billion by 2025 – more than double that projected for Japan.
The report further notes that, despite the fact 48% of Chinese companies surveyed are likely to use the reminbi (RMB) currency for settlement in the next six months, only 7% of Australian traders plan to settle in RMB, falling behind other markets like Hong Kong, Malaysia and Vietnam in their expected use of RMB for trade. 

New HSBC forecast tool predicts continued trade boom for Australia to 2025/2
Hogan continued, “China is by far our largest trading partner. As the use of RMB becomes more commonplace, Australian companies that do not have the capability to transact in RMB may be disadvantaged if Chinese traders prioritise RMB-ready businesses.”

CE Marking with Nick Williams, Conformance





The CE mark is a mandatory certification mark, which must be applied to almost all products imported to and sold within the European Union. It demonstrates that the product complies with the all the essential requirements of the relevant CE marking directives, and allows products to be freely traded between EU member states.
Nick is the founder and managing director of the UK company Conformance, with over 15 years’ experience of CE marking products. Nick specialises in electrical safety and manufacturing engineering, and his expert knowledge of the legislative procedure has enabled him to guide over 2,000 manufacturers through the CE marking process. He also has extensive experience of managing product design and production engineering, and as such is in an ideal position to help clients consider the CE marking requirements of their products from the design stage onwards. Nick has also established a sister company in Beijing, working with manufacturers who want to import to the EU.

Sunday, October 23, 2011

New South Wales top exporters recognised

“Even in these tough times for exporters there are some outstanding success stories that can inspire the export industry.” - Lisa McAuley, Australian Institute of Export

The success and sustainable growth of an export business depends on its ability to face challenges head on and seek new opportunities.
Right now companies are battling a high dollar, continued fallout from the Global Financial Crisis and increasing international competition.
“Business as usual” will not be enough to ensure success. Now more than ever there is a need to be more innovative, and look at new ways to keep up with the international market. Last night at a reception attended by the Hon. Barry O’Farrell, Premier of New South Wales the 2011 Premier’s NSW Export Awards recognised the State’s top export companies big and small and there were some outstanding winners.
“The 2011 winners of the Premier’s NSW Export Awards are role models for other businesses in our State.  The innovation, persistence, and focus they have exhibited in taking on the world and winning, in a period where the AUD is high and economic recovery is very fragile in many markets, is testament to their tenacity.  This year’s winners represent the wonderful cross section of industry sectors in NSW that can compete on the world stage. They are wonderful ambassadors for our State and we wish them well as they continue their export journey”.
             – Peter Mace, General Manager, Australian Institute of Export  
The winners of the 12 national categories will now go on to compete at the national level in the 49th Australian Export Awards on the 8 December in Brisbane. 

The 2011 Premier’s NSW Export Award winners are:

MEDIA CONTACT
Lisa McAuley
Australian Institute of Export
Tel: 02 8243 7400/ mobile: 0430 172458
E-mail: lisamcauley@aiex.com.au

Monday, October 17, 2011

HSBC Trade Connections:Trade Forecast Quarterly Update

New quarterly forecast exploring the future of world trade and the opportunities for international businesses
• World trade will grow by 73% in next 15 years
• World trade will grow at 2% until 2015
• Companies to increase trade activity annually by 4.1% to achieve projected growth
• Australia’s trade to grow by 129% by 2025

Global Trade Review 
The new Trade Forecast is predicting that world trade will grow by 73% in the next 15 years, with merchandise trade volumes in 2025 hitting US$43.6trillion compared to today’s $27.2trillion. To achieve this growth, the Trade Forecast is predicting that companies across the world will increase their trade activity by a combined 3.9% between 2011 and 2025. The Trade Forecast anticipates that the spotlight will be on Egypt, India, China, Indonesia and Brazil to drive world trade growth during this period.
This is reflected in HSBC’s Trade Confidence Index which reveals that businesses around the world believe that China will continue to be a source of key trading opportunities over the next six months, with Latin America, South East Asia, and the Middle East also featuring strongly. Despite an overall dip in global trade confidence, businesses in Indonesia, Saudi Arabia, Egypt and the UAE are particularly optimistic about the future, showing a positive uplift in confidence on the first half of 2011. On a global scale, the majority of respondents (84%) anticipate either an increase in international trade, or consistent levels of international business activity, over the next six months. For businesses trading internationally or starting to trade internationally, the combined global outlook provides a positive view of future business opportunities with new trade corridors opening.

Tuesday, October 11, 2011

Insights into the US market by Kylie Hargreaves, NSW Trade & Investment



Kylie Hargreaves, the Executive Director of International Markets and Trade at NSW Trade & Investment, is sharing some insights into the US market.

Interviewed by Lisa McAuley, Australian Institute of Export.

Sunday, October 9, 2011

Building with new BRICs

The rapid economic decline of the US and western Europe, fuelled by indecisive and frightened politicians, massive debt and a bloated sense of entitlement, has accelerated the process (first predicted by Jim O’Neill of Goldman Sachs as early as 2001, and now referred to as “the end of the great divergence” by Niall Ferguson in his recent TED lecture in Edinburgh) of transforming the global economy into one which is dominated by four countries – Brazil, Russia, India and China (The "BRIC" countries). Not far behind, although starting from a much lower base, is Continental Africa, referred to as the “last great emerging market “ in our most recent issue of Insights (click here to read it)

What we don’t know, and is very hard to predict at the moment, is how painful this transition will be.  Will Germany accept the horrible reality of a $2 trillion deficit in southern Europe and take decisive action by paying a figure which represents two-thirds of their total GDP into the system to save Greece and other ailing economies, and prop up the banks that will become insolvent in the event of a sovereign default? Or will the politicians prefer the “death by a thousand cuts” approach which has prevailed so far? Will the US face up to its own insolvency (with its total debt now at 100% of GDP and rising) and make serious and meaningful cuts to its Federal Budget? Or are we simply putting off the day when the US faces its own major debt crisis which will be too large for any other country to rescue and lead to a deep and painful global recession? As each day goes by it isn’t hard to paint a very pessimistic scenario for the future, despite the hope that sense will eventually prevail. Volatile investment markets simply reflect the confusion, optimism, fear and panic that oscillates each day throughout the investment community.

Unfortunately, this all happened much sooner than it was meant to! The BRICs are still relatively small economies (though growing rapidly) and are nowhere near ready to prop up the whole global economy. In any case, they are all going through their own internal transformations so as to be able to maintain economic growth despite the absence of the American consumer, the engine that has fuelled global growth for the last 50 years or more.

The key BRIC trends to be following to feel confident and optimistic about the future are as follows:

Domestic Consumption
China’s transition from an export driven economy to one which is dominated by domestic consumption (with urbanisation, rising wages and the development of a world class services industry as key drivers) is the focus of the 12th Five Year Plan and was the subject of the July issue of Insights (click here to read it).  India’s economy is already dominated by strong domestic spending, and Brazil’s wealth of resources, agriculture and renewable energy offers a high degree of self-sufficiency.

However, Russia has the largest consumer class amongst the BRIC countries, the highest GDP per capita, the lowest level of debt, and now leads the whole of Europe in the sale of key consumables eg pharmaceuticals, mobile phones, broadband and even beer (catching up with Vodka as the beverage of choice amongst Russians!). According to the recently released Forbes survey of billionaires, Moscow has more billionaires (79) than any other city in the world (the closest is New York with 58) and Russia accounts for a third of Europe's 300 billionaires, and 15 of the world's 100 richest people. Not surprisingly, retail sales in Moscow now exceed Paris and London, and by 2025 the consumer market in Russia, which is now approx. 142 million, is expected to be larger than Germany’s, one of Europe’s largest markets.

Intra-BRIC trade
The recent BRICS Leaders Meeting in China in April 2011 laid the tracks for greater “intra-BRIC” trade and investment co-operation in the years ahead.  This is vital to the global economy and should be occupying the minds of all forward thinking business leaders and entrepreneurs.

With a combined GDP of $8.7 trillion in 2010, the BRIC economies already account for 45% of global economic growth, and the combined BRIC share of world trade increased from 6.9% in 1999 to approx. 14.2% in 2008. Furthermore, BRIC collective trade with the world increased almost six times from $790 billion in 1999 to $4.4 trillion in 2008.

Intra-BRIC trade, or trade among the BRIC members, has accounted for the fastest growth rate in global trade in the last decade, and is expected to continue as the BRIC economies become more dominant. According to the IMF, intra-BRIC trade, which is valued at more than $170 billion, has grown at the rate of 30% p.a. since 1999 and now accounts for 8% of global trade. During the 10-year period up to 2009, intra-BRIC trade increased nine fold compared to global trade, which only doubled over the same period.

In recent years, Intra-BRIC trade has been mainly characterised by Russia and Brazil supplying natural resources to satisfy the industrial and infrastructural needs of India and China. However, this is likely to change. Watch out for more investment and trade deals between the BRICs as they create their own trading bloc, settle  deals in local currencies (notably RMB) rather than USD, and invest in eachother’s capabilities.

Strong Leadership
You have to admit that western style democracy is looking pretty sick at the moment! With hung parliaments all around the world, short parliamentary terms, continuous electioneering, disengaged and disgruntled voters, and career politicians looking after their own interests, the will to engage in structural reform and long term planning has virtually disappeared. It is not surprising that the west is in such a mess!

In contrast, the political systems of China and Russia (now with the prospect of Putin serving as President until 2024, having first been elected President in 2000) look remarkably strong, stable and effective, despite the way they are portrayed in the western media. And Brazil’s recent economic success can largely be credited to the successful 8 year terms of two reforming, pragmatic and popular Presidents, Fernando Henrique Cardoso and Luiz Inacio Lula da Silva.

The question now is whether India, the largest democracy in the world, will be able to remove the stifling influence of Government bureaucracy and consensus to allow their entrepreneurial culture to thrive. India’s growth rate of 10% p.a. would be much higher with decent infrastructure and less Government interference, and the hope is that India’s reforming Prime Minister, Manmohan Singh and his successors can be allowed to finish the job of transforming India into a modern economy. With its young demographics, entrepreneurial flair, technological excellence and strong domestic demand, India will surely reach its true potential and demonstrate that democracy (famously referred to by Churchill as “the worst form of government except all those other forms that have been tried”) is still alive and well!

Innovation
Here lies the big question for the BRICs to address....and for the US and the developed world to ponder. Will the next Steve Jobs be Chinese? Will Bangalore in India take over where Silicon Valley left off? Will Brazil become the world’s clean source of food, energy and transportation? Will Russia put the first man on Mars?

It’s too early to know for sure, but the BRICs benefit from “latecomers advantage”. The opportunity to leapfrog technological advances, capitalise on knowledge and past experiences, tap into existing networks and, above all, learn from the mistakes of those who have gone before.  They also have the funds to spend on research and equipment which is rapidly running out in the west.

So, here lies the key to the future. As so eloquently put by Seth Godin in his recent blog entry, The forever recession (and the coming revolution) “the future is about gigs and assets and art and an ever-shifting series of partnerships and projects”. It’s not a zero sum game…..we can innovate and they can innovate…the rest can be outsourced or ignored.  Let’s fix the debt problems quickly, take the pain, start again and get on with the innovating! The BRICs will lead the way…we all must follow.

David Thomas, BRIC expert- Think Global
www.davidthomas.asia

Tuesday, October 4, 2011

Tips for successful international business negotiations


By Maxence Lefebvre

Preamble: this article points out the influence of intercultural factors on the negotiation process in an international environment. This article is mostly based on the work of Brian J Hurn, teaching postgraduate students International Communication and Cultural Awareness at the Universities of Westminster and Surrey, UK. 

Negotiating is simply the process you follow to get somebody else to do what you want him to do. A successful negotiation has to follow a certain process with seven main stages: pre-negotiation, entry, establishing relationships, review of strategies, bargaining, agreement and post-agreement.
This negotiation process will pretty much keep the same structure in both domestic and overseas environments, however many new factors will need to be taken into consideration when negotiating across borders, such as the difference of language, cultural sensitivities, legal systems, tax regimes, labor laws and business practices. Moreover government-led bureaucracy, restrictive regulations and direct government interferences could further complicate the negotiating environment, as well as the need to analyze political and economic instability, currency fluctuations and ideological differences before starting any overseas negotiation. At the end of the day, even if the stages of the negotiation process remain the same in theory, international business negotiations are crucially different from domestic negotiations and the negotiator that engages in this should be aware of those differences and appropriately trained to ensure a successful negotiation.
This article will give you some general recommendations, tips and facts that you may want to know before dealing with foreign businesses to expand your own company.

Communicate effectively with your international negotiator
With the globalization and the multiplication of business transactions across borders, English became the main international language used in negotiating across cultures. This is more precisely, what is described as “international English” or “off-shore English” that became the official business language: a form of “low-risk English” using words, phrases and grammatical structures which can be easily understood, avoiding idioms, slang, jargon and complex structures. When starting contact with a foreign negotiator who may not be a native speaker, make sure you adapt your speaking and writing style to your counterparty to avoid misunderstandings.
If your negotiator cannot speak English, the use of an interpreter becomes essential. Before starting any direct conversation with the counterparty, the interpreter should always be briefed and provided with any notes you may have on the proposals you intend to make. During the negotiation discussion, you should express your main points in several different ways so that the meaning is clear and helpful for the interpreter. Moreover you should always look at the negotiator while corresponding, not the interpreter, since it could be perceived as a lack of respect in some cultures.

Adapt your approach to your negotiator’s culture
The “getting to know you” phase could be crucial in determining the success of a negotiation. The “shared experience” are a form of cultural shorthand and are extremely helpful in preliminary and informal discussions, as “ice-breakers”, covering interests, sport, art etc. In some cultures, building relationship and mutual trust are initially more important than proceeding to detailed negotiations. If your company is dealing with organizations from India, Middle East or Africa, showing interest and respect towards your counterpart’s family could be vital for successful relationship, since the family unit is highly valued in those regions. Such questions about  building a family could be judged as private and not appropriate to the situation in some other cultures (e.g. France, Germany). In any case, those “small talks” should avoid contentious subjects such as political, cultural or religious sensitivities, when not sure whether they are appropriate or not.
The use of humor could also be used as an “ice-breaker”. Humor was described as “the shortest distance between two people” by the comedian Victor Borge. However, in an international context, humor could be something of a double-edged sword, as it does not always translate well across cultures and could cause embarrassment, offence or confusion through misunderstanding. While humor is often used in British business presentations, Germans would judge it as a lack of seriousness.
Developing good listening skills is really important to succeed in international negotiations, because it enables you to pick up the various subtle cultural nuances. Silence is often used by the Japanese to mull over what has been said and think of the alternatives, but it could be mistaken by Westerners as showing a lack of understanding. Do not feel uncomfortable and jump in, or worse, make concessions, if you encounter this situation.
The concept of “face”, defined as the regard in which one is held by others, is of a vital importance in the Chinese, Thai and Japanese cultures. This could explain why Chinese business people use indirectness and prefer intermediaries for negotiations, in order to save and give “face” because of the importance they attach to the establishment and maintenance of long-term relationships. Keep in mind that Westerners separate business life from personal life, but this distinction is less significant for eastern cultures.

    Adopt the right negotiation practices
             The business etiquette differs greatly across cultures, especially the exchange of business cards. In the Japanese culture, the ‘meishi’ is treated with great respect because Japanese consider the business card as the manifestation of the person’s persona. They will give you their business cards directly after the initial formal introduction: make sure you analyze the cards before carefully placing them in the front pocket of your wallet or on your desk in front of you. Concerning your own card, the best would be to print one side in your own language and the other in the other culture’s language. When making business in Hong Kong you will meet many Westerners with business cards on which they even have their names translated into Chinese characters. Another aspect of business etiquette which differs across cultures is the level of familiarity in the approach. In Germany, The Netherlands and Italy, people address each other by their academic titles, calling Doctors people with doctorates, as opposed as the more familiar approach used by Americans and increasingly by the British. Greetings can also be more formal for some cultures, including Germany and Russia. When dealing with women from other cultures, always wait for them to initiate the handshake.
             Socializing plays an important role in successfully negotiating across borders. Due regard to seniority is essential with strict attention to seating at formal dinners, order of speeches, and giving and receiving gifts. On this last aspect, you should know that exchanging gifts for business purposes is very important in some cultures, sometimes it could even be an offense not to offer gifts, but it may be viewed as bribes in Australia and other western cultures. Try to offer gifts that symbolize the status of your company and the importance of an impending deal, such as an item characteristic of your local area, or one that displays your company logo.
             The negotiating environment should also be considered carefully to maximize your chance to make a successful business deal. Some cultures, such as Latin America, Japan and particularly France, business people tend to see negotiations as ‘social ceremonies’ as opposed to the British, Americans and Scandinavians who put less emphasize on the social aspects. When dealing with French negotiators, make sure you invite them to a restaurant during a lunch break, rather than offering them sandwiches in the Board Room.

    Understand your counterpart’s negotiation process
                In an international context, your negotiator will probably not use the same negotiation steps and methodology than the ones you are used to dealing with in the domestic market. Agreeing on an agenda is probably the best way to clarify the stages of the negotiations and determine what has been agreed on at a certain stage of the negotiation process. This agenda takes even more importance when dealing with a foreign organizations, and you should try to follow it as much as possible, since surprises and hidden items could affect long-term trust in some cultures.
                The pace of negotiations will differ a lot from culture to culture. In India and the Middle East, the progress will be initially slow until the negotiator succeeds at establishing trust. In contrast, indirectness is disliked in the USA, with an emphasis made on “getting the point”. The French, tend to view negotiations more as an intellectual exercise in logic, defending or disproving hypothesis. Arabs look upon deadline as merely general guidelines and see the possibility of amending these in the light of circumstances. The German, British and Japanese like deadlines and the agenda to be specifically stated and agreed upon in the contract and would expect negotiators to honor these.
                Another aspect that is influenced by culture is the attitude to time. The existence of different attitudes to time could cause concern. There are two types of culture concerning time: the monochronic and the polychronic cultures. Negotiators from North America, Germany, Scandinavia, and Japan, are part of monochronic cultures, so they will like strict time-keeping, punctuality and keeping schedules. On the other hand, negotiators from Latin America, Southern Europe, Africa and Arabic countries, are part of a polychronic cultures: they may arrive late, deal with several issues and activities at the same time, and engage in multiple conversations. This behavior could cause frustration, be perceived as irritating and unhelpful for people from monochronic cultures. If you find yourself uncomfortable dealing with people with such behavior, you will then need a high level of patience if you want to ensure the success of your business deal.
                Do you think your efforts made during the whole negotiation will be rewarded? First you should be aware of your counterpart’s ability to make decision by himself. Indeed, decision making in negotiations is often influenced by cultural characteristics and so the amount of authority given to the negotiator will differ from culture to culture. In Latin America and Greece, decisions will be made by the negotiating team leader. In Anglo cultures, negotiators often have high power and can make decisions by themselves concerning their business deals. In contrast, Japanese negotiators do not have much decision power. They have to report back to higher authority. This explains why Japanese will adopt a step-by-step approach to decision making with emphasize on what is agreed. This aspect of the Japanese culture causes frustration for western companies that are used to face-to-face negotiations with those who are empowered to make final decisions.               

                In practice, many negotiations often conclude in some form of compromise, either through mutual agreement or by some form of external mediation. Here are some examples of things that will maximize your chances to successfully negotiate: study and review the cultural sensitivities and characteristics; use skilled and experienced translators if necessary; adapt your negotiating style and pace accordingly; spend time building trust by establishing personal relationships at an early stage; always show patience; and be prepared for negotiations to continue after an apparent agreement.


Maxence Lefebvre, Australian Institute of Export


Brian J Hurn (2007), The Influence of Culture on International Business Negotiations, Industrial and Commercial Training Vol. 39 No. 7.
Cohen, R. (1999), Negotiating across Cultures: International Communication in the Independent World, US Institute of Peace Press, Washington, DC.
Guy, V. and Mattock, J. (1991), The New International Manager – An Action Guide to Cross –cultural Business, Kogan Page, London.

Business Success in the US – Blog 2


By Ian Smith, Chief Executive Officer at Access USA Pty Ltd (www.accessusa.com.au)

US Distribution Debunked

For any of you that have read my previous blogs you will be sick of me banging on about the importance of segmenting the US market, both by geography and industry! But the most common mistake people make is thinking of the States as one market – It is in fact made up of many markets (all significant in their own right) and companies not only need to carefully consider segmentation, but also what distribution model they will set up to achieve successful market entry. In this month’s Business Success in the US blog I look at some of the mechanics of setting up successful US distribution.

What are the common types of distributorships in the US?
Standard Distributorship – Buys and resells
Agency relationship/Manufacturer’s Representative – Generates sales but does not buy and resell

Is it important to enter into written agreements?
YES – The US is a common law jurisdiction and parties should therefore include all important terms and clauses in their contracts. In general, courts will only enforce what is in the written agreement signed by both parties.

Exclusive or non-exclusive?
This will be highly dependent on the nature of the product or service offering, the market share the potential partner offers and the competitive environment. In general, it is not advisable to offer exclusivity, particularly not across all geographies and segments – Remember that an exclusive means that you are completely reliant on your new partner for all sales in that territory! Consider the pros and cons of each before rushing in.

What performance requirements should I set?
Any agreement entered into should set out the minimum performance standards required of the distributor. In the case of exclusives, this is often an enforceable part of the contract. These may include (in no particular order):
·                - Value of initial order
           - Minimum purchase requirements (generally set by mutual agreement taking into consideration market dynamics and stage of product development) 
           - Marketing budget
·                - Minimum inventory levels

It goes without saying that all distribution agreements should be a two-way street and should outline your commitments to the distributor as well. For some reason, many Australian companies think that appointing a distributor is the end point and do not provide adequate in-market support to help to drive sales. Remember that you are dealing with the most competitive market in the world and your product runs a real risk of being lost amongst the other 1000 SKUs your new partner has if you don’t push hard!

Is it advisable to use a law firm?
With over 500,000 lawyers in the US it is not hard to see why it is one of the most litigious countries in the world. Seeking legal advice is just part of doing business in the US and seeking advice on distribution agreements is top of the list. A good lawyer will be able to assist with indemnification, limitations of liability, IP (trademarks, copyrights and patents) and termination of contracts just to name a few.

Make no little plans. They have no magic to stir men’s blood and probably will not themselves
be realized.” Daniel Burnham


Ian Smith